USAID E-PESO ACTIVITY
Shared Cash Agent Network
Cash Agent Network Specialist End of Contract Report
April 30, 2020
Prepared for the United States Agency for International Development by Anatoly Gusto under “E- PESO” Contract No. AID-492-C-15-0001 implemented by Chemonics International Inc. The author’s views expressed in this publication do not necessarily reflect the views of the United States Agency for International Development or the United States Government.
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EXECUTIVE SUMMARY
This report contains the activities, accomplishments and recommendations of the Cash Agent Network Specialist for the Interoperable Cash Agent Network Project for the period November 2019 to April 2020, which was spearheaded by the USAID- funded E-PESO Project.
The project entailed significant efforts in securing buy-in and alignment with key industry players as well as the regulator. Also, synergies were explored with the Bangko Sentral ng Pilipinas (BSP) and Philippine Payments Management, Inc. (PPMI) where support for the project was obtained. The development work that went into the project covered developing the ISCAN term sheet agreement, which covers the key preliminary agreements jointly identified by the pilot partners around policies, processes and standards in putting up a shared cash agent network.
1. Securing buy-in of Gcash-Mynt, PayMaya, Land Bank and OmniPay
The Project Team, which was composed of USAID E-PESO representatives, international consultant and local cash agent network specialist, held initial meetings with target initial start-up group (SUG) members to secure their buy-in and commitment to participate in the ISCAN Project. Their involvement as members of the start-up group is perceived to be critical in the successful development of a shared cash agent network in the country. Through consultation meetings and continuous dialogue, the project team was able to secure their commitment to proceed to enable the use of their institution’s cash agents by customers of other institutions, and the use of other institutions’ cash agents by their customers for cash in/out transactions; and to participate in pertinent pilot and eventual go-to market activities.
2. ISCAN Workshop
E-PESO facilitated a workshop on January 23, 2020, which was attended by representatives from the SUG members, BSP and PPMI. The objective of the workshop is for the initial participants to agree on an agent sharing model which includes the structure, the uses cases, fee arrangements and salient provisions of the multilateral agreement; high-level discussion on regulatory compliance; and identification of next steps.
3. Output and Recommendations
The report also includes the latest draft of the ISCAN Term Sheet Agreement, list of pertinent BSP regulations and a general recommended approach towards establishing a shared cash agent network, including key tasks that need consideration in the process to justify the project.
Anatoly Gusto April 2020
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TABLE OF CONTENTS
EXECUTIVE SUMMARY ...... i 1. ACTIVITIES AND RESULTS ...... 3 1.1. Consultation Meetings ...... 3 1.1.1. ISCAN Meeting with Land Bank ...... 3 1.1.2. ISCAN Meeting with Mynt-Gcash ...... 6 1.1.3. ISCAN Meeting with PayMaya ...... 8 1.1.4. ISCAN Meeting with Omnipay ...... 10 1.1.5. ISCAN Meeting with Palawan Pawnshop ...... 11 1.1.6. ISCAN Meeting with Bancnet ...... 13 1.1.7. ISCAN Meeting with UBX ...... 14 1.1.8. ISCAN Meeting with Security Bank ...... 16 1.2. Interoperable/Shared Cash Agent Network Workshopp ...... 18 1.3. Term Sheet Agreement and List of BSP relevant Regulations ...... 21 2. LESSONS LEARNED AND RECOMMENDATIONS ...... 21 2.1. Landmark to have key industry stakeholders to participate ...... 21 2.2. Engaging the regulator and industry governing body early on ...... 21 2.3. Ecosystem approach ...... 22 3. NEXT STEPS ...... 22 ANNEXES ...... 23 ANNEX 1: DRAFT TERM SHEET AGREEMENT ...... 23 ANNEX 2: LIST OF PERTINENT BSP REGULATIONS ...... 33
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1. ACTIVITIES AND RESULTS
The Interoperable/Shared Cash Agent Network Project (ISCANP) is one of the technical assistance initiatives of the USAID/E-PESO Project, which is intended to increase the financial access points in the country through a network of interoperable cash agents under the National Retail Payment System (NRPS) Policy Framework to complement bank branches and automated teller machines (ATMs). The project is anchored on the idea that increasing the number of transaction accounts can drive the shift to digital payments through the use of accounts for payment transactions.
The Cash Agent Network Specialist played a role in providing technical support in the design and conduct of project activities, as summarized in the table below.
List of Project Activities
Activities Timeline 1) Attended individual stakeholder engagement sessions November 2019 2) Drafted workplan; prepared inputs/comments on the slides December 2019 of international consultant 3) Attended/participated in preparatory meetings/calls for the January 2020 workshop 4) Coordinated invitation and follow-ups with target workshop participants 5) Drafted/finalized pre-workshop survey questions 6) Sent out surveys; processed/consolidated results 7) Attended/participated in consultation meetings (Bancnet, January 2020 UBX, Security Bank) 8) Attended/facilitated the SCAN SuG Workshop Jan. 28, 2020 9) Prepared list of cash agent - related regulations based on Feb. 2020 inputs from BSP and other stakeholders 10) Prepared and sent workshop highlights for SUG members. Feb 2020
11) Prepared/edited draft term sheet agreement March-April 2020 12) Prepared and submitted End of Contract Report
1.1. Consultation Meetings
Part of the initial steps of the project involved consultation meetings with the members of the start-up group (“SuG”), composed of select electronic money issuers (“EMI”) and banks.
1.1.1. ISCAN Meeting with Land Bank
Date/Time Nov. 12, 2019 In Randy Montesa / Head of the Card and Electronic Banking Group / attendance [email protected]; 0998 9604863 Johann Bezuidenhoudt, Mert Tangonan, Vice Catudio, Dette Ramos,
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Jackie Dela Fuente, Jing Gusto, Liezl Basco Highlights Bank’s vision: By 2023, LANDBANK shall be the leading universal bank that promotes inclusive growth, especially in the unbanked and underserved areas, through the delivery of innovative financial products and services powered by digital banking platforms. In March 2019, got Management approval for the bank’s Inclusive Growth Roadmap targeting 534 unbanked municipalities. PHASE 1: Introduce agent banking powered by android-powered POS terminals and featuring agent banking cards; CICO; account opening; closed-loop Fund Transfer; enable prepaid card top-up through agents (Ongoing) Launched Agent Banking Program in compliance with BSP Circular 940. Account opening: prepaid card account powered by Mastercard, which is patterned after Basic Deposit Account Tech Partner: Tangent – provider of android-powered POS terminals Agent banking features/services: card availment (transactional account opening); perform onsite KYC including taking photo of client’s ID and signature; CICO; fund transfer/Padala; POS Cash-out via Bancnet; bills payment and card top-up (via Linkbiz Portal) Deployed 19 agents covering 15 unbanked municipalities, initially. Secured approval for 11 people to run agent banking unit. Fund Transfer via Linkbiz process: (1) Input 10-digit savings account no.; (2) Input 16-digit card no. Running on Mastercard rails Requires the agent to open an Agent Partner Corporate Wallet (virtual account). Pre-funded account. Phase 1 will be focused on account opening and agent onboarding. PHASE 2: Onboard partner aggregator outlets as bank agents; full blast on merchant acquiring together with mobile wallet; Run AFCS platform to enable cashless payment for transport; enable fund transfer to any account via Instapay (Target completion – June / Q2 of 2020). Onboard partner aggregator outlets as bank agents: Enable iPay (Aggregator) agents as Land Bank agent banking partners (some will do only cash-in; some cash-out; others, full-pledged – CICO and account opening; 7-11 maybe cash-in and account opening); also, convert qualified, old POS agents to full-pledged agent banking partners. Intend to enable 800 initially for 2020. Convert current Landbank POS agents who are able to meet the minimum guaranteed revenues into full-pledged agent banking partners. Convert current Lanbank Cash Card prepaid cards to transactional account - (4m to 6m cards) Full blast on merchant acquiring together with mobile wallet: Introduce Landbank Pay (virtual/mobile wallet; uses downloadable app that enables QR code, card-less payments); from running on Mastercard to Pesonet rails. - Landbank Pay – envisioned as a lifestyle app. Linkbiz will be
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embedded in the mobile app. Add more merchants in Lanbank Pay through Linkbiz, including transport. Linkbiz has now 700 merchants; - By next year, include various LTO retail payments (now: payment for registration of car dealers; target is to also include payments for renewal of licenses and car registration by individuals) Essentially, agents can accept payments via QR code following National QR code standard Phase 3: Enable Basic Deposit Account; enable cashless payments for automated fare collection Mobile app – top up agent account; in-app notification Mobile wallet (landbank Pay) will have biometrics capability Next target: account opening. Minimum payment is P250 (P150 for card with P100 deposit; P30 fee to be shared among Land Bank, Tangent and Bancnet) Use Cases: CI-CO, bills payment, fund transfer (from one account to another account), and Account Opening CO – requires a card to transact; FT or CI – no need for the card to transaction. POS CI (for any account) - No POS CO (for any account) – Yes: Plans to add other use cases: Loans focused on priority segments. Target market segment / priority sectors: Farmers (3million in 3 years); CCT beneficiaries; Micro and small entrepreneurs; OFWs Convenience Fee: (For CICO) - P3. Any amount per transaction. Process: Guided Self-service. Client goes to an agent. S/he tells the agent want s/he wants to do. For Cash-in, client is given an option “With card” (dip card) or “W/out card” (just enter card no.) . Client enters source account number > enters destination account no. > enters amount > shows to the agent > gives cash to the agent. If everything is in order, agent clicks proceed button and transaction is then completed. Agent fee crediting: After transaction proceeds, net amount will be credited to the destination account (X amount less P3 service fee). Agent onboarding: Requires the agent to open an Agent Partner Corporate Wallet (virtual/pre-funded account) and maintain average daily balance. Client Notification: client receives email notification per transaction (not yet SMS). Receipt: POS device will also print out a receipt. Card features: Mastercard-enabled, nameless, deployed to the full- pledged agents; Account opening: 100 nameless cards given to agent Outreach IPay outlets: 40,000 (committed 800 outlets for next year) 2020 Target bank agents: 1,000 Has a strong case to drive P2G and G2P transactions with the prepaid card product and traffic to the agent.
