On 27 August 2022 the new Belarusian law No. 164-Z of 19 April 2022 On Payment Systems and Payment Services (the Law) entered into force. The new law comprehensively regulates payment relations and applies to both Belarusian and foreign payment service providers.
The provisions of the Law are expected to impact the payment services market, transform many existing business models and affect businesses in various sectors – banks, payment systems, e-money services, marketplaces, retail stores that have loyalty programmes, companies offering technological solutions for payments, and many others.
Payment services: what is covered by the Law?
The Law sets out an exhaustive list of activities that fall within the definition of payment services:
1) Services of a payment system operator when organising a payment system. The Law highlights significant payment systems and classifies them by type of significance into systemically, potentially and socially significant ones. The National Bank will decide on whether a payment system is recognised as significant and determine additional requirements for such systems and their operators.
2) Settlement services. These include opening and closing accounts with financial organisations, debiting and crediting funds from or to such accounts, sending confirmations on the execution of payment instructions, as well as other settlement operations related to account servicing and display of account
3) Payment initiation services. These imply processing payments made by an initiating user and the transferring to other payment service providers of information necessary for making a payment or accepting funds.
4) Acquiring of payment transactions. This type of service covers, first of all, activities of payment aggregators related to receiving and transferring user funds in favour of third parties without opening an account
5) Issue or distribution of payment instruments, including bank payment cards, payment software applications, prepaid financial payment products, such as fuel cards, gift certificates, cards with bonus points for purchases, and others
6) E-money transaction services, including the issue, distribution, exchange and repayment of e-money
7) Clearing services, meaning the activities of a clearing centre related to the transfer, collection, reconciliation and calculation of mutual monetary claims and obligations of clearing process participants
8) Processing services, meaning the activity of a processing centre on the collection and processing of information contained in payment instructions, as well as the transferring of the processed information for settlement of transactions
9) Information payment services, which are services involving providing information necessary for making payments, as well as collecting, processing, storing, providing information on payments, invoices and payment obligations, and other related information
Similarly to how it worked before, under the new law only financial organisations with a licence for banking activities issued by the National Bank have the right to provide settlement services and issue bank payment cards. Non-financial organisations are now able to provide other types of payment services, if they meet the requirements and fulfil the obligations stipulated by the Law and supplementary legal acts.
The Law also regulates the provision of technological services related to payments, including the development and support of software and technical infrastructure for payments, provision of cloud services related to payments, technical support for money transfers, information security assurance and other payment-related technological services.
In some cases, the new Law allows the outsourcing of technological and payment services to third-party organisations and individual entrepreneurs, and establishes mandatory rules and requirements for such outsourcing. Outsourcing of technological services is defined as transfer of certain technological functions from a payment services provider to a third-party organisation or individual entrepreneur to procure provision of payment services. Outsourcing of payment services means the transfer by a settlement centre to certain organisations of the right to give out cash to a payment instrument holder.
Payment service providers
As a general rule, the following persons may be payment service providers:
- financial organisations that have a licence issued by the National Bank allowing them to conduct banking activities (the list of banking operations in the licence should include provision of settlement services to individuals and/or legal entities)
- other entities (both residents and non-residents) included in the Register of Payment Service Providers and Types of Payment Services Provided by Them (Register)
- other entities that have the right to render payment services without being included in the Register (for example, state authorities that render payment services based on legislative acts)
Under the new law, payment services providers, as a general rule, are subject to a number of regulatory requirements, including:
- requirements for the procedure of authorised capital formation (applicable to Belarusian residents, with the exception of financial organisations)
- qualification requirements applicable to officials, members of management bodies, and beneficial owners, and/or requirements to business reputation of such persons
- safe functioning standards
- financial standards
- payment risk management and internal control requirements
Besides that, payment services providers are required to perform a number of obligations when carrying out their activities, including those in the following fields:
- ensuring data protection
- storage of data and performance of other obligations in accordance with the AML/CFT legislation
- ensuring equal and free access of users to payment services
- payment risk management, including assurance of payment activities continuity
- ensuring security of payment services
- ensuring the possibility of a refund
- use of multi-factor authentication in specified cases
- disclosure of information
- informing users of payment services
In addition to general requirements and obligations, the Law provides for special rules applicable to providers of specific types of payment services.
The Law allows payment service providers to render several types of payment services. Depending on the combination of such types, providers will need to comply with different levels of requirements. The levels of requirements for payment services and their combinations will be specified by the National Bank in supplementary acts.
The Register of Payment Service Providers and Types of Payment Services Provided by Them
With certain exceptions, entities have the right to render payment services only after being included in the Register, which is created and maintained by the National Bank. The information from the Register is posted on the official website of the National Bank.
At the present moment, the procedure for including entities into the Register has not been specified. It is expected that such a procedure will include, among other things, provision to the National Bank of information on the legal status of the service provider, its experience in the payment market, the compliance of its management and beneficiaries with established requirements, and compliance of the expected activity with information security requirements, as well as passing the test at the National Bank.
Resident entities that operated as payment services providers on the date when the Law entered into force (27 August 2022) have the right to continue operating without being included in the Register for three months – until 27 November 2022. To be able to continue rendering payment services after that date, such entities must be included in the Register.
The Law stipulates a twelve-month period for foreign payment services providers to be included in the Register. After 27 August 2023, non-residents will be able to render payment services only if they are in the Register.
We are closely monitoring developments related to the adoption of supplementary laws and clarifications by the National Bank in this area and will be happy to help with any regulatory issues related to financial services:
Ann Laevskaya, Partner
+375 29 347 7703
Artem Melnikovich, Associate
+375 29 618 8574