Page 44 - ITU-T Focus Group Digital Financial Services – Interoperability

ITU-T Focus Group Digital Financial Services
Interoperability

Box 4. Licensing and overseeing PSPs
The issue of licensing PSPs is becoming especially important as the number of non-financial
entities offering payment or payment-related services is growing rapidly in an increasing number of
jurisdictions, as in the case of business for the provision of mobile and Internet payment services.
Identifying the “right” criteria for licensing and overseeing these entities requires a careful balancing
act in that the oversight authority should want to ensure the payment system against the risks
these entities bring into the systems while being able to avoid subjecting them to disproportionate
regulatory requirements that might jeopardize their innovation capacity or put them at a competitive
disadvantage vis-à-vis the financial PSPs.

Licensing requirements may include, inter alia, the following information to be provided by the
applicant entity to the satisfaction of the oversight authority:

• A program of operations, setting out the type of payment services to be provided.

• A business plan, which should include an initial budget showing the resources available to the
applicant, how it would employ them, and indications of business sustainability.

• Evidence of adequate capital: adequacy may vary in relation to the type of payment services
to be provided, with higher capital required for services implying the operation of payment
accounts or the issuance/acquiring of payment instruments, and smaller capital required for
the provision of remittances or transactions that do not imply operation of payment accounts.

• Evidence of adequate own funds (in addition to capital): adequacy may be defined, alternatively,
as a share of fixed overhead costs, as an increasing share of the payments volume, or as an
increasing share of net income, adjusted for a factor that changes in relation to the type of
services provided.

• Measures to safeguard payment service users’ funds.
• A description of the applicant’s governance arrangements and internal control mechanisms
(including administrative, risk management, and accounting procedures).
• A description of the applicant’s organizational structure, including, where applicable, a
description of the intended use of agents and branches and a description of outsourcing
arrangements, and of participation in a national or international payment system.
• A description of the applicant’s technology solutions underpinning its operation and supply of
services, and the arrangements adopted to ensure operational continuity under critical events.
• A description of the applicant’s audit arrangements and measures to protect the interests of
users and to ensure continuity and reliability in the performance of payment services.
• The identity of persons holding qualifying holdings in the applicant, the size of their holdings,
and evidence of their suitability against the PSS oversight objectives.
• The identity of directors and managers, and indications of their suitability for the job.

• The applicant’s legal status of association, and head office address.

Policy, research & development (R&D)

30. The central bank should promote R&D activities on payment system issues. These activities might range
across several areas, from operational to legal, institutional, technological, and developmental areas. R&D
should study payment system and payment services developments, providing essential inputs to payment
system modernization strategy making, as well as methodological inputs to payment system stress testing
and risk analysis.

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