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G2P – 4Ps, LGU payroll; P2G – Government bill payments Takeaways Research Agenda Items: / Learnings Partnership models with government financial institutions: We are open to partnerships, preferably that will not involve competitive bidding or disbursement of public funds. Agents can be shared but they will have to open an account with us and maintain an ADB; We need to enable our app to process other principals. Sari-sari stores will be most likely be “shared”. Smart, Globe and True Money are already there. API strategies and best practices Settlement and Reconciliation: If we are able to ensure that those processes and controls are in place, I think we will have no problem with it.
1.1.2. ISCAN Meeting with Mynt-Gcash
Date/Time Nov. 13, 2019 In Mark Khris B. Santiago / Sr. Manager, Cash-In / Cash-Out / Money attendance Transfer / 0917-8178752 / [email protected] Johann Bezuidenhoudt, Mert Tangonan, Vice Catudio, Dette Ramos, Jackie Dela Fuente, Jing Gusto, Liezl Basco Highlights Looking at aggregators as a major distribution channel: In the past, Mynt-GCash had a lot of long-tail partners (individual outlets, retail stores small pawnshops, etc.). Last year, the direction changed, wherein they have focused on partnering with aggregators. The idea is to connect and manage remaining individual/small partners to one of their aggregators. They still maintain a number of direct partnerships with bigger merchants (key partners). The way they are acquiring new partners is based on purchasing network and number of doors. They have 4-5 accredited aggregators as CICO touchpoints (EC Pay, Express Pay, Digi Pay, POSIBLE, GrowSari) and 22 Key Partners (modern trades, SM, etc.). The problem working with aggregators is that sometimes they overlap. CI transactions are with their partners; CO transactions are mostly coming from ATM (90%). They sell cards that can be linked to their account. Process: clients have to download the app, then register; once they are fully KYCed, they can buy the card from any stores or order online; once they receive the card, they just need to link the card with their account/app. Moving into the secure one. Only 6 partners using USSD (feature phone based) Pawnshops are fit for CO: they have processes in place for both in and out, their personnel are used to / trained on AMLA requirements; stores like 7-1 are not set up as such. “How you will integrate a complex process of CO is something that is not particularly fit on the existing process of some merchants (e.g., 7-11). There are certain complexities on handling CO (compared to CI). Most of the
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frontliners are not knowledgeable.” On Convenience Fee: For 7-11 clients - CI fee: charging 2% of amount for CI, P5000 and above; if less than P5,000, no charge. Aggregator model for sari-sari stores (one of the models being studied): Mynt pays the aggregator a fixed rate for every transaction regardless of the amount, to be paid on a monthly basis (rather than real-time). Aggregator then allows its agents to charge a fixed convenience fee to their end-clients (between P5 to P7 fixed price), which then becomes the full revenue of the agent-sari-sari store. Veering away from the percentage model for retail stores as it subject to abuse by stores wherein an agent can just repeat the cycle of cashing-in and then cashing out the same funds to gain from the commission. There are different models depending on what type of agents are being handled by the aggregator. For those branches which Mynt considers business-center type (e.g., Bayad Center), the agent usually share the aggregator income with their agent. For agents dealing with sari-sari store agents (e.g., TrueMoney, Express Pay, DigiPay, POSIBLE), the direction is not to share the aggregator income; instead their agents will just collect a fixed convenience fee from their customers. How does Mynt cover its costs: through other use-cases performed by end-customers: merchant payment (merchant discount rate of 2% average but negotiable depending on the merchant partnership), investment, account opening, etc. embedded in the Gcash app. Mynt absorbs the cost of Instapay conversion (negative use-case). Seeing more and more companies will become an aggregator, e.g., Pet Net. There are partners that are not originally setup as an aggregator but have started to offer aggregator services as a result of their captured network-customer base. Thinning margin / lower revenue for additional layers of aggregation. Look at telco distribution model as basis: distributor – subdealer – retailer setup. Aggregator Pain point: how you manage a fund of an agent is more difficult than acquiring an agent, funds rebalancing. Once the store has the cash and its wallet has been depleted, how can an aggregator facilitate collection, replenishment. Liquidity rebalancing; average daily balance If we would be sharing agents or access points, we will need to look at business models and platforms that to level the playing field so as not to discriminate any of the participants. For instance, now with Bayad Center, their bills payment system is different from their e-wallet system, which can result in their agents favoring Paymaya. Form Factor: CI – cash-in bar code which has 3hour expiration period. From the app, the user generates a bar code through the app, which will already capture relevant user information. As a result, it reduces the time/queue as the agent no longer needs to manually collect
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information from the customer, i.e., name, amount, etc. Outreach Covers 7,300 doors; targeting 30,000 doors (EC Pay – 8,000 doors) They have 4-5 accredited aggregators as CICO touchpoints (EC Pay, Express Pay, Digi Pay, POSIBLE, GrowSari) and 22 Key Partners (modern trade). Takeaways Problem with aggregators is overlap / Learnings Community folks are used to having sarisari stores putting a margin on top of suggested retail price. Maybe it makes sense for the ISCAN platform to have a functionality that captures this flexibilty, i.e., Agent Transaction Limits and Fees should be parameterized. On fees: It is something that is hard to regulate. It is common for sari-sari stores to charge fees not mandated by the Telco. The direction is to shift from USSD to API-integration. Research Agenda Items: Negative List as ISCAN service to members? – “We are looking at cooperating .. to address fraudulent transactions.” Interchange fees and APIs: This implies enabling aggregators to integrate/connect with the principals. Platforms of agents/aggregators Merchant Registration Identifiers
1.1.3. ISCAN Meeting with PayMaya
Date/Time Nov. 13, 2019 In Kenneth Lee Palacios / VP Consumer and Trade Wallets / 0939 930 attendance 8911 / 0917 8411960 / [email protected] Johann Bezuidenhoudt, Mert Tangonan, Vice Catudio, Dette Ramos, Jackie Dela Fuente, Jing Gusto, Liezl Basco Highlights Paymaya is not comfortable with the idea that the study group will try to learn what Paymaya is doing and to present that to the group participants given that they are developing technologies that are proprietary in nature. Instead, they hope that the ISCAN initiative will look at what the industry is doing, what is applicable to the Philippines given the models that are existing rather than in-depth study of what we are doing and what is working for us. Following the QR standardization initiative, they hope that ISCAN will be clear on its vision for the Philippines from an agent banking perspective at the onset. Mert responded that “We want to identify the shared layer or sphere which participants (bank or BSFI) can cooperate and deploy their business strategies on. The scope of the service is just money in and money out for any account; and account opening (transaction account) for a single principal. Sees a lot of reusable components that have been made and can form part of the potential rails depending on who the potential partners are (Pesonet, Instapay, Bancnet, Visa direct or Mastercard seller) From a Money/Cash-in perspective, there are only two rails that Paymaya can ride on from a Paymaya account to any transactional
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account or vice versa (Instapay and Pesonet) From a Money/Cash-out perspective, some agents already have been issued POS terminals by certain bank institutions, which ride on Bancnet rails rather than Instapay/Pesonet. Paymaya updates: More than a mobile money provider, Paymaya is a fintech, Tiered level of agents: have “key accounts” but also deals directly with agents (has contract with some agents); have a standard accreditation process for key accounts. For Key accounts, Paymaya provides an API. Have Money-In only agents (7-11) Verticals: agent, merchant and consumer. For consumers, there are online and offline. Market segment focus: the way Kenneth sees it is that the ones (early adopters) who are going to use Paymaya accounts are banked. These people are already used to bank rails and they are generally willing to pay for a service if it is convenient for them. Paymaya features: Has card service Can do push transaction (send money) – YES Can do POS withdrawal via bank-issued terminals - YES but Paymaya decided to disable withdrawal via bank-issued POS terminals as they have not configured yet the commercials and processes, e.g., reversals (when Bancnet turned it on, they apparently did not inform Paymaya that it will be a POS withdrawal; Paymaya thought it will be just a POS transaction.) Do you differentiate P2P and P2Merchant transactions: YES. Upon registration, merchants are given a Merchant ID. We are tagging transactions differently depending on the purpose. P2P is dfferent from p2Merchant or a M2M. Certain requirements are charged differently (P2P – free; P2M – with fee) Biometrics – Not yet. There is no database yet to store said information. Potentially, when the national ID and QR code are in place, there is potential to build on it. Cardless withdrawal – They can but not yet implementing because it will require bilateral agreements between Paymaya and the bank; some banks are imposing high charges for such. Takeaways / In terms of ownership and accountability, the framework that is being Learnings floated is the ability for an agent to process CICO/MIMO transactions for any account and open transactional account for one principal. Policy wise. Things should be shifting to the NRPS. The initiative should look at the practicality and implications of Research Agenda Items: Third party reliance: existing practice and regulation, such as: http://www.bsp.gov.ph/downloads/Regulations/MORB/MORNBFIA P-5.pdf Reversals ISCAN Platform feature: must have merchant identifiers to be able to identify the profile of each agent and to which principal and
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aggregator it belongs to. What is the definition of a terminal? A merchant ID is tagged to a terminal but what if it is an app? Interchange/Cost recovery fees: bulk of the share of the fees rest on the agent, depending on the agent infrastructure.
