Brazilian Central Bank makes public consultation to change payment institutions regulation

July 15, 2020
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BC receives until 08/08/2020 contributions on the payment transaction initiator, an important agent in the operationalization of Open Banking in Brazil.

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Continuing the Open Banking agenda, the Central Bank (BC) launched a public consultation on proposals for changes in the regulation of payment institutions, with emphasis on the payment transaction initiator, a new type of payment institution that will enable consumers to make payments using different means than traditional ones. Give your contribution on this link, in the edict nº 77/2020. The public consultation runs until 08/08/2020. To see the standard currently in force, access Circular No. 3,885 / 2018.

Whether in a physical store or in a shopping portal (e-commerce), nowadays debit or credit cards are the most used means of payment. With the initiator of the payment transaction, the consumer will be able to make a debit payment in his deposit or payment account, even if he does not use his card. Using the means provided by the payment transaction initiator, the consumer will be able to order the institution in which he has an account that will transfer the amount of the purchase made to the merchant's account, within any payment arrangement that is part of the Brazilian Payment System (SPB), like the PIX.

The payment transaction initiator must be an institution authorized to operate by the Central Bank and will be able to provide the service to the consumer and commercial establishments.

“Where there is a need to pay, there may be a payment initiator”, explains Mardilson Queiroz, consultant at BC. "In this way, the flow of money is restricted to the institutions that hold the payer and recipient accounts and the customer's digital journey is simplified."

Hypothetical example

The customer orders the delivery of food directly to the restaurant through an application from the restaurant itself. In a traditional payment, he would have to go to the application of the institution where he has an account to pay or use the card. With the new payment transaction initiator institution, the same restaurant application will be able to connect you to a single payment transaction initiator and it will be able to order the institution in which you have an account to transfer the resource to the restaurant account.

Open Banking

The regulation of this new type of payment institution was foreseen in the open banking project, as can be seen in Communiqué nº 33.455, of 4/24/2019, and in Public Consultation nº 73 of 2019, due to the possibilities created by the Open ecosystem. Banking. When the open financial system is implemented, the technological interfaces of the financial world will be interconnected. Thus, the step of initiating payment may be disassociated from the traditional chain.

Institutions authorized by the Central Bank to provide payment services may perform the function of initiating payments normally, without the need for a new authorization. The difference is that, after the edition of the standard that is under public consultation, they will start competing with new players in the market, whose performance depends on the BC's authorization. This competition has the potential to stimulate new business models and lower costs for the consumer.

About payment institutions

Payment institutions differ from financial institutions in that they are not authorized to make loans and financing. Check the types of payment institutions currently in existence.

Other changes under public consultation

The normative amendment proposed by the BC also dispenses with the fintechs of the Direct Credit Society (SCD) type that provide services as issuers of a post-paid payment instrument of the BC's prior authorization requirement for the provision of this service.

In addition, the proposed amendment now requires payment institutions that issue electronic money to request authorization to operate with the BC before beginning its activities. Six years after the beginning of the regulation of payment institutions, the Central Bank considers it necessary to standardize the rule of access to the payment system. As a result, asymmetries of opportunities are mitigated in the market conditions of this business model that manages prepaid accounts, the monitoring of transactions is improved, notably in the prevention of money laundering and the financing of terrorism, and the management of part of popular savings.

Las opiniones compartidas y expresadas por los analistas son libres e independientes, y de ellas son responsables sus autores. No reflejan ni comprometen el pensamiento u opinión de Latam Fintech Hub, por lo cual no pueden ser interpretadas como recomendaciones emitidas por la platafomra. Esta plataforma es un espacio abierto para promover la diversidad de puntos de vista sobre el ecosistema Fintech.

Continuing the Open Banking agenda, the Central Bank (BC) launched a public consultation on proposals for changes in the regulation of payment institutions, with emphasis on the payment transaction initiator, a new type of payment institution that will enable consumers to make payments using different means than traditional ones. Give your contribution on this link, in the edict nº 77/2020. The public consultation runs until 08/08/2020. To see the standard currently in force, access Circular No. 3,885 / 2018.

Whether in a physical store or in a shopping portal (e-commerce), nowadays debit or credit cards are the most used means of payment. With the initiator of the payment transaction, the consumer will be able to make a debit payment in his deposit or payment account, even if he does not use his card. Using the means provided by the payment transaction initiator, the consumer will be able to order the institution in which he has an account that will transfer the amount of the purchase made to the merchant's account, within any payment arrangement that is part of the Brazilian Payment System (SPB), like the PIX.

The payment transaction initiator must be an institution authorized to operate by the Central Bank and will be able to provide the service to the consumer and commercial establishments.

“Where there is a need to pay, there may be a payment initiator”, explains Mardilson Queiroz, consultant at BC. "In this way, the flow of money is restricted to the institutions that hold the payer and recipient accounts and the customer's digital journey is simplified."

Hypothetical example

The customer orders the delivery of food directly to the restaurant through an application from the restaurant itself. In a traditional payment, he would have to go to the application of the institution where he has an account to pay or use the card. With the new payment transaction initiator institution, the same restaurant application will be able to connect you to a single payment transaction initiator and it will be able to order the institution in which you have an account to transfer the resource to the restaurant account.

Open Banking

The regulation of this new type of payment institution was foreseen in the open banking project, as can be seen in Communiqué nº 33.455, of 4/24/2019, and in Public Consultation nº 73 of 2019, due to the possibilities created by the Open ecosystem. Banking. When the open financial system is implemented, the technological interfaces of the financial world will be interconnected. Thus, the step of initiating payment may be disassociated from the traditional chain.

Institutions authorized by the Central Bank to provide payment services may perform the function of initiating payments normally, without the need for a new authorization. The difference is that, after the edition of the standard that is under public consultation, they will start competing with new players in the market, whose performance depends on the BC's authorization. This competition has the potential to stimulate new business models and lower costs for the consumer.

About payment institutions

Payment institutions differ from financial institutions in that they are not authorized to make loans and financing. Check the types of payment institutions currently in existence.

Other changes under public consultation

The normative amendment proposed by the BC also dispenses with the fintechs of the Direct Credit Society (SCD) type that provide services as issuers of a post-paid payment instrument of the BC's prior authorization requirement for the provision of this service.

In addition, the proposed amendment now requires payment institutions that issue electronic money to request authorization to operate with the BC before beginning its activities. Six years after the beginning of the regulation of payment institutions, the Central Bank considers it necessary to standardize the rule of access to the payment system. As a result, asymmetries of opportunities are mitigated in the market conditions of this business model that manages prepaid accounts, the monitoring of transactions is improved, notably in the prevention of money laundering and the financing of terrorism, and the management of part of popular savings.

Las opiniones compartidas y expresadas por los analistas son libres e independientes, y solamente sus autores son responsables de ellas. No reflejan ni comprometen el pensamiento o la opinión del equipo de Latam Fintech Hub y, por lo tanto, no pueden interpretarse como recomendaciones emitidas por la plataforma. Esta plataforma es un espacio abierto para promover la diversidad de puntos de vista en el ecosistema Fintech.
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