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Republic Act (R.A) No. 11127 or the “National Payment Systems Act” and BangkoSentral ng Pilipinas (BSP) Circular No. 1049

Posted by on February 19th, 2022

HEADNOTEEncapsulating highlights of National Payment Systems Act, the rules and
regulations on registration of operators of payment systems (OPS), directives on
operating payment system without registration, and defines the violations, fines,
and penalties under the Act.

ATTENTION: Any person who is treated as an operator by providing clearing and settlement services in a payment system and those who define prescribes, regulates, controls, and maintains the operational framework for the systems.

R.A NO. 11127 or the NATIONAL PAYMENT SYSTEMS ACT (The NSPA)

The NPSA is a landmark legislation that supports the third pillar of central banking of the Bangko Sentral which is the maintenance of a safe, efficient, and reliable payment and settlement systems. This will govern the payment systems in the Philippines, necessary to control systemic risk and of providing an environment conducive to the sustainable growth of the economy.

In line with the provisions of the National Payment Systems Act (RA 11127), the Monetary Board issued its Payment System Oversight Framework (PSOF) through BSP Circular No. 1089 which sets out the regulatory approach of the Bangko Sentral in overseeing payment systems in the country. The framework follows a risk-based oversight approach mainly through the designation of payment systems. Designation is based on the relative importance of payment systems as systemically or prominently important. A designated payment system (DPS) shall be subject to periodic assessment and closer monitoring by the Bangko Sentral. This assessment shall focus on the observance of standards such as the Principles for Financial Market Infrastructures (PFMI), and on compliance with relevant laws and regulations.

BSP CIRCULAR NO. 1049

BSP Circular No. 1049 provides the rules and regulations on the registration of operators of payment systems (OPS). It is the first phase of the phased-in implementation of the NPSA that prioritizes the creation of a baseline inventory of all OPS. This is required under Section 10 of the NPSA which provides that all OPS shall register with the Bangko Sentral.

Operators of Payment System

An OPS under the NPSA is a person that performs any of the following functions:

  1. Maintains platform that enables payments or fund transfer, regardless of whether the source and destination accounts are maintained with the same or different institutions
  2. Operates the system or network that enables payments or fund transfer through the use of a payment instrument
  3. Provides a system that processes payments on behalf of any person or the government
  4. Any other similar activities as may be determined by the Monetary Board.

The term “person” as used in Circular No. 1049 covers both natural and juridical persons, and therefore covers all types of business organizations (e.g., single proprietorship, partnership, cooperative, corporation)

Examples of Activities Performed by an Operator of a Payment System

  1. Maintains the platform that enables payments or fund transfers, regardless of whether the source and destination accounts are maintained with the same or different institutions
  • Owns or operates a computer application system that enables payments or fund transfers
  • Sets rules by which payments may be made or funds may be transferred
  • Allows customers to fund their accounts by submitting to the operator cash or its equivalent in exchange for the value to be stored in their account
  • Allows accounts of system users to be linked to their accounts with other financial institutions (Fls) (e.g., deposit account, e-money account, credit card account)

2. Operates the system or network that enables payments or fund transfers to be made through the use of a payment instrument

  • Provides a system or network infrastructure that enables payments and financial services of FIs.
  • Sets rules, functions, procedures, arrangements or devices that enable an account holder or holder of the payment instrument to transact with a third party
  • Transfers payment information (e.9., card transaction details) to and from participating institutions
  • Provides network participants with a listing of the amounts due to/from other participants
  • Offers service/s to more than one (1) Fl and enables them to perform payments or fund transfers among each other
  • Enables the acceptance of specific payment instrument/s by institutions such as government, commercial establishments, and other merchants/billers

3. Provides a system that processes payments on behalf of any person or the government

  • Receives payment for or on behalf of the sellers of goods, providers of services, or creditors/billers in accordance with a written agreement
  • Sets rules, provides arrangements or facilities to collect funds from the public and transmits the same to sellers of goods, providers of services, or creditors/billers in accordance with a written agreement
  • Allows payments to be made to more than one commercial establishment or creditor/biller

