REGULATION AND SUPERVISION OF PAYMENT SYSTEMS IN PERU José Luis Vásquez Paz Jefe del Dpto. Análisis del Sistema de Pagos Banco Central de Reserva del Perú Brasilia, September 2014 PERU: BACKGROUND PERU LATAM Average Growth (2004 – 2013) 6.6 4.1 Average Inflation (2004 – 2013) 2.9 6.3 55 3 Economic growth and price26stability 2 enhance confidence in the means of -15 -29 payment, reducing both costs and risks to economic agents. Source: International Monetary Fund 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 WHY SUPERVISION? • 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 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) 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. Supported by adequate National legislation (Payment Systems Law and BCRP Circulars) International Standards (Principles BIS) SYSTEMICALLY IMPORTANT PAYMENT SYSTEMS (SIPS) PAYMENTS HAVE GROWN FASTER THAN GDP Value of Payments/GDP (times) 6.7 6.2 6.3 6.1 5.6 4.9 2008 Source: BCRP 2009 2010 2011 2012 2013 PREFERENCE FOR ELECTRONIC PAYMENTS Operations in ACH Estructura % del volumen de operaciones en la CCE (% share) ene-08 abr-08 jul-08 oct-08 ene-09 abr-09 jul-09 oct-09 ene-10 abr-10 jul-10 oct-10 ene-11 abr-11 jul-11 oct-11 ene-12 abr-12 jul-12 oct-12 ene-13 abr-13 jul-13 oct-13 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Cheques Transferencias 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 Operators E-Money Acquirers CCE (ACH) Telcos Issuers SLMV (SSS) Other Arrangments 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. 15 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. 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. 18 E-MONEY LAW • Consumer protection - Trust fund. - Data protection. - Contracts • Telco regulation BYLAWS Operations Res. SBS 6283-2013 EEDEs Res. SBS 6284-2013 • Authorization • Authorized operations • Constitution • Simplified accounts • Contracts • Prohibition to extend loans • Trusts • Prudential measures 20 Bank Agents Res. SBS 6285-2013 • Role of bank agents • Aggregators 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) 21 ECOSYSTEM TOP MED Servicios Públicos BASE Tradicional Cooperativa Microfinancieras Giros y Remesa s Aceptación Y Agentes Dispersión Créditos Seguros Nóminas, Beneficios, Servicios profesionales Micropagos Gobierno Venta Directa Source: Asociación de Bancos del Perú PLATFORM Operador 2 Operador 1 Operador 3 Operador 4 Canales Channels Bancos Switch Agentes Financieros ASBANC-Ericsson ASBANC Wallet Wallet Platform Platform Tarjetas de crédito Switch Switch Red de Agentes 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.