BOJ makes strides towards to retail payment systems

Getting money from a mobile phone my sound like science fiction, but the Bank of Jamaica (BOJ) is setting up regulations that will allow persons to do just that.

The development is the latest move in the long history of digital transactions, starting with systems that allowed the transfer of millions of dollars between banks.

“The BOJ has assessed the major risks of such a large payment systems,” said Livingstone Morrison, the regulator’s deputy governor.

Mobile money, also known as mobile payments, are financial services currently offered on mobile phones.

But the Bank, which has just published its Draft Guidelines for Retail Payment Services, would like operators to find other alternatives.

“We don’t want to get locked into a particular device or method,” Morrison said.

Among the options are stored value cards, similar to those operated by Palace Amusement at its cinema chain.

If they store value, can be accessed electronically or magnetically, are issued for funds, can be used to make purchases and are accepted for payment by persons other than the issuer then they will come under the draft guidelines.

“Those consulted will have to satisfy the BOJ”s underlying principle of achieving transparency and safety,” Morrison said.

“It cannot be a free for all. The BOJ is responsible for oversight and to ensure that systems are safe and efficient.”

Operators around the world have been experimenting with mobile phones, chips and sim cards as payment systems, the Bank said.

“Innovations in the area of mobile payment have been adapted to an extent in Jamaica”, the BOJ said. It added that the provision of guidelines will define the criteria that operators in the retail payment sector must satisfy.

The Bank expects that the guidelines will bring greater levels of transparency to the retail payments sector.

It also believes that it will lead to the introduction of new payment instruments and services and make paying for goods and services easier.

“The competitive nature will be inconsistent if we use different guidelines for devices that have the same purpose,” Morrison said. The BOJ, through consultation with the major stakeholders wants to know; who will use these devices; when the devices will be used and how they will be used.

With the introduction of new retail payment services, the national payment system will be have to include appropriate levels of risk management.

The regulations are also expected to boost consumer confidence, the BOJ said.

Consultation started in April last year, and the BOJ expects feedback on its draft within the next 90 days.

“It was important that we invited a discussion,” Morrison said.

Entities and their agents authorised to provide retail payment services will have to be transparent regarding their terms and conditions of service.

Dennis Cohen, deputy group managing director of National Commercial Bank said that the draft guidelines seek to establish a balanced regulatory framework.

They will define standards while keeping the flexibility to allow innovation and infrastructure development by private interests.

Both Sony Erickcon and Google have implemented mobile payments internationally.

Seven years ago, the BOJ embarked on a comprehensive plan to reform and modernise the payment and settlement infrastructure in Jamaica.

On the retail side, the BOJ said it has invested a lot of time to come up with workable solutions to problems that may arise when it comes to the transfer of money.

Phase two of the BOJ’s payment system reform agenda is in the process of implementation. A part of this component is the strengthening of the regulatory framework governing retail payment services.

There are some existing legislative framework, notably the “Enactment of the Payment Clearing and Settlement Act of 2010; JamClear-RTGS the framework used for settlement of large value payments; JamClear-CSD to implemented to serve as the national register for dematerialized fixed income Bank of Jamaica and Government of Jamaica securities and related investor accounts.

BOJ has noted that the current legal and regulatory framework in Jamaica provides for the issuance and management of e-money by the commercial banks under the Banking Business (Electronic Money) Order, 2006.

The Bank said, “to date, this Order has been effective in preventing unauthorized persons from offering innovative retail payment services in a manner that could undermine the safety of the entire system and undermine public confidence in the subsector”.

Those existing legislative framework and regulations are being reviewed in along with the implementation of these guidelines to ensure these reforms are implemented to support the retail payment system in accordance with international standards and requirements.

The policy positions have been reached after extensive consultations and discussions with stakeholders in the payment services sector. The National Payments Council, which is chaired by the BOJ, representatives from the Ministry of Finance and Planning, Bankers Association were some of the stakeholders consulted. The major telecommunication service providers were also engaged in discussions.

Institutions intending to offer these services are required to seek authorization from the Bank. Retail payment services that are currently offered by deposit taking institutions, which were previously approved by the Bank, will be brought within the scope of the Draft Guidelines, the BOJ revealed.

“A mobile is just a device”, Morrison said. While the device has special techniques, there must be consistency; there must be applicability in other areas such as cards and chips. “They must be treated on a consistent fashion”, he said.

Based on Cohen’s reckoning, this development represents the next stage in the evolution and reform of Jamaica’s payment system.