Registration of Operators of Payment Systems (OPS)

A. OPS that is yet to commence operations
• Application for Registration:
o Duly Accomplished application for Registration form 1, signed by the President or any officer holding an equivalent position
o Business plan
o Copy of business registration or permit
• Fees – Registration Fee of P20,000 and 1,000 for replacement of COR
• Date of Registration – one month from the start of operations except where registration is required prior to commencement in the following instances:
o A regulator or government agency requires appropriate action from the BSP prior to the start of the OPS business;
o The OPS offers services that are similar from money service business
o Other instances as may be determined by the Monetary Board

B. OPS that is currently operating
• Application for Registration:
o Accomplished application for Registration form 1, signed by the President or any officer holding an equivalent position
o Business plan
o Copy of business registration or permit
• Fees – Registration Fee of P20,000 and 1,000 for replacement of COR
• Date of Registration – Within 3 months from the effectivity of this Circular

C. For Banks and EMIs (Electronic Money Issuers) that are currently operating, or will later operate:
• Registration through Notification – A Bank or an EMI shall submit to the appropriate department of the Bangko Sentral, a notification of its activities as an OPS. It includes business as an OPS, business model and target markets.
• Date of submission – within 3 months from the effectivity of this circular or 1 month from the start of their operations as an OPS.

Issuance of Bangko Sentral Certificate of Registration (COR)

The Bangko Sentral shall issue a provisional COR (PCOR) upon receipt of the required documents or Notification from the OPS which shall be valid for the period stated therein unless indicated otherwise in the List of PCORs published on the Bangko Sentral website. Thereafter, the Bangko Sentral shall issue a COR to the OPS, if warranted, and provided that the submitted documents satisfy the regulatory requirements.

Operating a Payment system without Registration

The Monetary Board will issue a directive to comply with the registration requirements. If remains unregistered after directive actions, the Monetary Board shall issue an order to such OPS to stop from operating a payment system without registration and to take immediate action to register. Any violation of this Section shall subject the OPS and/or its directors, officers, and/or employees to the sanctions set forth in Section 37 of R.A. No. 7653, as amended, and Section 19 of R.A. No. 11127, as appropriate.

Administrative Sanctions

Any person or entity acting as an operator without the requisite Authority from the Bangko Sentral fines in amounts as may be determined by the Monetary Board to be appropriate which do not exceed P1,000,000 for each transactional violation or P100,000 a day for each continuing violation.

In the event that the operator of a DPS fails to satisfy regulatory expectations, resulting in a threat to the safety, efficiency, and reliability of the system, the PSOF provides for the appointment by the Bangko Sentral of a manager to administer the operation of the operator of a DPS.

Attached also are the abovementioned BSP Circular No. 1049, R.A No. 11127 and the pertinent FAQs as provided by the BSP for your reading pleasure.ra11127Downloadbsp-circular-no-1049-series-of-2019Downloadfaq_ops_registrationDownload

DISCLAIMER: The advisory is not a substitute for an expert opinion and is purely a general research that may have not considered the entirety of other related topics. Any tax and/or compliance advice is not intended or written by the author to be used, and cannot be used, by a client or any other person or entity for the purpose of (i) avoiding penalties that may be imposed on by the regulatory bodies, or (ii) promoting, marketing, or recommending to another party any matters addressed herein.

The opinion or advice expressed in this advisory is based on the facts and circumstances gathered. Any inaccuracy in any of the assumptions set forth above may have the effect of changing all or part of this report, and this report may not apply. The advice is based on our interpretation of the provisions of the Code, the Revenue Regulations promulgated and issued by the tax bureau, BIR positions as set forth in published Revenue Rulings, other pronouncement, orders and circulars, and judicial decisions in effect on the date of this report, any of which could be changed at any time. Any such changes may be retroactive and could significantly modify the statements and opinions/ advice expressed herein. In effect, this might render the advisory obsolete or incorrect in partial or in full. We undertake no obligation to advise you of changes that may hereafter be brought to our attention