1.1.4. ISCAN Meeting with Omnipay
Date/Time Nov. 14, 2019 In Simoun Ung / President & CEO / Omnipay / [email protected] attendance Johann Bezuidenhoudt, Vice Catudio, Jing Gusto Highlights Omnipay thinks that ISCAN makes sense especially for non-bank emoney issuers that do not have their own branch/outlet network. The rising cost of ATM withdrawals for account holders and Bancnet’s decision to migrate their Instapay to Vocalink resulting in higher friction costs (from P1 to P5) are indications of how things are becoming more expensive around ways banks are currently offering their services. There appears to be some resistance with banks to push the real sense of interoperability in NRPS: BDO blocking EMIs Gcash, Paymaya or Omnipay in receiving funds from bank account holders via Instapay. Cash is still king: “Fundamentally, that is the mentality we are fighting. Most people, including government and our accounting system, are set up this way – cash is free. Every time I make an emoney transaction, there is cost and an additional layer/process, e.g., KYC requirement. If people see emoney costing “zero” fees, just like cash, then the incentive to use it will be much higher. If you can’t remove the friction costs for e-money, then epayments adoption cannot happen.” We want to set up a new ACH (Omnipay, Gcash, Paymaya), where the business rule is zero for push and pull, but the question is if PPMI will support it. There is interest on non-bank EMIS on shared agent networks given the scenario of big network merchants registering their own EMI (What happens if 7-11 registers its own EMI? Then 7-11 outlets will compete with us. Outreach: Works with aggregators (Ecpay). Is considering accrediting/acquiring their own agents given what is happening in the market; Toying with the idea to partner with Gemini(?), which offers cash management services to support Omnipay kiosks. It has a total of 300 bonded personnel which provides support in terms of replenishing/collecting cash in/from ATMs of client banks. Issues cards; will be piloting kiosks with two screens and barcode scanners Worked with government financial institutions but had some challenges Worked with Land Bank but the latter still owes them. Problem working with GFIs, institutional resistance to change and internal corruption make it difficult to do so.
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Problems servicing CCT beneficiaries Onboarding – dirty database; lack of identification / KYC documentation for existing beneficiaries (at one point, only 200,000 out of 4million beneficiaries were KYCed); poor level of functional, financial and digital literacy (some beneficiaries were just putting X on the signature panel of forms). Takeaways Drivers that are expected to address KYC challenges – Use of National / Learnings ID, QR codes and biometrics: one or a combination of these will help address level of literacy of users, particularly for 4Ps. Research Agenda Items: eKYC National ID Biometrics QR code 4Ps market segment: as potential priority use case for ISCAN agents?
1.1.5. ISCAN Meeting with Palawan Pawnshop
Date/Time Nov. 18, 2019 In Lilian Castro Selda / VP (External Affairs) / Director attendance [email protected]; 0917-8484099 Roberto “Bobit” Castro / VP (Technology) / Director [email protected]; 0917-8507253 Mert Tangonan, Jing Gusto Highlights Traces roots in Palawan. Owned by Castro family. Still has head office there. Offered domestic remittance in 2003; started Remittance Sub-Agent (RSA) partnerships in 2010; started partnership with LBC (pay-out each other’s domestic remittance) in 2012. Lilian – handling accounting, legal/compliance and other corporate matters; another brother handling traditional services (pawnshop, remittance, cash-in/cash-out, remittance); Bobit handling digital initiatives Lines of businesses: . Pawning – still main business - P5,000 – P6,000 avg. loan size. 1% for 11 days . Domestic remittance/Money transfer (“Pera Padala” brand) . Money changer . Bills payment . Security agency payroll . Collection for Philip Morris; FMCG . POS ATM card withdrawal [in partnership with BD0] - Exclusive to 2,000 out of 3,000 company-owned branches. - POS provided by BDO - Fees: P 15 – Urban areas, locations with banks/ATMs; P 40 – Sub- urban to rural areas where there is no ATM - Fees shared between Palawan and BDO - Off-us cash withdrawals via Bancnet. . Remit to bank account (“Padala to bank account”) [in partnership
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with Security Bank] - Provided by Security Bank via API. Function can be accessed through Palawan’s IT system. - Beneficiary banks are Bancnet banks - Offered in all of their branches - Real-time credit - Up to P50,000 deposit - Fee of P100 paid to the branch - Available to Suki cardholders. - Per BSP c950, Palawan KYC’s the remittance transaction. . Cash in/out [in partnership with Gcash and Paymaya] - GCash cash-in volume > Paymaya . Cash In only – in partnership with 7/11 . Payout only – in partnership withLBC . Bills payment – about 41 billers mostly regional power utilities/coops and water districts. Offered in their 3,000 branches . Suki card - Loyalty card and program - Offers 5% discount on interest and penalty charges; Discounts available on other fees; Earns points . Airtime loading . For CARD MRI (the MFI NGO). CARD collector deposits collections at Palawan . 4Ps (CCT) payouts for Phil. Veterans Bank customers On mobile money (GCash): observed that GCash clients are banked; growing use of GCash among SMEs; high volume is still in Metro Manila and a few provinces. o Concerns: Countering terrorism funding (CTF) On pawning: o They observed that while the business of pawning might have declined for some players, it has steadily grown for Palawan. o Their RSA partnership with other pawnshops resulted in better/improved pawning business for their partners as the latter were able to cross-sell their other products to remittance clients. Paint Point on taxes: encounter problems with BIR re documentary stamp tax (DST) since TRAIN 1. DST is P40, Outreach Channels – more than 8,000 locations: o 3,000 – Company-owned branches o 2,000 – 3rd party / RSAs (only for domestic remittance). Other pawnshops and businesses that carry Palawan’s domestic remittance service alongside their regular business activities, E.g. Tambunting, SM, Robinsons, etc. o 1,200 – LBC outlets (only for PAYOUT transactions) o 2,000 – 7-11 outlets (only for domestic remittance SEND transactions only) Takeaways On interoperable cash agent network and having only one BSP- / Learnings supervised financial institution (BSFI) as principal: Favoring the concept of having only one BSFI as principal and being able to service cash-in/out of customers of other BSFIs for the following reasons: o Operational simplicity and efficiency
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o Technology simplicity and efficiency. Maintain data connection with only one BSFI. o Liquidity efficiency. Managing working capital in only one or few accounts. On AMLA: Pain point - KYC requirements being more stringent for non-bank accounts, i.e., re: identifying the “beneficial owner”i and taking reasonable measures to verify the identity of the beneficial owner per BSP Circular 950ii. o Believes that fees they earn should be commensurate to the ease of doing cash management in the branch, i.e. lower fees if there are banking offices nearby and higher fees if there are none. On interchange fees: Ok with the concept of the industry setting interchange fee per class of cityiii or municipalityiv. Example: lower fees for HUCs and higher fees for CCs. On partnership with banks under BSP Circular 940: Not receptive to current bank proposals: If they open accounts for banks, they will earn fee for the account opening service but they have no participation in the customer’s business thereafter (e.g. loans, etc.). They believe they should also earn a share out of banking transactions of customers whose accounts they “opened”. On partnerships: Palawan’s experience showcases how pawnshop partnerships can be done with different types of players: A pawnshop partnering with… Banks BDO; Security Bank Other pawnshops and entities without RSA partners - Tambunting, SM, their own domestic remittance service Robinsons, etc. Entities that have their own domestic LBC remittance service Convenience retailing chain 7-11 Nonbank EMIs GCash; Paymaya Research Agenda Items: AMLA; BSP Circular 950 (Amendments to Part Eight or the Anti- Money Laundering Regulations). BSP Circular 940 compliance and status.
1.1.6. ISCAN Meeting with Bancnet
Date/Time Jan. 21, 2020 In Aristeo P. Zafra / EVP and CEO / [email protected] attendance Natalie “Pinky” Uy / Vice President, Business Development Division / [email protected] / 02 856-8115 Johann Bezuidenhoudt, Jing Gusto and Liezl Basco Highlights On Use Cases: Cash-out @ POS Bancnet at the moment only has Cash-Out @ POS. Card-based, debit use case; treated as ATM withdrawal. Cash-in @ POS It has no Cash-In @ POS and has no immediate plans to offer it. On capturing and reporting transaction type for card-based transactions
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(i.e., purpose field for Cash-In): Bancnet is not capable of doing it at the moment but can do so if and when certain preparatory steps have been completed: Member proposes a new feature/function Draw up technical specifications, which need to be approved by participants and go through PPMI Draw up rules, including liability management and how agents will be authorized to perform such transaction Put it in API message format Challenges: POS service has not really taken off as evidenced by its moderate number of takers and usage. Big banks seem to still struggle how it can sustainably offer the POS service. Only 9 entities (8 banks plus 1 MASS-SPECC coop) out of 124 members are offering the Bancnet- enabled POS service. Poor telco signal in remote areas continues to pose as a concern in promoting digital financial services for the unbanked. Much as banks and other financial institutions might want to, there is still limited access to financial services as they can only make it work if they can connect to the internet; right now, those unserved and underserved areas also have telco/data connectivity challenges. Also, clients tend to lose trust with the digital channel when transactions are not completed on time or as fast as expected; such delays or lags can be attributed in part to poor, inconsistent connection. Takeaways Bancnet role has evolved as it should be, wherein now it defers to the / Learnings participants/members’ decision to introduce new features/functionalities in the payment network platform. There seems to be an approval process that is emerging when introducing enhancements in Bancnet: Bancnet member initiates -> goes through ACH (if already setup) -> goes through PPMI -> then BSP. Only after being signed off by concerned approvers can Bancnet act on it to implement platform enhancements.
