The Regulatory Framework
The NRPS provides the framework to secure promised gains of modernizing retail payments for the benefit of the consumers, the industry and the economy as a whole. This is built on three core principles, namely: interoperability, inclusivity and “coopetition”.
- Interoperability is defined as a state in which customers can transfer funds from their own account to any BSP-regulated transaction account using any device. This means that a consumer, which may be an individual or an institution, need only maintain one account – whether a bank or an e-money account - to be able to conveniently transact with anyone in the system.
- The inclusivity principle requires that all qualified financial service providers must be able to effectively participate in the system – regardless of their size and type of transaction accounts offered. This fosters greater competition and spurs innovation to better support the diverse needs of the consumers.
- “Coopetition” is coined from the words “cooperation” and “competition,” because NRPS promotes both cooperation and competition in the industry. The industry is expected to cooperate in matters that directly impact our shared objectives of system efficiency and resilience. This includes clearing and settlement rules and standards, industry governance and risk management. Product features such as end-user fees, delivery channels and customer service fall outside the cooperative sphere and will be used as basis of competition.
Payment System Management Body
Retail payments are directly regulated by a payment system regulator such as the Central Bank or through a Payment System Management Body (PSMB) that can be appointed by the Central Bank with delegated responsibilities. The PSMB, which comprise of representatives from different stakeholders, manages risk and self regulates members through the creation of rules, risk monitoring, auditing and compliance and the development of a clear overall regulatory framework.
On 12 January 2018, the BSP and the Philippine Payments Management, Inc. (PPMI) entered into a memorandum of agreement, whereby the BSP recognizes PPMI as the payment system management body, while the PPMI recognizes the authority of the BSP as the primary overseer of the retail payment system given its critical role in the financial infrastructure as envisioned under the NRPS framework.
Automated Clearing Houses (ACHs) and Clearing Switch Operators (CSOs)
An Automated Clearing House or ACH is a multilateral legally binding agreement that lays down the clearing and participation rules for a particular payment stream to facilitate electronic fund transfers among its participants. Payment streams that are covered by a multilateral ACH promotes greater efficiency, better risk management and interoperability compared to those that are covered by separate bilateral agreements as most often practiced.
Under the NRPS framework, any two (2) members of the PSMB can come together and create an ACH. This shall be created/ differentiated based on the payment instruments or instructions, business rules and risk considerations. As such, a payment use case can only fall under one (1) ACH.
Another principle under the NRPS framework is that each ACH shall have only one clearing switch operator or CSO, whose operations shall be limited to clearing and other services that do not compete with services offered by PSMB members. Nonetheless, this does not prevent a CSO from rendering services to more than one (1) ACH or multiple ACHs.
Ultimately, the CSOs are expected to submit the net settlement information at the ACH’s agreed frequency to PhilPaSS for direct settlement and in accordance with what has been provided in the ACH’s contract with the CSO.
Regulatory Issuances on the NRPS