27 Sept 2016
Implementation of the Stored Value Facilities Regulatory Regime
The global retail payment landscape has been developing rapidly. Technology advancements have led to the emergence of new retail payment products and services. In Hong Kong, there has been a notable growth in such products and services being offered to the public in recent years. This article describes the new regulatory framework for stored value facilities under the Payment Systems and Stored Value Facilities Ordinance (Cap. 584) and the Hong Kong Monetary Authority’s approach in implementing the relevant regulatory requirements.
The Payment Systems and Stored Value Facilities Ordinance (Cap. 584) (PSSVFO) commenced operation on 13 November 2015. Prior to the enactment of the PSSVFO, the regulatory regime for stored value cards was provided in the Banking Ordinance (BO) (Cap. 155) which only applied to multipurpose stored value cards1 . The Clearing and Settlement Systems Ordinance (CSSO) also provided a legal framework for the Monetary Authority to designate and oversee large-value clearing and settlement systems such as the Real Time Gross Settlement systems and securities settlement systems. However, neither the regulatory regime under the BO nor the CSSO covered non-devicebased stored value payment facilities (which are commonly issued outside the banking sector, and store value on network-based accounts, mobile network accounts or computer servers) and retail payment systems (RPSs).
In light of this, it was considered necessary to expand the existing regulatory regimes to cover non-device based stored value facilities (SVFs) as well as RPSs to ensure their safety and soundness. Accordingly, the Hong Kong Monetary Authority (HKMA) together with the Government and the Department of Justice introduced legislative proposals to amend the CSSO, the BO and other relevant legislations to establish a new regulatory framework for SVFs and RPSs with the following policy objectives:
(a) to ensure the safety and soundness of the operation of SVFs and RPSs;
(b) to ensure adequate protection and no misappropriation of users’ float;
(c) to foster innovation in retail payment products and services in Hong Kong by providing clarity in the laws and a level playing field for market participants; and
(d) to maintain Hong Kong’s status as an international financial centre by upgrading the retail payment legislation to bring it in line with what other major financial centres are pursuing.
The legislative proposals were submitted to the Legislative Council in February 2015 and subsequently passed into law in November 2015. The PSSVFO was enacted accordingly, empowering the HKMA to, among other things, implement a mandatory licensing regime for multi-purpose SVFs and perform relevant supervisory and enforcement functions. This article focuses on the SVF regulatory regime under the PSSVFO.
1 “Stored value card” is defined in section 2 of the BO. In gist, a stored value card refers to a physical device, often in the form of a plastic card, issued by its issuer to the user as a payment means on which value can be stored.
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