1.1.7. ISCAN Meeting with UBX
Date/Time January 22, 2020 In John Januszczak / President & CEO at UBX / [email protected] attendance Johann Bezuidenhoudt, Vice Catudio, Dette Ramos, Jackie Dela Fuente, Jing Gusto, Liezl Basco Highlights UBX started as Union Bank’s fintech subsidiary that houses its technology initiatives, platforms, and investments in fintech companies. It is now a separate entity, with which Union Bank still possesses majority ownership but would like to also serve / work with other big banks. Its major initiatives include the following: i2i – A decentralized, cost-efficient, real-time inter-rural bank and NBFI payment platform that operates autonomously outside of existing payment infrastructures and intermediaries. The Project i2i platform works to connect rural banks as well as national
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commercial banks to the central bank, helping remote banks integrate with the domestic financial system while also improving banking access for local citizens. It has received clearance and support from BSP to operate as the country’s first Ethereum-based payment network for domestic funds transfers. Already signed up 20% of rural banks and several coops; target is to sign-up 50% in Q1 2020. Settlement account is free Through settlement account, they connect the RBs to NRPS. UBX gets i2i user-banks on NRPS and gives them a path to full sponsorship, when they are deemed qualified. “Send” – available already; “Receive” – still working on it; “Clears” real time; “Settles” not real-time out between a member and non-member institution The idea is to connect rural banks not only to its members but also to other payment networks (instapay and Pesonet). They are working toward expanding the platform to include international funds transfer Agent banking – They are working towards enabling agents to perform transactions using their POS device. Initial use-cases include: balance inquiry; bills payments; and loan payments The issue that they are still evaluating is whether or not i2i can serve as a professional agency. Lending platform targeting MSMEs – started offering loans to TrueMoney agents by connecting to FMCG platforms BUX – e-commerce solution to onboard merchants who are selling via FaceBook or Instagram. Integrate BUX payment feature in FB messenger and Instagram. Automatically generates an invoice; It tries to solve the cash acceptance problem by offering the following features: Can generate a bar code for cash-paying customers Has automated notifications: it informs the merchant and client if and when merchandise has been received Payment is put on escrow and will only be released upon client’s acknowledgment receipt of merchandise. Working toward integrating logistics Averaging 200 signups/day; targeting at least a total of 3,500 signups by February 2020 Core Banking Solution – turn key, something that can be easily activated for existing i2i member banks. Takeaways They are a candidate to become a CANP. / Learnings There might be challenges in onboarding big banks given the big role that Union Bank plays in the company.
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1.1.8. ISCAN Meeting with Security Bank
Date/Time January 24, 2020 In Daniel Yu / Executive Vice President and Head, TBG & Channel attendance Network / [email protected] / 02 888 7269 Elfin Jay Magno / Assistant Vice President and Channel Partner Head, Channel Network Group / [email protected] / 0917-8178906 / 867-6788 loc. 8446 Johann Bezuidenhoudt, Jing Gusto, Liezl Basco Highlights Doing well vs. Doing good. In the discussion around developing and promoting services for the unbanked/underbanked, it is worth asking about how can regulation and policy making be exercised to create a conducive environment for product development in emerging markets. At the end of the day, bank officers will need to convince themselves, their Board and their stakeholders that the products they are offering are not just nice and creating value for their target segments but are also viable/profitable to maximize their resources. The question that needs to be answered then is: “how might the BSP enable financial service innovation and deepening among its regulated institutions?”. For instance, are the initiatives of CLIA and the other tech-innovation oriented units of the BSP aligned with the way bank examination is being carried out? Is there room for simplification of regulations or provision of incentives to encourage banks to offer new products and/or enable them to recoup their investments? is tIn what area/way can the BSP encourage banks to embrace strategies to promote financial inclusion? Given that the level of effort and resources (compliance with AMLA, KYC and other requirements) will be the same regardless of products, what is the incentive for banks to allocate resources to market segments that generate lower or slower returns? Expressed concern on how banks might be allowed to increase their fees for ATMs, which is viewed to possibly influence consumer behavior in terms of encouraging usage of e-payment channels rather than cash. On BSP Circular 940: some areas are vague; no clear guidelines on how to manage KYC. Initiatives include: CASH-IN: Sponsoring a participant to the NRPS: Palawan Pawnshop – allowing them to do a transaction on behalf of the bank Cash-In to any bank account @ Palawan Palawan Pawnshop – is a Palawan product, which is governed as a remittance product and not deposit OTC client cashes in @ Palawan branch -> Funds get credited to Palawan’s account at Security Bank -> bank transfers equivalent amount to the destination bank via Instapay 2 kinds: Individual clients – a convenience fee is charged to the user which is shared by Palawan Pawnshop and the bank;
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corporate clients – the bank shoulders the convenience fee paid to Palawan Palawan is required to have 2 licenses: (i) Money Service Business (MSB) License; (ii) Remittance License CASH-OUT: 2 ways to do it. 1. Using POS code riding on ATM rail (POS use case) NOTE: BSP allegedly wans the bank to restrict ATM charges 2. Cardless withdrawal The bank issues a one-time PIN; only works with their own ATM at the moment but is already working to implement it for other ATMs Aha: need for central token service – will see how Vocalink (Bancnet’s provider) will connect with Euronet (service provider for the bank’s ATMs) Cash Accept Machine – pending approval by the BSP (cash-in @ ATM use case) Takeaways Specific concerns: simplified KYC requirements for onboarding / Learnings agents and small-value transactions given emerging infra enhancements (application of National ID and adoption of QR code standard), authentication for on cash-out Research agenda: BSP or EPESO ought to do an evaluation of branchless distribution channels of banks to see their viability and their propensity to shift users to epayments and ultimately to address market/regulatory gaps, if any (ATM, POS, etc.). Research/policy agenda: need for central token service to promote cardless withdrawal across ATMs Let the banks segment their market and accordingly rationalize fees as they deem fit and proper. For instance: Client segment Fee Type (one- ADB Dormancy/Inactivity time, periodic, requirement rule per transaction) (Yes/no) High value deposit/transactions … Basic Deposit accounts / Prepaid accounts
Question: Can a remittance company get an EMI license? Question: What is the difference between a remittance and a deposit product, as provided by existing policies?
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1.2. Interoperable/Shared Cash Agent Network Workshopp
E-PESO facilitated a workshop with the SuG on January 23, 2020. The objective of the workshop is for the initial participants to agree on an agent sharing model which includes the structure, the uses cases, fee arrangements and salient provisions of the multilateral agreement; high-level discussion on regulatory compliance; and identification of next steps. Workshop highlights are provided below.
INITIAL POINTS OF CONSENSUS The workshop participants agreed that the Philippines needs common areas for cooperation for relevant Shared Cash Agent Use Cases to facilitate access to digitally delivered financial services and thereby aid financial inclusion. The workshop provided an avenue for the participants to discuss these focal areas, as follows:
Focal Area Agreements/Discussions 1. Prioritized Under an interoperable/shared cash agent network, SuG Payment Use members agree that cash agents must be able to offer the Cases following services, irrespective of which financial institution the end-customer has his/her account at: Use Case Instapay ACH Card ACH* Cash-In / Money-In (Self) Cash-In / Money-In (Others) Cash-Out / Money-Out (Self) Balance Inquiry
*Current card ACH (Bancnet) is not an ACH as defined under the NRPS policy framework but serves as the de facto card clearing switch operator. 2. Target For the purpose of the pilot, membership/participation to Payment the shared cash agent network will be limited to the current Service SuG members, which include the following Payment Provider System Providers (PSPs), all being BSFIs: Participants Mynt - GCASH Land Bank of the Philippines Pay Maya Omni Pay 3. Contribution to SuG members agree to include several participation modes and Usage of in a shared cash agent arrangement: the Agent PSPs both contributing cash agents and enabling their Network own customers to access the other cash agents, which are contributed by other PSPs PSPs only enabling their own customers to access the shared cash agents, which are contributed by other PSPs PSPs only contributing cash agents
There will be a central point where transactions to and
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Focal Area Agreements/Discussions from shared cash agents with customers of the PSPs are cleared between the participating PSPs. Hence, to participate, the PSP must be a direct participant in the ACH or ACHs where transactions are cleared and settled. 4. Expanding SuG members agree on the need to build and expand the cash agent reach of the cash agent network, especially in unserved, network underserved areas. outreach Each SuG member can opt to implement its own set of strategies in line with their company’s overall direction/goals. Aligned with the acquirer-based fees/pricing principle, PSPs that will invest in expanding its agent network will be able to recoup its investment through acquirer fees. Further discussions are needed to identify cooperation points to effectively and viably expand outreach, especially in geographically isolated and disadvantaged areas. 5. Contractual A multi-lateral agreement will be signed by each PSP structure entering into the interoperable/shared cash agent network arrangement with each other. 6. Customer Fee The interchange fee will be standardized (i.e. acquirer PSP Models and fee). It is the fee that the issuing PSP pays to the acquiring Charging PSP for off-us cash in/out transactions. Mechanisms As to how much the acquiring PSP will compensate its cash agents, and the issuing PSP will charge its customer or if they will charge or not, are part of each institution’s competitive space and should be left to each PSP to decide.
OTHER AREAS FOR FURTHER DISCUSSION AND CONSENSUS BUILDING
1. Principles The group also discussed how cash agent network around services can be connected and shared at different levels. interoperability While it was agreed that a shared cash agent would only / sharing of have one principal, i.e., be an agent of only one PSP, agents there needs to be a technical discussion on enabling the priority use cases. This includes: Will platform interconnection be required? Will non-exclusivity of agents be required? Will agents have a single cash pot / wallet? 2. Structure and Which entities will own/operate the agent network? governance of a Option 1: SuG members will be co-owners of an Cash Agent independent cash agent network provider company Network (CANP) with the mission to recruit and operate Provider agents who will provide shared CICO services to the customers of all financial institutions? Option 2: SuG members will contract a third-party to serve as an independent CANP. Option 3: SuG members will neither create or tap a
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third-party to serve as independent CANP, but will just contribute (onboard) their agents to the shared cash agent network, criteria for which is subject for further discussion. 3. Governance of What would the I/SCAN governance structure be? What I/SCAN would be the roles, function, member selection criteria of each structure? How long would the term of members be in each structure? How will the rules be set/modified in the future? 4. Core service What would be the set of user experience standards or standards principles for the customers of shared cash agents? For the shared cash agents? What would be the service level agreements (SLAs)? How would transaction issues be resolved? 5. Interchange fee How much would the interchange fee be? setting and How will the interchange fees be billed? billing 6. Timeline to What would be the launch profile of the shared cash commercial agents? launch What are the milestones to commercial launch and target dates for each milestone
SUMMARY OF AGREEMENTS AND WAYS FORWARD
1. Consolidation of inputs from the workshop (February) 2. Follow-on consultation with SuG and Finalization of Draft Terms Sheet Agreement among the participants of the SuG (February) 3. Consultation with BSP and PPMI (March) a. Regulatory clearance b. Whether there is a need for a formal pilot or whether a small-scale testing with a later major rollout is not better. c. What would require a sandbox to be created? And what a sandbox would cover, if it is necessary.
