The Payment System Act: New Age of Payment Regulatory Landscape
The Payment System Act B.E. 2560 (2017) (the PSA) was published in the Government Gazette on 18 October 2017. Please click here to view the PSA.
The PSA aims to unify existing payment laws and regulations and synchronize certain requirements with international standards as well as allow some flexibility to support or regulate emergence of new payment system/service in the future. The PSA regulates Systemically Important Payment Systems, Regulated Payment Systems, and Regulated E-Payment Services.
1. When will the PSA become effective?
The PSA will become effective 180 days after the publication in the Government Gazette (i.e., 16 April 2018). The Ministry of Finance (MOF) will issue notifications designating the types of Regulated Payment Systems and Regulated Payment Services and the Bank of Thailand (the BOT) will issue notifications on ongoing compliance requirements. These notifications are planned to be announced on the same date that the PSA becomes effective (i.e., 16 April 2018). The draft notifications are not yet publicly available. According to the BOT officer, public hearings on the draft notifications can be expected around December 2017. Once the PSA becomes effective, certain existing e-payment laws and regulations will be revoked.
2. Do service providers need to get new licenses?
Existing licensed e-payment service providers who wish to continue their businesses must submit an application for a new license or registration within 120 days after the publication of the MOF Notification (i.e., 13 August 2018). Upon the submission of the application, existing operators can continue to operate their businesses until the MOF or the BOT orders otherwise.
For new operators, although they are not required to submit an application for a license or registration within the said 120-day period, they cannot operate the business unless and until they receive the licenses or are registered under the PSA.
3. New Categorization: Regulated Payment Activities under the PSA
3.1 "Systemically Important Payment System" refers to the principal payment system infrastructure that supports money transfers of a high value or that is used for clearing or settlement between Members, which upon interruption may cause a continuing and widespread effect on the members of the system. Systemically Important Payment Systems include the Payment Systems established and operated by the BOT, and any other Payment Systems prescribed by the MOF as Systemically Important Payment Systems. Examples are BAHTNET (BOT Automated High-value Transfer Network) and ICAS (Imaged Cheque Clearing and Archive System).
3.2 "Regulated Payment System" refers to the system for fund transfer, clearing or settlement with either of the following characteristics and that has been designated as Regulated Payment System by the MOF:
(a) a payment system that acts as a center of or a network between system users for the purpose of accommodating fund transfers, clearing or settlements.
The current e-payment services like transaction switching, clearing, credit card network, and settlement services under the current Royal Decree Regulating on Electronic Payment Services B.E. 2551 (2008) (the E-Payment Royal Decree) will likely be re-categorized and regulated as "Regulated Payment Systems" under the PSA instead. Examples are inter-institution fund transfer system, payment card network, and settlement system, the details of which are subject to the MOF Notifications.
(b) other payment systems that may affect the public interest, public confidence or the stability and security of payment systems.
3.3 "Payment Service" refers to the provision of any payment instrument or payment channel service, for the purpose of paying for goods or services, transferring money, or carrying out other financial transactions. The MOF may announce the following services to be a "Regulated Payment Service":
(a) provision of credit card, debit card, or ATM card services - This will likely refer to "issuance" of these payment cards, subject to the final MOF notification;
(b) provision of e-money services - There will likely be new categorization and exemptions for e-money services in the MOF notification;
(c) provision of payment service via electronic means to receive payments on behalf of sellers, service providers, or creditors - This could possibly cover a wide range of services e.g., acquirer, payment facilitator, online payment gateway, bill payment, etc.;
(d) money transfer via electronic means; and
(e) any other payment services that may affect the financial system or the public interest.
4. License or Registration?
Providers of Regulated Payment Systems and Regulated Payment Services are required to obtain a license from the MOF. However, in the case where the systems or services are innovations adopting new technologies and are in trial period (e.g. FinTech participating in regulatory sandbox), or are provided to a limited number of customers without broad effect on the payment system or the public, only a registration with the BOT is required.
5. Who are eligible to apply?
Only a limited company or public limited company, or other juristic persons as prescribed by the BOT can apply for a license from the MOF or register with the BOT to be able to operate a Regulated Payment System or a Regulated Payment Service. The details regarding qualifications of the applicants, application process, application fee, will be specified in the draft BOT notification.
6. Protection of Settlement through Systemically Important Systems
To ensure reliability and efficiency in the payment markets in case of failure of a Member in the Systemically Important Systems, the PSA introduces the following concepts:
6.1 Finality of Payments
The money transfer, settlement, or clearing of the Member through any Systemically Important Payment System carried out before the issuance of the court order to accept the business reorganization petition or the grant of the receivership order against the Member may be carried out until completion in accordance with the system’s criteria, but must be completed no later than the end of the day of the issuance of the order, and shall be valid, not being subject to any revocation or amendment.
6.2 Protection of Collateral
Any funds, securities, or other instruments that a Member maintains as security for participating in a Systemically Important Payment System, will be protected and not be deemed assets distributable among the creditors of the Member in bankruptcy proceedings.
7. Protection of Prepaid Fund
- Any business operators who receive prepaid fund from customers must keep it separate from its own assets (i.e. asset segregation) and cannot use such fund for any other purpose.
- Such fund still belongs to the customers but the business operator will bear the interest.
- In bankruptcy proceedings and civil case in respect of the e-payment business operator, the prepaid fund will be segregated and protected and will not be subject to seizure, attachment or distribution to the creditors.
8. Supervision in Special Cases
For efficient oversight and ability to apply the law to the dynamic payment industries, the BOT is empowered to:
- Inquire those involved in a payment system or a payment service not yet regulated, for monitoring reason.
- Prohibit any transactions relating to payment systems and payment services with those who are not licensed or registered.
- Propose a royal decree to regulate any service similar to Regulated Payment System or Regulated Payment Services if such service may affect the public or the stability of the financial/payment systems.
For more comprehensive information, please contact our team at Baker McKenzie.