The rise of alternative payment methods is definitely a boon for the financial industry, as digital applications replace traditional physical transaction activities. Contactless payment could not have come at a more crucial time especially with a dangerous virus going around but questions has been raised on the security and level of data collection that is being administered throughout the whole process, from point of sales to the fintech company that provides these applications.
Rightfully, Bank Negara has stepped in with its new policy for merchant acquirers- the agencies or company’s assigned by fintech companies to recruit businesses to accept alternative payments methods either via terminals or QR codes.
Merchant acquiring services enable merchants to accept payment instruments for the sale of goods or services to their customers. What acquirers do is they provide the link between the users of payment instruments to the merchants to enable the purchase of goods or services. When users pay for the goods or services using payment instruments, acquirers ensure that funds for such payment are settled in a timely manner to the merchants.
Bank Negara notes, that in tandem with the rapid changes in the electronic payment (e-payment) landscape, merchant acquiring services have experienced significant growth and considerable change in their business arrangements and set-up. Where merchants have extended their acceptance of payment instruments from only payment cards to other types of instruments such as electronic money (e-money).
In this aspect, merchant acquiring services are no longer confined to the use of traditional Point-of-Sale (POS) terminals but now extend to the use of new payment methods such as Quick Response (QR) code and online banking. The acquiring arrangements have also expanded to accept more electronic commerce (e-commerce) merchants and involvement of third parties such as payment facilitators to facilitate expansion. They have also adapted to constant evolution of technological advancements to cater for needs of users and enhance efficiency. All of the above changes have increased the complexity and the number of players along the payment chain before payment reaches the merchants.
Due to the increasingly important role played by acquirers in the payment landscape, Bank Negara points out that it is important to specify the minimum expectations and regulatory requirements for merchant acquiring services to promote confidence in the use of e-payment by both merchants and users of payment instruments.
And that the regulatory requirements serve to ensure proper risk management in merchant acquiring services, which includes the management of settlement risk, financial risk, fraud risk and technology and cyber risk.
The Central Bank issued the on its requirements and expectations on merchant acquirers registered pertaining to governance, operational risk management, information technology (IT) and others. Bbjectives of this policy document is to ensure the safety and reliability of merchant acquiring services provided by acquirers; and to preserve public confidence in using or accepting payment instruments for the payment of goods and services.
With this new policy, all acquirers registered who assist in transferign of funds to the merchant must: conduct responsibly for fund settlement; or in issuing fund settlement instructions, facilitates the merchant’s acceptance of payment instruments; and is a direct participant of payment instrument network(s) to provide merchant acquiring services. These guidelines will only apply to non-bank acquirers.