APPROVAL PROCESS
1. Seek high-level approval / commitment from the management of each SuG member (SuG Company President or Board) to proceed to enable the shared use of the institution’s cash agents and the use of other institutions’ cash agents by their customers for CICO transactions; and/or participate in the pilot activities. 2. Finalize membership of Start-Up Group for developing the cash agent network concept 3. Draft and finalize Terms Sheet Agreement 4. Formalize agreements among SuG members based on finalized term sheet; sign multi-lateral agreement, as necessary. 5. Coordinate with PPMI, Instapay Steering Committee, and Bancnet to provide updates and clarify issues, as necessary.
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6. Coordinate with BSP to provide updates, clarify issues, and formalize sandbox proposal, as necessary.
1.3. Term Sheet Agreement and List of BSP relevant Regulations
Based on research findings, workshop outputs and consultations with SUG members, the Project Team was able to draft a Term Sheet Agreement, which is intended to serve as a framework on establishing an interoperable cash agent network. The framework covers principles, payment stream considerations, processes, fee arrangements, and roles and responsibilities.
Attached as Annex A is the latest version of the draft term sheet agreement. The draft is still for further review as of this writing.
Also attached as Annex B is the list of relevant regulations that require further review of USAID-EPESO team and the consultants.
2. LESSONS LEARNED AND RECOMMENDATIONS
2.1. Landmark to have key industry stakeholders to participate
The project was able to achieve key milestones necessary to address the key issues hampering agent network growth. These milestones can potentially pave the way for increased collaboration among the key industry players to enable rapid expansion of the agent networks in the country, drive wider epayments adoption and help achieve broad-based and inclusive economic growth through financial inclusion.
It is the first time that key industry players are participating and collaborating to build a shared agent network model under the National Retail Payment System (NRPS) framework, aimed at enabling bank and electronic money issuer (EMI) customers to convert their cash to electronic value in their accounts, and vice versa. Key players in the market namely, GCash Mynt, Land Bank of the Philippines, PayMaya and OmniPay are onboard and are committed to collaborate from prototype phase to pilot implementation phase. This is envisioned to pave the way to address the structural issue of distribution model by shifting to an agnostic or shared agent network model.
2.2. Engaging the regulator and industry governing body early on
More importantly, BSP and PPMI are providing support through regulatory guidance and a commitment to use the learnings or insights from the project in crafting a regulation on agent networks in the future.
There are learnings and insights from the initial phase of the project that can be shared and replicated in developing interoperable digital financial services touchpoints. Engaging BSP and PPMI and aligning with market players early on allowed the project to kick-off quickly and smoothly. Feedback mechanisms are
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important especially during the early implementation stage to ensure issues / gaps are identified and resolution measures are executed to facilitate continuous learning and improvement.
2.3. Ecosystem approach
Digital financial services must have an interoperable environment to survive. Previous mobile money implementations point out to the need for an inclusive ecosystem around it for consumers to develop the habit (of using mobile money and other epayment services) for it to be sustainable. There has to be an ecosystem in the market served by the agents that can cater to different customers regardless of their source of account.
3. NEXT STEPS
The Covid-19 outbreak1, which has resulted in a restriction of movement and has brought a state of emergency in the county, has caused major delays in project activities. But to a certain extent, it can be considered the necessary catalyst for organizations and communities to digitally transform and institutionalize e- payments in the country. The recommended next steps below cover the areas where the Cash Agent Network Specialist feels should be reinforced, taking into consideration the gaps and even new opportunities to be addressed as a result of the Covid-19 pandemic.
USAID E-PESO needs to build on the project’s accomplishments and work towards expediting formalization of agreements and execution of the pilot. Towards this end, the project team needs to work on the finalization and signing of multilateral agreements and update the list and schedule of action items drawn from the SUG workshop:.
o Draft and finalize Terms Sheet Agreement o Formalize and sign agreements among SuG members based on finalized term sheet. o Coordinate with PPMI, Instapay Steering Committee, and Bancnet to provide updates and clarify issues, as necessary. o Coordinate with BSP to provide updates, clarify issues, and formalize sandbox proposal, as necessary.
1 The threat of the disease first came to the attention of the country’s health officials on December 31, 2019. The first human-to-human transmission was confirmed three weeks afterward. On January 30, 2020, the country had its first confirmed case of Covid-19. From March 16 to May 15, 2020, Metro Manila and significant parts of the country were placed under an enhanced community quarantine (ECQ), equivalent to a total lockdown in response to the growing threat of a Covid-19 pandemic in the country. Quarantine measures in Metro Manila have gradually eased since shifting towards a modified ECQ and a General Community Quarantine state during the period after.
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ANNEXES
ANNEX 1: DRAFT TERM SHEET AGREEMENT
1. SHARED CASH AGENT NETWORK
1.1. A Shared Cash Agent Network (SCAN) is a network of cash agents that are contributed by eligible Bangko Sentral ng Pilipinas (BSP) - Supervised Financial Institutions (BSFIs) (herein after referred to as “Participants”) who agree to share agents through an interconnection arrangement and allow payments from and to their own cash agents to be made directly to/from wallets/accounts at other Participants.
1.2. There will be a central point where transactions to and from shared cash agents with customers of one Participant is cleared with another Participant.
1.3. The list of Participants is attached as Annex “A”.
2. COOPERATION MODEL
2.1. Participants agree to allow and enable shared cash agents to offer a set of services enumerated and described in Section 3, irrespective of which financial institution the end-customer has his/her account at. Each Participant shall implement its own facility that enables customers to confirm account usage (e.g., electronic receipt / SMS notification containing transaction amount) and query the balance of their account (e.g., mobile app, SMS, etc.).
2.2. Participants agree to include the following participation modes in a shared cash agent arrangement:
a. Participants who are contributing both their own cash agents and enabling their own customers to access the cash agents contributed by other Participants. b. Participants who are only enabling their own customers to access the cash agents contributed by other Participants; c. Participants who are only contributing cash agents.
2.3. Participants agree that a shared cash agent needs to only have a single agent principal linked to a Participant. Participants shall accordingly require their non-exclusive cash agents to elect their principal within a specified period set by the SCAN Steering Committee.
2.4. Participants shall also require agents to open an agent account and maintain an electronic float with the principal to cover transactions, both for its principal’s customers and customers of participating principals.
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3. PAYMENT USE CASES
3.1. Participants agree on a set of SCAN services (herein after referred to as “initial use cases”) that will be standardized and can be performed by a shared cash agent for customers of any Participant with whom the said agent has no direct contractual relationship.
3.2. Participants can offer other payment use cases not covered by SCAN to their own customers through their own cash agents without the need for SCAN approval.
3.3. Refer to Annex “B.1” for the list of initial use cases; refer to Annex “B.2” for corresponding transaction flows and user experiences; refer to Annex “B.3” for technical/user interface. 4. SERVICE FEE ARRANGEMENT
4.1. The amount that will be charged to a customer shall vary depending on the agent device/channel being used. Its basic mechanics shall be in accordance with the acquirer-based charging method, as follows:
a. Setting of fee shall not be solely determined by the issuing BSFI. lt shall largely depend on the fees set by the acquiring BSFI and network switch. b. Participants agree to pay a common interchange fee, which refers to the fee that the issuing BSFI pays to the acquiring BSFI for off-us cash in/out transactions. c. The issuing BSFI, at its option, may likewise charge a fee, provided that the same shall be properly disclosed to its customers/cardholders. d. The amount to be charged to a customer/cardholder shall be properly disclosed and clearly displayed on the agent device, wherever applicable. Said amount shall consist of the fees charged by the acquiring BSFI and network switch. The signage or notice shall likewise clearly indicate that the amount displayed is on top of the charges that may be imposed by the cardholder/s issuer. e. The customer/cardholder shall be given an opportunity to cancel the transaction if he does not wish to pay the fee or believes that an agent charging a lower fee may be situated nearby.
4.2. Each Participant may implement its own charging model to remunerate/incentivize its cash agents and/or end-users. The following are part of the competitive space and will be left for each Participant to decide:
a. Amount with which the acquiring BSFI will compensate its cash agents b. Amount with which the issuing BSFI will charge its customer.
5. CORE SERVICE STANDARDS
5.1. Accreditation. Each Participant shall be responsible for its agent accreditation / registration process based on specific regulations that apply to the Participant and/or accreditation process approved by the BSP. Each
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Participant shall warrant that accredited cash agents comply with their respective accreditation policies and are not blacklisted by any of the SCAN participants.
5.2. Onboarding and Training. Each participant shall be responsible for onboarding and/or training of their cash agents, including but not limited to SCAN rules and regulations, AMLA, core service standards, and technology.
5.3. Agent Classification. Participants agree to segment agents into three, as follows: a. Cash-In (CI) only agents; b. Cash-Out (CO) only agents; c. CI/CO agents.
