regulation and supervision of payment systems in peru

REGULATION AND SUPERVISION OF PAYMENT

SYSTEMS IN PERU

José Luis Vásquez PazJefe del Dpto. Análisis del Sistema de Pagos

Banco Central de Reserva del Perú

Brasilia, September 2014

PERU: BACKGROUND

Source: International Monetary Fund

Average Growth (2004 – 2013)

Average Inflation (2004 – 2013)

6.6 4.1

2.9 6.3

55 3

PERU LATAM

226

-29 -15

Economic growth and price stability enhance confidence in the means of payment, reducing both costs and risks to economic agents.

THE ROLE OF THE CENTRAL RESERVE BANK OF PERU (BCRP) IN PAYMENT SYSTEMS

GOALS FUNCTIONS

Systemic Stability Oversight and Supervision

Safety Promotion

Efficiency User

Competition System Operator

Inclusion

• Market forces do not necessarily ensure the public objectives of safety and efficiency.

• Participants do not always assume all risks and costs associated with clearing and settlement.

• Factors like economies of scale, barriers to entry, etc. can potentially limit competition and create a dominant market position, which in turn may lead to lower service quality and higher prices.

WHY SUPERVISION?

WHY THE CENTRAL BANK?

• Payment systems are the basic infrastructure through which money flows across the economy, thereby facilitating the exchange of money for goods, services, and financial assets.

• They are instrumental in the implementation of monetary policy.

• A failure in the payment systems can affect the stability of financial firms and markets.

SYSTEMICALLY IMPORTANT PAYMENT SYSTEMS (SIPS)

Supported by adequate National legislation (Payment Systems Law and BCRP Circulars) International Standards (Principles BIS)

Value Operator Oversight

RTGS Large-Value Central Bank Central Bank

ACH Low-Value CCE S.A. Central Bank

SSS Securities CAVALI Central Bank*

(*) Only Fund Settlement.

SYSTEMICALLY IMPORTANT PAYMENT SYSTEMS (SIPS)

PAYMENTS HAVE GROWN FASTER THAN GDP

2008 2009 2010 2011 2012 2013

4.9

5.6

6.2 6.3

6.7

6.1

Value of Payments/GDP (times)

Source: BCRP

PREFERENCE FOR ELECTRONIC PAYMENTS

0%10%20%30%40%50%60%70%80%90%

100%

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r-08

jul-0

8oc

t-08

ene-

09ab

r-09

jul-0

9oc

t-09

ene-

10ab

r-10

jul-1

0oc

t-10

ene-

11ab

r-11

jul-1

1oc

t-11

ene-

12ab

r-12

jul-1

2oc

t-12

ene-

13ab

r-13

jul-1

3oc

t-13

Estructura % del volumen de operaciones en la CCE

Cheques Transferencias

Operations in ACH(% share)

TIMELINE

• 1997 / 1998: Early studies (International Monetary Fund)

• 2000: Introduction of RTGS and ACH.

• 2005: Introduction of Securities Settlement System (funds).

• 2009: Law of the Payment Systems (Law 29440).

• 2011: New RTGS.

• 2013 / 2014: New studies (IMF and World Bank)

PILLARS OF THE PAYMENT SYSTEMS LAW

• Finality.

• Governance/Transparency.

• Supervision/Scope and Powers.

PRINCIPLES FOR SUPERVISION

• Transparency.

• International standards.- Core Principles (2001): adopted- Principles for FMIs (2012): work in progress

• Effective powers and capacities.

• Consistency.

• Cooperation with other authorities.

SUPERVISION TOOLS

• Monitoring: is performed by collecting information.

• Evaluation: Regarding observance of the Law and Bylaws.

• Induce changes: In case of problems of the administrative agencies, or problems with participants, or the existence of potential for improvement.

• Inspections on site.

CENTRAL BANK REGULATORY SCOPE

CARD PAYMENTS PAYMENT SYSTEMS MONEY TRANSFER OTHERS

Networks LBTR (RTGS) Money Transfer E-MoneyOperators

Acquirers CCE (ACH) Telcos

Issuers SLMV (SSS) Other Arrangments

15

FINANCIAL INCLUSION

• The creation of a Commission to design the National Strategy for Financial Inclusion (ENIF), promotes both greater access and use of quality financial services.

• The ENIF should promotes financial inclusion through the implementation of coordinated actions (the public and private sectors) in the context of the preservation of financial stability.

E- MONEY AS A FINANCIAL INCLUSION TOOL

E-Money has the potential to provide access to payment services to a large segment of the population, avoiding the costs and risks of cash.

Relies primarily on mobile telephony, which has a wide coverage across populations and regions in the country.

Facilitates access to payment services by low-income and/or rural population segments.

E-MONEY LAW

Purpose: Regulation of the issuance of e-money and for EEDEs.

Definition: e-money is a monetary value as represented by a claim on the issuer:

- stored in an electronic medium,

- accepted by entities or persons other than the issuer,

- issued for an amount equal to the proceeds received,

- convertible to cash,

- not a deposit and does not accrue interest.

18

E-MONEY LAW

Issuance: Only entities supervised by the Superintendence of Banking, Insurance Companies, and Pension Funds (SBS), including “Empresas Emisoras de Dinero Electrónico” (EEDEs).

EEDEs:- Their main purpose is the issuance of e-money.

- May not grant credit against the funds received.

- Carry out only operations related to their main purpose.

- Required to comply with the provisions on the prevention of money laundering and the financing of terrorism.

E-MONEY LAW

• Consumer protection

- Trust fund.- Data protection.- Contracts

• Telco regulation

20

BYLAWS

• Authorization

• Constitution

• Prohibition to extend loans

• Prudential measures

• Role of bank agents

• Aggregators

Operations Res. SBS

6283-2013

EEDEsRes. SBS 6284-

2013

Bank AgentsRes. SBS

6285-2013

• Authorized operations

• Simplified accounts

• Contracts

• Trusts

21

INICIATIVES IN MOBILE PAYMENTS IN PERU

Mobile payment initiatives (currently at a stage of development) are led primarily by financial companies.

Mobile Payments- Banks- Using Smartphones or other devices

E-Money- Bank and non-bank entities.- Prepay cards (can use also cellphones)- Agent network

Platform of E-Money (Bank Association)

ECOSYSTEM

DispersiónCréditosSeguros

TradicionalCooperativaMicrofinancieras

AceptaciónY Agentes

Micropagos

Nóminas, Beneficios,Serviciosprofesionales

Gobierno

ServiciosPúblicos

Giros y Remesas

TOP

MED

BASE

VentaDirecta

Source: Asociación de Bancos del Perú

PLATFORM

Switch

Cha

nnel

s ASBANC Wallet Platform

Switch

Bancos

Red de Agentes

Operador 1 Operador 3 Operador 4Operador 2

Agentes Financieros

Tarjetas de crédito

Switch

Switch

ASBANC-Ericsson Wallet Platform

Can

ales

Source: Asociación de Bancos del Perú

FINAL REMARKS

• Payments systems regulation in Peru follows the international standards and ensures -through a careful supervision- the compliance by the systems administrators with the law and bylaws.

• Peru has implemented the regulatory framework for E-Money as a tool for financial inclusion.

• Both regulation and supervision evolve with innovation and new international standards.