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The Bangko Sentral ng Pilipinas (BSP) has announced that applications for its new Merchant Acquiring Licence (MAL) category must now be submitted entirely online.

In a  issued last week, the BSP informed all firms that intend to engage in merchant acquisition that they must obtain an MAL via an online application process.

The central bank also provided new application guidelines to firms in an effort to clarify the requirements they must fulfil in order to obtain an MAL.

Effective immediately, all MAL applications and related communications must be addressed to PSLD-Applications@bsp.gov.ph.

Likewise, all supplementary information must be submitted electronically, preferably as a PDF, and files that require shared drive access or passwords will not be accepted. 

Quickly changing situation

The move comes less than six months after the BSP’s new MAL licence was introduced.

Since August last year, as covered by ���ĺ�������, any firm that intends to provide merchant acquiring services in the Philippines must obtain an MAL licence before doing so.

The requirement is applicable to firms that already hold an Operator of Payment Systems (OPS) licence, and to firms that do not hold an OPS licence.

If a firm does not already hold an OPS licence, but applies for and successfully obtains an MAL, it does not need to obtain an OPS licence.

As outlined in the circular that introduced the MAL licence category, the BSP’s aim is to standardise the conduct of firms offering merchant payment acceptance activities (MPAA).

Specific standards in areas such as safeguarding of customer funds and protection of merchants’ rights are imposed by the licensing framework.

Information technology (IT) and anti-money laundering (AML) standards are also imposed, including know your customer (KYC) standards for onboarding merchant customers.

“The framework aims to ensure that payment system operators engaged in MPAA adopt governance structures and measures to effectively manage risks attendant to their business model,” said the BSP.

New application checklist

Alongside the requirement to apply online, the BSP also provided a  to guide firms when building and submitting their applications. 

Each MAL application must pass through three stages: 1) Determination of applicant’s eligibility; 2) Evaluation of application; and 3) Issuance (or denial) of MAL.

In the “business plan” section of the application, the BSP has clarified that this must include, at a minimum:

• Company overview, business model and operational network
• Profile of target market
• Proposed products or services, with a complete description of their features and transactions/processes, including security controls
• Information on whether the proposed products or services are incidental to, or bundled with, any other products or services
• Diagram of the configuration of the system/s supporting the proposed products and services, showing the linkages of host systems, network infrastructure, security tools and disaster recovery setup
• Detailed narrative of funds flow/channels, including transaction/process flowcharts for each product/service offered
• Pricing mechanism and schedule of fees
• Implementation plans, target milestones for business/product launch, including systems, processes and third parties that will perform key roles

The BSP has said the illustrations and diagrams should clearly outline how the applicant intends to manage merchant onboarding while maintaining KYC and due diligence standards.

The applicant must also show how a typical transaction would take place, and how the acceptability of the source of funds used in the transaction could be ensured.

Timelines for payment and settlement cycles must be provided, including service-level agreements with third parties.

Philippines tightens digital payments regulation following explosive growth

The move towards tighter supervision of merchant acquirers follows a period of explosive growth for digital payments in the Philippines.

In July 2024, the BSP  that it had hit a long-standing target of digitising at least 50 percent of all retail payments (by volume).

In 2023, according to a BSP  on digital payments, 52.8 percent of retail payments were made via digital channels.

This was a 25 percent increase over the previous year, during which 42.1 percent of retail payments were made digitally.

Digitising 50 percent of retail payments was a key goal under the BSP’s .

“We take pride in this achievement as proof that our pursuit of a cash-lite economy has consistently been progressing,” said Eli Remolona, BSP governor.

“We owe this to our citizens who are the foremost beneficiaries of a safe, efficient and inclusive digital payments system.

“As we serve their payment needs and deepen financial inclusion, we are ready to bring digital finance to new heights.”