5.4. Know-Your-Customer (KYC) Process. Each Participant will have its own agent rules on “know-your-customer” (KYC) verification.
5.5. Transaction Limits. Each Participant will have its own rules on agent transaction limits.
5.6. Customer Service. Each Participant will have its own customer service support for the SCAN, which are enumerated and described in Annex “C”.
5.7. Marketing Collaterals. Each Participant may create its own marketing programs to promote shared cash agent services. Participants agree to authorize one another to include and use each other’s names in any directory or promotional materials produced in connection with the shared cash agent services. Participants may agree on joint marketing programs and co-branding schemes to promote the shared cash agent services.
5.8. Compliance Monitoring. Each Participant shall ensure compliance of its agents with all standards, especially with regulatory standards including but not limited to: AMLA, financial consumer protection and data privacy. In case of non-compliance, the Participant shall impose sanctions to penalize the agent. Specific policy shall be developed and implemented on penalties and sanctions.
5.9. Database of Cash Agents. (insert text here)
5.10. Blacklisting and Whitelisting of Cash Agents. Participants agree to set-up a database of blacklisted cash agents and use the inclusion in the list as basis for denying accreditation.
6. BRANDING
The SCAN shall adopt a brand name and develop brand guidelines to facilitate effective communication with customers. Such branding and brand guidelines shall be adopted by all SCAN participants in their cash agent and cash agent services communication or marketing materials.
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7. PARTICIPATION
7.1. Institutions eligible to participate:
a. Bangko Sentral ng Pilipinas (BSP) - Supervised Financial Institutions (BSFI) b. Must be direct participants in the Automated Clearing House/s (ACH/s) where transactions are cleared and settled c. Be able to receive InstaPay and BancNet transactions d. Be a signatory to the SCAN Multilateral Agreement
8. CESSATION OF PARTICIPATION/ TEMPORARY EXCLUSION/ SUSPENSION
8.1. Any Participant may voluntarily withdraw its participation from the SCAN at any time by sending a formal letter of withdrawal to the SCAN Steering Committee sixty (60) calendar days prior to the desired effectivity date.
8.2 A participant that ceases operations for whatever cause or reason shall automatically be considered as terminated from SCAN.
8.3. The SCAN Steering Committee, after due investigation of a verified complaint for culpable infraction or material breach of the SCAN Rules and Regulations, and approved by three-fourths (3/4) vote of all its members, shall decide on the expulsion from the SCAN of any Participant.
9. GOVERNANCE
9.1. The SCAN Participant Group (all participants) will be the decision-making body. Voting to be based on transaction volume and/or agent contribution (to be determined later). Vote of 67% of Participants is needed to amend the terms of the service. A SCAN Steering Committee will be set-up to discuss operational issues and recommend actions/decisions to the Participant Group.
9.2. The SCAN Steering Committee is the governing body of the SCAN. It shall be responsible for monitoring the Participants’ compliance with the SCAN conventions. The SCAN Steering Committee shall adopt its own rules on meetings, procedure and passing of rules on the implementation of the SCAN conventions.
10. AMENDMENTS
These SCAN Rules and Regulations may be amended, repealed or altered, in whole or in part, by the affirmative vote of at least sixty-percent (67%) of the SCAN Participants at any regular or special meeting of the Participants duly called for the purpose, except when the amendment, repeal or alteration pertains to penalties and such other operating policies and/or procedural guidelines related to the conduct of SCAN operations, in which case approval of the SCAN Steering Committee will suffice.
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11. ARBITRATION
Any dispute involving Participants which cannot be resolved amicably by the SCAN Steering Committee shall be referred to the BSP recognized Payments Systems Management Body for arbitration.
12. TRANSITION
The participants shall submit a list of their cash agents to a central repository, indicating each agent if exclusive or non-exclusive. All non-exclusive agents shall elect the principal they want to retain to participate in the SCAN no later than XXX. The Participants shall be responsible for reporting to the central repository list of new exclusive agents that have elected to stay with the network no later than XXX.
The foregoing details are agreed terms of reference for all Parties to prepare and enter into the Definitive Multilateral Agreement.
Signed on this ______day of ______2020.
______
______
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Annex A. List of Shared Cash Agent Network Participants
The Participants to this cooperation model are comprised of payment system providers (PSPs), all of which are BSP-Supervised Financial Institutions (BSFIs) who are likewise signatories and members of the Shared Cash Agent Network (SCAN) Multilateral Agreement, as follows:
1. Land Bank of the Philippines 2. Mynt - GCASH 3. Omni Pay 4. Pay Maya
Annex B.1. Payment Use Cases
Participants shall provide and make available the following services to shared cash agents:
Service Description of the Service Automated performed by Clearing House/s Cash Agent (ACH/s) Cash-in (CI) to Customer presents cash and the CA transfers Instapay self credit to customer’s account Card* Cash-in (CI) to Customer presents cash and the CA transfers Instapay another credit to the account of another using the Card* customer / details provided by the customer (an OTC others deposit) Cash-out (CO) Customer initiates a cash withdrawal using Instapay either his/her phone or by presenting a card and Card* entering a PIN or providing an account number and entering a PIN, after which the CA dispenses cash to the customer; Customer encashes a digital token and receives cash. * Current card ACH (Bancnet) is not an ACH as defined under the NRPS policy framework but serves as the de facto ACH.
The list of services above are based on the assumption that the customer can interact with the cash agent through multiple channels, including but not limited to:
Physically handing cash and providing information Handing a prepaid/debit card and entering a PIN Identifying an account and entering a PIN Customer communicates directly with the BSFI holding his/her account through an application in his/her phone, which triggers transactions that result in the cash agent receiving messages from its agent principal.
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Annex B.2. Transaction Flows and User Experiences
Cash withdrawal via POS
1 2 3 4
ACH CSO 8 7 6 5 Customer Cash Agent Cash Agent BSFI Customer BSFI
1. Customer visits cash agent and presents ATM card 6.Card ACH CSO records the clearance and forwards the debit approval 2. Customer dips or taps the card for withdrawal, enter amount and PIN to Cash Agent BSFI 3. POS Cash Agent BSFI submits the debit request to Bancnet (Card ACH 7. Cash Agent BSFI forwards the approval to cash agent, credits agent CSO in the future) account and prints the transaction receipt and new balance 4. Card ACH CSO submits the debit request to the issuing/customer s 8. Cash Agent gives the cash withdrawn to the customer BSFI 9. BancNet at the end of the day triggers a settlement from Customer 5 The Customer BSFI approves the transaction and debits the BSFI to the Cash Agent BSFI to settle the obligation generated by the customer s account withdrawal.
Information Flow
Funds Flow
Cash withdrawal via QR Code
3 2 Customer's BSFI
1
ACH CSO 6
Cash Agent
5 4
Cash Agent BSFI
1. Customer visits cash agent and scans the cash agent s QR Code for 4. Instapay CSO submits the direct credit request to the cash agent BSFI withdrawal, enters amount and their PIN 5. Cash Agent BSFI credits Cash Agent Account and sends notification 2. Customer sends instruction to customer s BSFI via mobile phone to 6.Cash agent gives the cash to the customer transfer funds to Cash Agent s Account. 7. The InstaPay CSO then submits the obligation for settlement of the 3. Once approved, Customer's BSFI submits instant payment instruction funds between Customer s BSFI and the CA s BSFI during the scheduled to the InstaPay CSO for clearance. settlement cycle.
Information Flow
Funds Flow
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Cash-in via QR Code
1 2 3 4
ACH CSO Customer 8 7 6 5 Cash Agent Cash Agent BSFI Customer BSFI
1. Customer visits cash agent network 5 The Customer BSFI validates the customer information and credits the 2. Agent scans customer QR Code to capture account information and customer s account enters amount and the Cash Agent s PIN 6.Instapay CSO forwards the approved response to Cash Agent BSFI 3. Cash Agent BSFI debit its account and submit credit request to 7. Cash Agent BSFI forwards the approved response to cash-in agent Instapay CSO 8. Customer pays the agent with cash-in amount 4.Instapay CSO submits the credit request to the customer s BSFI
Information Flow
Funds Flow
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Annex B.3. Technical/User Interface
(For further discussion.)
Annex C. SCAN Core Service Standards
1. CUSTOMER SUPPORT
1.1.The Participant will provide a Customer Support personnel, who is knowledgeable about the products and services, processes, and the system / platform, to help resolve agent concerns. The Participant will provide or set- up customer support hotline, email or web-chat facility which shall be accessible by the SCAN.
1.2.The Customer Support personnel shall also extend assistance to agents for customer-related complaints such, but not limited to, tracking of transaction status, verification of transaction reference number and escalation or reconciliation with third-party service providers for non-posted or non- fulfilled transactions.
1.3.The Participant will maintain a log of all agent and/or customer complaints escalated by agents, and monitor their resolution. The log shall contain, at the minimum, the following details: Details of each complaint; The date the complaint was received; Summary of correspondences; Action taken to resolve the complaint; and The date the complaint was resolved.
1.4.The following service levels shall be observed in responding to agents and/or customer complaints related to customer transactions:
Complaint Definition Response Resolution Time Time No SMS Failure to receive SMS 30 minutes 24 hours from notification / notification or confirmation about from notice to notice to confirmation from third-party service provider. Participant Participant from third-party Example: Smart Money service provider subscriber did not receive SMS notification of cash-in while platform shows cash-in transaction is successful. No SMS or Failure to receive SMS or 30 minutes 24 hours from electronic electronic transaction receipt from from notice to notice to transaction platform. Example: Bills Participant Participant receipt from payment customer did not receive platform SMS receipt from platform but Agent system shows transaction was successful.
