Saturday September 18, 2021

State Bank issues rules to promote e-money

May 10, 2016

KARACHI: The State Bank of Pakistan (SBP) on Monday issued prepaid card regulations in order to promote electronic payments and providing an enabling and level playing field for all the existing and potential participants.

The central bank said the regulations have been developed in line with the international recommendations such as those issued by the Financial Action Task Force (FATF) for anti-money laundering (AML)/ combating the financing of terrorism (CFT) risks associated with the prepaid cards.

Prepaid card is a payment instrument built around a pay early, spend later model rather than the pay now and pay later models used in debit and credit cards respectively, the SBP said.

Prepaid cards are considered ideal for giving unbanked segments of the population a flavour of formal financial products without the need of opening a formal banking account. Prepaid cards are being promoted as an alternative to a transaction banking account as its features resemble those offered in transaction banking accounts.

As a result, prepaid cards are considered to play an important role for enabling financial inclusion, targeting not only the lower-income unbanked individuals, but also conventional consumers of traditional banking services, the central bank said.

The SBP said to promote card usage in the domestic market, financial institutions are allowed to offer prepaid cards through authorised agents.

The regulations will govern the open loop prepaid cards that are issued by a bank on a prepaid basis in electronic or physical form to a customer in a specified amount, may be reloadable in exchange for payment; and can be redeemed at multiple, unaffiliated merchants, or usable at different alternate delivery channels like ATMs and Internet etc.

The central bank said the commercial banks can issue up to Rs500,000 worth prepaid cards directly to a person on biometric verification and Rs100,000 on verification of CNIC. Authorised agents, however, were authorised to issue prepaid cards amounting Rs50,000 and Rs25,000.

Under the regulations, banks would identify and document the risks associated with issuance of prepaid cards, including reputational risks that may arise in relation to the development, business practices, and sale of prepaid card products before launching. “Banks shall perform this exercise for all existing prepaid cards by September 2016,” the SBP said.

The SBP allowed payroll cards to be issued by the banks for the purpose, for which the banks have been instructed to enter into agreements with employers seeking to issue payroll cards to their employees.

The banks are also allowed to issue social transfer card with the condition that the beneficiary name, along with CNIC and other details are provided by the relevant government entity. Further, the SBP allowed issuance of Hajj card not more than 5,000 Saudi Riyal against customer’s passport having a valid Hajj visa.

To ensure compliance of SBP’s AML and CFT Regulations, banks have been directed to develop internal policies, procedure and controls to prevent money laundering, and terrorist financing through the prepaid cards. “Banks shall clearly define and apply prepaid card funding limits, reload limits, cash access limits and purchasing limit for different categories of prepaid cards, commensurate with the risk assessment of the card product, targeted market and intended use,” the SBP added.