As we know, payment institutions (PIs) can take on the following distinct natures, depending on their business model:
- Electronic currency issuer;
- Postpaid payment instrument issuer;
- Payment Transaction Initiator.
The Central Bank of Brazil (BCB) has been doing an excellent job of creating a more competitive financial environment, opening the doors of many new players to provide payment services.
This brings real benefits to the general population, compared to the traditional banking system, such as:
- Cost reduction with account maintenance;
- Fee exemptions for financial transactions, such as payments, transfers and withdrawals;
- Improved user experience;
- Greater affinity through more accessible language and approach.
It is for no other reason that we are witnessing a real revolution in payment services, which ends up being good for the consumer.
Even with all the good intention of the BCB in encouraging these new times, PIs are still subject to a broad (and often complex and costly) regulatory framework.
There are not many alternatives for this, as it is a high-risk environment, which involves the management of customer resources, a subject that is therefore highly regulated.
Imagine a PI issuing electronic money that makes an operational error, putting at risk the deposits of thousands of customers it has, or even an acquirer that does not properly record and settle the amounts receivable from thousands of commercial establishments. It’s a matter of a lot of responsibility (dealing with third-party resources), so it has to be really well regulated.
To get a more concrete idea of what we are talking about, an authorized PI will have to fulfill many requirements. We have created below, for illustration purposes only (that is, it is not an exhaustive list), a table that, by normative pillar, presents the matters that must be properly managed at IP, through processes, controls, governance and specialized people:
|AML/TF & Regulatory Compliance||Money Laundering Prevention and Terrorism Financing|
|UN Security Council sanctioned lists|
|Payment Accounts: Rules and Operational Management|
|Citizen’s Demand Registration System (RDR)|
|Internal Controls & Auditing||Management of the Internal Controls Structure|
|Treasury, Operations & Products||CCME (Electronic Currency Corresponding Account)|
|Customer Registration System (CCS)|
|Provision of information to Deban|
|Suitability of Products and Services|
|Fees in general|
|Credit Information System (SCR)|
|Instant Pay Account (IP Account)|
|Risk Management||Risk management, minimum equity and governance requirements|
|Accounting||Financial statements in COSIF standard|
As you can see, this new world of magnificent business opportunities for creative and innovative entrepreneurs comes with great responsibility and compliance cost.