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Non-posted or Non-posted or delayed posting of 24 hours from 72 hours from delayed posting transaction by biller. Example: notice to notice to of transaction Meralco customer paid bill within Participant Participant cut-off time but received a notice of disconnection indicating he has not paid his bill. Duplicate or A transaction was processed twice 24 hours from 48 hours from redundant by the platform. notice to notice to transaction Participant Participant Erroneous Agent processed the wrong 24 hours from 48 hours from transaction transaction or the Agent’s wallet notice to notice to was charged for a transaction it Participant Participant did not perform or authorize. Other complaints Other complaints related to 24 hours from 72 hours from customer transactions with notice to notice to Agents. Participant Participant
1.5.The following guidelines and service levels shall be followed in resolving technical or platform-related issues:
Severity Definition Response Workaround Correction Time Time Time Critical The software or its 30 minutes 4 hours from 2 days from significant elements are not from notice notice to notice to functioning. All or part of the to Participant Participant activities connected to the Participant product are not functioning or functioning with a performance that makes them unusable. High The product or its significant 30 minutes 6 hours from 3 days from elements are functioning at from notice notice to notice to partial capacity which to Participant Participant hampers the functioning of Participant all or part of the activities connected to the product Medium The product or its significant 8 hours 3 days from 6 days from elements are exhibiting errors from notice notice to notice to that have minor influence on to Participant Participant all or part of the activities Participant connected to the product Low The product or its significant 2 days from 6 days from 12 days from elements are exhibiting errors notice to notice to notice to that do not have direct Participant Participant Participant influence on all or part of the activities connected to the product
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ANNEX 2: LIST OF PERTINENT BSP REGULATIONS
Topic Comments / Remarks BSP Circular No. / URL / pertinent provisions 1. E-Money Circular Guidelines governing the issuance of Electronic Money (e-money) and the operations of electronic money issuers (EMIs) http://www.bsp.gov.ph/downloads/Regulations/attach ments/2009/c649.pdf
2. E-Money Network Guidelines on Outsourcing of Services by Electronic Service Provider Money Issuers (EMIs) to Electronic Money Network Sevice Providers (EMNSP) http://www.bsp.gov.ph/downloads/regulations/attach ments/2010/c704.pdf 3. Money Service - Covers remittance agents Amendment to Section 4511N of the Manual of Business Operations and sub-agents Regulations for Non-Bank Financial Institutions relating to Money Service Business Operations. http://www.bsp.gov.ph/downloads/regulations/attach ments/2017/c942.pdf
Amendments to the N and P Regulations of the Manual of Regulations for Non - Bank Financial Institutions relating to Money Service Business Operations. http://www.bsp.gov.ph/downloads/regulations/attach ments/2019/c1039.pdf 4. Cash Agents Guidelines on Deposit and Cash Servicing Outside of Bank Premises. http://www.bsp.gov.ph/downloads/regulations/attach ments/2017/c940.pdf
5. Application - Are there pertinent BSP regs No BSP regulation issued on this. Programming related to API integration for Interface (API) BSFIs? For Cash Agents? 6. Interchange fees - enabling aggregators to No BSP regulation issued on this. At the moment, we integrate/connect with the leave it to the commercial agreements among the principals. players. - Similar principles from acquirer-based pricing for ATMs (see Item 18. ATM Procedures and Fees) - May also be covered by regs on correspondent banking 7. KYC Policy / - Specific concern: simplified eKYC Customer Due KYC requirements for http://www.bsp.gov.ph/downloads/regulations/attach Diligence onboarding agents and small- ments/2017/c950.pdf value transactions given emerging infra enhancements “Section 4. Section X806/4806e and Subsections (application of National ID X806.1 to X806.1.d/4806e.1 to 4806Q.1.d shall be and adoption of QR code amended to read as follows: standard) Section X806/4806q Customer Due Diligence. - On eKYC: I think there is the KYC-lite reg – BSP c950. See a. In conducting customer due diligence, a risk-based Subsection X806.1/4805q.f approach shall be Customer acceptance and undertaken depending on the type of customer, identification policy; business relationship or paragraphs d and e, reduced nature of the product, transaction or activity. In this
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Topic Comments / Remarks BSP Circular No. / URL / pertinent provisions due diligence and restricted regard, a covered person accounts, respectively. Also shall maintain a system that will ensure the conduct of see Subsection customer due diligence X8O6.214806e.2 Customer which shall include: identification on eKYC, outsourcing and 3rd party (1) Identifying the customer and verifying the reliance. true identity of the customer based on official documents or other reliable, independent source documents, data or information. In case of corporate and juridical entities, verifying their legal existence and organizational structure, as well as the authority and identification of all persons purporting to act on their behalf; (2) Identifying the beneficial owner and taking reasonable measures to verify the identity of the beneficial owner, such that the covered person shall be satisfied that it knows who the beneficial owner is, as well as the ownership and control structure of the customer, in case of juridical entities or legal arrangements; (3) Understanding and, as appropriate, obtaining information on the purpose and intended nature of the business relationship; and (4) Conducting ongoing due diligence on the business relationship and scrutiny of transactions undertaken throughout the course of the relationship to ensure that the transactions being conducted are consistent with the covered person's knowledge of the customer, their business and risk profile.
b. A covered person shall be required to undertake customer due diligence when: (1) It establishes business relations with any customer; (2) It undertakes any occasional but relevant business transaction for any customer who has not otherwise established relations with the covered person; (3) There is a suspicion of money laundering or terrorism financing; or (4) There is doubt about the veracity or adequacy of previously obtained customer identification data.
c. Business relations" means the opening or maintenance of an account or the provision of financial advice by the covered person to a customer.”
7.1. National ID National ID – No BSP regulation issued on this. 7.2. Biometrics Biometrics – No BSP regulation issued on this but the use of biometrics is allowed under existing rules and regulations 7.3. QR code Adoption of a NationalQuick Response (QRl Code 7.4. authentication Standard.
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Topic Comments / Remarks BSP Circular No. / URL / pertinent provisions for cash-out http://www.bsp.gov.ph/downloads/regulations/attach ments/2019/c1055.pdf Authentication for Cash-out No BSP regulation issued on this. Depends on the arrangement 8. Third party reliance http://www.bsp.gov.ph/downloads/regulations/attach ments/2017/c950.pdf http://www.bsp.gov.ph/downloads/regulations/attach ments/2018/c1022.pdf 9. AMLA Re: AMLA - KYC http://www.bsp.gov.ph/downloads/regulations/attach requirements in relation to ments/2017/c950.pdf identifying the “beneficial owner” and taking reasonable Amendments to Part Eight of the Manual of measures to verify the identity Regulations for Banks/Manual of Regulations for of the beneficial owner. Non-Bank Financial Institutions and Circular No. 980 dated 06 November 2017 http://www.bsp.gov.ph/downloads/regulations/attach ments/2018/c1022.pdf
Section 2. Section X803/4803Q shall be amended to read, as follows:
"Section x803/4803Q Definition of Terms. xxx
xxx
m. Beneficial Owner refers to any natural person(s) who ultimately owns or controls a customer and/or on whose behalf a transaction is being conducted; or those who has ultimate effective control over a juridical person or legal arrangement.
Ultimate effective control refers to situation in which ownership/control is exercised through actual or a chain of ownership or by means other than direct control.
Beneficial owner shall be:
(1) The natural persons, if any, who ultimately have controlling ownership interest in a juridical person.
A shareholding or ownership interest of at least twenty percent (20%) in the customer held by a natural person shall be an indication of direct ownership. A shareholding or ownership interest of at least twenty percent (2O%) in the customer held by a corporate entity, which is under the control of a natural person(s), or by multiple corporate entities, which are under the control of the same natural person(s), shall be an indication of indirect ownership.
(2) The natural persons, if any, exercising control over the juridical person through other means, to the extent that there is a
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Topic Comments / Remarks BSP Circular No. / URL / pertinent provisions doubt under Item "(1)" above, as to whether the persons with the controlling ownership interest are the beneficial owners or where no natural person exerts control through ownership interests.
Control through other means, includes control exerted by means of trusts, agreements, arrangements, understandings, or practices, or when an individual can exercise control through making decisions about financial and operating policies. In addition, control also includes: (a) power to govern the financial and operating policies of the enterprise under statute or an agreement (b) power to appoint or remove the majority of the members of the board of directors or equivalent governing body; (c) power to cast the majority votes at a meeting of the board of directors or equivalent governing body; or (d) any other arrangement similar to any of the above.
