Umar asks financial institutions to improve cyber security

ISLAMABAD: Finance Minister Asad Umar on Monday asked financial institutions to strengthen cyber security infrastructure to ensure safety of customers during cashless transactions, while launching maiden central bank’s regulations for non-banking institutions to offer e-payment solutions.

Umar, while unveiling the regulations for Electronic Money Institutions (EMIs), asked the central bank and non-banking institutions (NBIs) to ensure safety and security of customers for avoiding hacking of data.

The new regulations will provide regulatory framework for EMIs eager to offer innovative payment services. EMIs offer innovative, user-friendly and cost effective low-value digital payment prepaid instruments like wallets, prepaid cards, and contactless payment instruments, including wearables.

Finance minister said NBIs must put up an effective know-your-customer system. If a couple of incidents of data hacking occurs it could retard all efforts of the regulator and stakeholders to introduce the new payment system.

“The state-of-the-art safety mechanism is imperative to place this system into Pakistan,” he said. “I have told Prime Minister Imran Khan on several occasions that no real change could occur without digitalisation and increased use of technology. The FBR with workforce of 27,000 has been raiding business premises but the solution lies in usage of technology.”

Finance minister raised question over confidentiality of data which is used as an excuse for tax evasion. The elites could use luxury vehicles to demonstrate their wealth but when tax details are published they said the disclosure could be exploited for kidnapping for ransom, he said.

Umar said the economy is facing a number of challenges, including budget deficit, low savings and investment and balance of payment crisis. Another crisis, which is not mentioned regularly, is lack of digitization of the economy. “Innovation and technology could promote entrepreneurship and advancement of society.”

The minister said Pakistan lags behind 20 to 40 years and innovation and technology use could help the economy leapfrog. An entity desirous to get EMI licence is required to fulfill initial capital requirement of Rs200 million under the new regulations.

State Bank of Pakistan (SBP) Deputy Governor Jameel Ahmed said the limit is to ensure safety and security of customers. SBP’s Director for Payment System Sohail Jawad said a proper screening system is in place to comply with money laundering and counter financing of terrorists.

There will be monthly load limit of Rs50,000 on computerised national identity card verification and Rs200,000 on biometric verification under the new regulations for e-payment system. There will be a cash withdrawal limit of Rs10,000/day subject to biometric verification or at least two-factor verification.

The EMIs could not co-mingle with user/customer funds and place the funds in trust account with licenced banks. There will be limit on placing more than 50 percent of the funds with a single trustee in case of outstanding e-money exceeds Rs100 million.

An EMI is allowed to invest 50 percent of the last three-month daily average outstanding e-money in government securities with maturity of up to 1 year.

Traditionally, payment instruments in Pakistan are issued by banks without participation of non-banking entities. “EMIs may engage in the following activities such as issuing and distribute e-money payment instruments,” the SBP said in a statement.

“These firms can also acquire payment instruments of other EMIs and banks and

microfinance banks. EMIs will be allowed to carry out multilateral routing, switching and/or processing of payment transactions.”

The SBP said the EMI cannot conduct the business of banking including the acceptance of funds from public for the purpose of lending, investments or any speculative activity.

“EMI shall take approval from SBP before offering cross-border e-money products/services,” it said. EMI shall neither pay interest/returns to customers nor offer anything that adds to the monetary value of e-money, however, EMI may offer discounts etc. on goods and services provided such discounts are not linked to the amount or length of time e-money is held by the customer.”