Friday, September 3, 2021

What is an Operator of Payment System (OPS)?

Recent reports probably got us fed with headlines about an OPS or an Operator of Payment System. In July, the Bangko Sentral ng Pilipinas (BSP) has ordered social media platform Lyka to stop its operations as an OPS and urged to apply for registration first before continuing with its activities. In other news, the central bank also considers classifying the popular play-to-earn NFT game Axie Infinity as an OPS. But what really is an OPS, and why is it important to have it registered? Let’s find out.

Under the BSP regulations, OPS includes cash-in service providers, bills payment service providers, and entities such as payment gateways, platform providers, payment facilitators, and merchant acquirers that enable sellers of goods and services to accept payments, in cash or digital form.

National Payment Systems Act (NPSA)

The National Payment Systems Act (NPSA) or Republic Act 11127 mandates the BSP to oversee payment systems in the Philippines and exercise supervisory and regulatory powers for the purpose of ensuring the stability and effectiveness of the monetary and financial system.

Section 4 (1) of the NPSA defines an operator as any person who provides clearing or settlement services in a payment system, or defines, prescribes, designs, controls, or maintains the operational framework for the system. Under Circular No. 1049, an OPS performs any of the following functions:

(a) Maintains the platform that enables payments or fund transfers, regardless of whether the source and destination of accounts are maintained within the same or different institutions;

(b) Operates the systems or network that enables payments or fund transfers to be made through the use of payment instrument;

(d) Performs such other similar activities, as may be determined by the Monetary Board.

According to BSP, the term “person” as used in Circular No. 1049 covers both natural and juridical persons and therefore covers all types of business organizations, such as single proprietorship, partnership, cooperative, or corporation.

Who are the Operators of Payment Systems (OPS)?

• Cash-in service providers
• Merchant acquirers
• Payment facilitators
• Payment gateways
• Platform providers
• Bills payment service providers
• Entities facilitating payments for goods and services

Furthermore, the BSP reminds the public to deal with, entertain product offerings, or carry out financial transactions only with BSP-registered OPS.

Why is OPS registration required?

Under BSP Circular No. 1049, entities that operate as OPS are required to register with the central bank.

As per the BSP, registration is important as it allows the central bank to have oversight authority over all payment systems in the Philippines to ensure that it functions “safely, efficiently, and reliably” by itself and in relation to RA No. 11127, consistent with the BSP’s goals of consumer protection and financial stability.

Thus, in the exercise of its powers, the BSP will cover all institutions that perform operator functions relative to a payment system, including institutions not currently supervised by the BSP. Independent ATM Deployers, Bayad Centers/bill payment aggregators, online merchants/billers, and payment gateways may also be part of the scope if they perform operator functions relative to a payment system.

Meanwhile, all OPS that has not commenced operations shall register with the BSP within one (1) month from the start of their operations except in the following instances where registration is required before commencement of operation:

1. A regulator or government agency requires appropriate action from the BSP prior to the start of the OPS business;

2. The OPS offers remittance services as well as other similar activities performed by money service businesses; and

3. Such other circumstances may be determined by the Monetary Board.

The one (1)-month period will be reckoned from the date of the actual commencement of the OPS activity of the entity’s business operations.

OPS Registration Process

The BSP Circular No. 1049 and Memorandum No. 2019-023 provide the requirements and process for registration.

The BSP has no differing requirements for applicants registering as OPS. Hence, a COR will be issued to an applicant if it performs OPS activities, whether it identifies itself as a payment gateway, payment processor, or payment aggregator.

One of the requirements for registration is the copy of the business registration/permit indicating the line of business of the OPS from the city or municipality that has territorial jurisdiction over the principal place of business of the OPS.

On the other hand, for foreign-based OPS, the BSP requires the submission of equivalent documents issued by the jurisdiction of their principal place of business, such as the registration and incorporation documents with a certificate of translation, as necessary.

The BSP does not conduct a review of an OPS’s system or network infrastructure as part of the approval process for the COR. However, the BSP mentioned that they are not precluded from doing so in relation to the BSP’s oversight authority over all payment systems in the country.

Meanwhile, in the course of the evaluation, the BSP may request additional documents and information from the applicant to be apprised of the extent of its OPS activities. Besides, more specific rules and regulations on certain payment systems and their participants will be issued in the near term.

There’s no fee upon the submission of the application for registration. However, only entities that are found to be OPS under Circular No. 1049 and issued a Certificate of Registration (COR) are required to pay a registration fee of PHP 20,000. Further, under the Memorandum No. M-2019-023, banks and EMls that are also OPS and are issued COR are exempt from paying the registration fee.

Upon successful online registration, a Provisional Certificate of Registration (PCOR) is automatically issued to the applicant. For banks and EMIs, the PCOR shall be issued no later than three days from successful online registration.

As of August 27, 2021, there are 158 business entities registered as OPS. To verify if an OPS is duly registered with the BSP, check out the list of OPS with Certificate of Registration (COR) below.

Here is the list of OPS with Provisional Certificate of Registration (PCOR):

According to BSP, such PCOR shall be valid for the period stated therein unless otherwise provided in the list of entities with PCORs published on the official BSP website. Generally, the PCOR has a validity period of three months from the date of issuance. However, on or before the expiration of the validity period of the PCOR, the applicant shall be advised on the disposition of its application for OPS registration.

In addition, the PCOR shall be valid for the period stated therein unless indicated otherwise in the list of PCORs to be published on the BSP website.

The website will list the entities to whom PCOR and COR have been issued. The period of validity of the PCOR will be as indicated in the PCOR. Nonetheless, such period may be adjusted-shortened or, when warranted, extended to allow for compliance with additional requirements. Thus, in all cases, the periods will be published on the website.

Sanctions for operating a payment system without registration

Under Circular No. 1049, the Monetary Board may issue a directive to an OPS to:

(a) comply with the registration requirements under the Circular; and

(b) stop from operating a payment system without registration from BSP and to take immediate action to register.

And if the OPS continues to operate without registering despite the foregoing directives, the BSP may coordinate with other government agencies to inform them that said OPS is operating without registration under Section 9 of RA No. 11127.

The BSP may also impose other penalties and sanctions provided for in Section 20 of RA No. 11127 and the pertinent portion of Section 37 of RA No. 7653, as amended by RA No. 11211.

So, if a platform wants to be an OPS in the Philippines, it has to be registered so it can be regulated and monitored to make sure it’s safe and reliable for the consumers.

Source: BSP

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