The natural person(s) who hold the position of senior managing official(s) or equivalent ranks, where no person under Items "(1)" and "(2)" is identified, or if there is any doubt that the person(s) identified are the beneficial owner(s). 10. Central token service NONE YET. But we can agree on the observance of to promote cardless certain standards to promote greater usage of this withdrawal across facility. ATMs 11. Definition / treatment BSP c980 on NRPS might be Circular 942 provides a definition for remittance of remittance vis-à- referenced for some definition business. vis deposit account and distinction. http://www.bsp.gov.ph/downloads/regulations/attach ments/2017/c942.pdf
http://www.bsp.gov.ph/downloads/regulations/attach ments/2017/c980.pdf 12. Definition of a - A merchant ID is tagged to a No definition in existing regulations. terminal terminal but what if it is in an app? 13. Settlement and Regulations are normally principles-based and do not Reconciliation, cover detailed procedures and processes such as Reversals settlement and reconciliation. This should be drive by the agreements among the players. 14. Negative List as a - “We are looking at This is normally proprietary. But access is usually service to members cooperating .. to address through subscription from a reputable service fraudulent transactions.” provider. 15. Basic Deposit Features include “Liberalized Framework for Basic Deposit Accounts Account customer onboarding” – http://www.bsp.gov.ph/downloads/regulations/attach Follows simplified Know- ments/2018/c992.pdf Your-Customer (KYC) for low risk customers, wherein identifying the customer and verifying their true identity may be based on any document or information reduced in writing which the
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Topic Comments / Remarks BSP Circular No. / URL / pertinent provisions covered person deems sufficient to establish customer's identity as provided under ltem "w" of Sec. X803 of the MORB, or other reliable, independent source documents, data, or information. 16. Outsourcing “Subsection XL62.2 BSP Circular No. 899. Amendments to the Prohibition against Guidelines on Outsourcingv outsourcing of inherent http://www.bsp.gov.ph/downloads/regulations/attach banking functions. No bank ments/2016/c899.pdf shall outsource inherent banking functions such as:
a. Services normally associated with placement of deposits and withdrawals including the recognition based on recording of movements in the deposit accounts;” 17. ATM procedures and BSP Memorandum No. M-2019-20. fees Lifting of Moratorium on Automated Teller Machine (ATM) Fees http://www.bsp.gov.ph/downloads/regulations/attach ments/2019/m020.pdf
“In line with the results of the review of ATM fees pursuant to Memorandum M-2013-044 dated 27 September 2013 and the actions taken by the industry, the Monetary Board (MB) in its Resolution No. 661 dated 19 April 2018 approved the lifting of the moratorium on ATM fees, subject to the following:
1. Each participating BSFI shall file a letter request with the BSP indicating their proposed ATM fees as well as the costs currently incurred by the BSFI with respect to its ATM activities; 2. Costs declared should be clear and adequately supported, such that when deemed necessary, the same may be validated by the BSP onsite; 3. Setting of fees, including convenience fees, shall adhere to the pricing principles provided under BSP Circular No.980 dated 06 November 2O17, whenever applicable; 4. Acquirer-based charging model ("Annex A") should already be adopted. To ensure effective implementation of said model, the imposition of fees arising from agreements among BSFIs to fix the fee or have a fix share in fees shall not be allowed; and 5. Appropriate disclosures on ATM fees and charges shall be provided to the cardholders. The amount to be charged to a cardholder shall be clearly displayed on the ATM location and on the screen of the ATM
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Topic Comments / Remarks BSP Circular No. / URL / pertinent provisions terminal. Said amount shall consist of the fees charged by the acquiring BSFI and the network switch. The notice shall clearly indicate that the amount displayed is on top of the charges that may be imposed by the cardholder's issuer.
While the BSP does not directly intervene in the prices of BSFIs' products and services as a matter of policy, the BSFIs are reminded that it is their responsibility to ensure adherence to the principles of reasonable and market-based pricing provided under BSP Circular No. 980 dated 06 November 2O17.” 18. Other non-BSP Competition Policy https://phcc.gov.ph/republic-act-no-10667/ Policies/Regulations https://phcc.gov.ph/wp-content/uploads/2016/04/RA- 10667-Implementing-Rules-and-Regulations-1.pdf
Data Privacy Act https://www.privacy.gov.ph/data-privacy-act-primer/ https://www.privacy.gov.ph/wp- content/uploads/DPA-of-2012.pdf https://www.privacy.gov.ph/wp-content/uploads/IRR- of-the-DPA.pdf
i Beneficial owner refers to any natural person(s) who ultimately owns or controls the customer and/or on whose behalf a transaction or activity is being conducted; or those who has ultimate effective control over a legal person or arrangement. Ultimate effective control refers to situation in which ownership/control is exercised through actual or a chain of ownership or by means other than direct control. ii Amendments to Part Eight or the Anti-Money Laundering Regulations of the Manual of Regulations for Banks and Manual of Regulations for Non-Bank Financial Institutions. http://www.bsp.gov.ph/downloads/regulations/attachments/2017/c950.pdf iii Cities are classified into three categories: 1) Highly Urbanized Cities (HUCs) with a minimum population of 200,000 and latest annual income of PhP50 million; 2) Independent Component Cities (ICCs) which are those whose charters prohibit their voters from voting for provincial elective officials; and 3) Component Cities which do not meet the requirements for HUCs and ICCs. Source: https://www.senate.gov.ph/publications/AAG%20on%20cities_FINAL_nov%20%2028.pdf iv Municipalities are divided into income classes according to their average annual income during the previous four calendar years: Class Average annual income (₱) First At least 55,000,000 Second 45,000,000 – 54,999,999 Third 35,000,000 – 44,999,999 Fourth 25,000,000 – 34,999,999 Fifth 15,000,000 – 24,999,999 Sixth At most 14,999,999 Source: https://en.wikipedia.org/wiki/Municipalities_of_the_Philippines v SERIES OF CIRCULARS ON OUTSOURCING ISSUED BY BSP (source: http://www.nubephil.com/series-of-circulars-on-outsourcing-issued-by-the-bangko-sentral-ng- pilipinas/)
In its General Banking Law of 2000 Section 55.1(e), the BSP stated that “No director, officer, employee, or agent of any bank shall outsource inherent banking functions.” On December 5, 2000, it came out with the rules and regulations or Circular No. 268 to implement this provision, and specify which bank functions may be outsourced.
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The rules and regulations to implement the outsourcing framework of banks are found the BSP’s Manual of Regulations for Banks (MORB) and Non-Bank Financial Institutions (NBFIs). The Manuals underwent revisions and amendments since 2000 to its latest January 2016.
Under Circular No. 268 (2000), banks may outsource all information technology systems and processes except for functions such as strategic planning for the use of information technology; determination of system functionalities; change management inclusive of quality assurance and testing; service level and contract management; and security policy and administration.
Meanwhile, other bank functions may be outsourced however subject to prior approval of the Monetary Board, includes data imaging, storage, retrieval and other related systems; clearing and processing of checks not included in the Philippine Clearing House System; printing of bank deposit statements; credit card services; printing of bank loan statements and other non-deposit records, bank forms and promotional materials; credit investigation and collection; processing of export, import and other trading transactions; transfer agent services for debt and equity securities; property appraisal; property management services; messenger, courier and postal services; security guard services; vehicle service contracts; janitorial services; and such other activities as may be determined by the Monetary Board.
On March 6, 2003 under Circular No. 383, the BSP added public relations services; temporary staffing (provided that these activities do not include servicing bank deposits or other inherent banking functions) as activities a bank may outsource.
On April 24, 2003 under Circular No. 390, the BSP allowed the outsourcing of trade support services and downstream processing activities, by parent to a subsidiary or vice-versa, subject however to certain conditions.
On October 13, 2003, the BSP through Circular No. 408 added procurement services among the activities which may be outsourced by banks without prior Monetary Board approval.
On March 1, 2005, legal services from local legal counsel are added to the activities that may be outsourced, as per Circular No. 479.
Through Circular No. 488, the BSP reclassified and added bank functions allowed to be outsourced but with prior approval of the Monetary Board. These are: data imaging, storage, retrieval and other related systems; clearing and processing of checks not included in the Philippine Clearing House System; printing of bank deposit statements; credit card services; credit investigation and collection; processing of export, import and other trading transactions; property appraisal; property management services; and added internal audit, but subject to certain conditions. marketing loans, deposits and other bank products and services, provided it does not involve the actual opening of deposit accounts; general bookkeeping and accounting services, provided that these activities do not include servicing bank deposits or other inherent banking functions; offsite records storage services; front/back office functions, i.e., trade support services and downstream processing activities, by parent to a subsidiary or vice-versa, subject to certain conditions; and such other activities as may be determined by the Monetary Board.
Similarly, the said circular reclassified that the following activities or services may be outsourced without the approval of the MB: printing of bank loan statements and other non-deposit records, bank forms and promotional materials; transfer agent services for debt and equity securities;
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messenger, courier and postal services; security guard services; vehicle service contracts; janitorial services; public relations services, procurement services, and temporary staffing, provided that these activities do not include servicing bank deposits or other inherent banking functions; sorting and bagging of notes and coins; maintenance of computer hardware, e.g., disk drives, printers, monitors, UPS, network cabling systems; payroll of bank employees; telephone operator/receptionist services; sale/disposal of acquired assets (ROPOA); personnel training and development; building, ground and other facilities maintenance; and such other activities as may be determined by the Monetary Board. On September 8, 2006, the BSP added call center operations for credit card and bank services to services a bank may outsource with prior approval of MB, under Circular No. 543. Provided that such bank services do not involve inherent banking functions.
On September 16, 2006, also allowed back-up and data recovery operations as services that may be outsourced with prior approval of MB under Circular No. 493. Meanwhile, under the said circular legal services from local legal counsel is moved to the list of activities that may be outsourced without prior approval of MB, and added compliance risk assessment and testing.
On September 25, 2006, the BSP added tax compliance services (provided that the service provider is not also the external auditor of the bank) to the list of bank services that may be outsourced without need of prior MB approval under Circular No. 548.
On March 22, 2007, the BSP clarified with its Memorandum 2007-009 that trust departments of banks may outsource its trust and other fiduciary business and investment management activities, however subject to prior approval of the BSP.
On January 30, 2009, the BSP with Circular No. 642 amended the MORB’s item b.13 of Subsection X169.3 “personnel training and development” to “Human-resource related services (such as personnel training and development, background investigation and salary benchmarking service)”
On December 22, 2010, the BSP with Circular No. 704 allowed the outsourcing of E-money related services of Electric Money Issuers (EMIs) to Electric Money Network Service Providers. EMIs may or may not be considered as financial institutions.
On August 3, 2012, the BSP revised the entirety of its Outsourcing Framework for Non-Bank Financial Institutions (NBFIs) and for Bank with its Circular No. 764 and 765, respectively as written under the MORB and MORNBFIs.
On January 18, 2016, the BSP with Circular No. 899 further amended its Guidelines on Outsourcing in its MORB. Amendments were made on the governance framework, particularly on managing outsourcing risks.
On January 20, 2017, the BSP with Circular No. 940, further amended functions that are inherent to banking and may not be outsourced as follows: a. Taking of deposits from the public; b. Granting of loans and extension of other credit exposures; c. Managing of risk exposures; and d. General management.
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