25 October 2017
The New Payment Systems Act − Links to Fintech and Thailand 4.0
by, Nopamon Thevit Intralib, Associate, Chandler MHM Limited
In line with the Thailand 4.0 agenda, Thailand is issuing fintech-related laws to encourage the growth of fintech1 start-ups, particularly in the e-payments area. One such law is the Payment Systems Act (the “Act”).
Electronic payment services in Thailand are currently regulated under the Royal Decree Regulating Electronic Payment Service Business, B.E. 2551 (2008) issued under the Electronic Transactions Act
B.E. 2544 (2001) as amended, and the Notification of the Finance Ministry issued under Section 5 of the Revolution Council Decree No. 58. The Notification of the Electronic Transactions Commission re: Rules, Procedures and Conditions for Undertaking Electronic Payment Service Business B.E. 2559 (2016) as amended, further sets out the rules and procedures that electronic payment service providers have to comply with. Currently, a business operator wishing to provide e-money or e-payment services is required to apply for licenses pursuant to the aforementioned laws.
The new Act was approved by the National Legislative Assembly on 10 August 2017 and was published in the Government Gazette on 18 October 2017. It will come into force and effect 180 days after publication. The Act will streamline the process for electronic payment business operators to obtain the required license(s).
The Act categorizes different types of payment systems into three new classifications: (1) important payment systems; (2) supervised payment systems; and (3) supervised payment services. The Act also provides that important payment systems are ones that have the following characteristics:
(1) Being a payment system that is the main infrastructure of the country which may continuously and extensively affect the members in the system if there is a problem or a disruption; and
(2) Being a payment system that supports high-value money transfers or is used for clearing or settlement between members.
Under the Act, the Minister of Finance (“Minister”), with the recommendation of the Bank of Thailand (“BOT”), has the power to prescribe the following, (i) payment systems as a “supervised payment system” and, (ii) payment services as a “supervised payment service”, which requires permission.
Payment systems
(1) Central or network payment system between service recipients of the system to facilitate money transfers, clearing, or settlements, such as an intermediary clearing between system service users, a card network system, a settlement system; or
(2) Any other payment system that may affect public interest, public trust, or the stability and security of payment systems
(1) Credit card, debit card, or ATM card services
(2) Electronic money services
(3) Electronic payment acceptance services on behalf of sellers of goods or service providers or creditors
(4) Electronic money transfer services
(5) Any other payment services which may affect payment systems or public interest
Current business operators will be required to apply for licenses or registrations if their payment system or payment service is considered a supervised payment system or a supervised payment service under the Act.
The Act also takes into account emerging technologies as it is drafted broadly enough for the Minister and the BOT to administrate new payment systems or services which are not currently addressed. Upon the Minister determining that any payment system or payment service falls under the supervision of this Act, businesses operating or providing such payment systems or payment services have to submit an application for license or registration to the BOT within 120 days if they wish to continue operations.
The Minister, with the recommendation of the BOT, also has the power to prohibit the execution of any transaction relating to payment systems and payment services with a business operator that is not granted permission or registered under the Act.
This Act has the potential of being an effective legal and regulatory framework for electronic payment systems and services which aligns with the Thailand 4.0 movement to drive Thailand toward an innovation and technology-oriented economy. Embracing and developing the fintech sector has wide-ranging benefits for Thailand. These include, stimulating local and regional business growth through increased efficiency and participation of small businesses, strengthening national position as a regional leader, fostering increased global relations by lowering barriers for entry into the market, and attracting top foreign talent in the tech sector, which will then further cultivate local talent.
Fintech, particularly electronic payment systems and services, acts as a bridge for the unbanked to be integrated into the Thai economy. With smart contracts, blockchain and related new technologies rapidly emerging, especially in the financial services sector, it will be interesting to monitor how Thailand manages to embrace (and regulate) these new developments without stifling its growth.
Whether Thailand can solidify its position as a regional leader in the fintech domain will depend on how it (and its regulators, the BOT, the Office of the Insurance Committee, the Office of the Securities and Exchange Commission and the Stock Exchange of Thailand) effectively regulates this new space, while also balancing consumer protection with the appropriate level of flexibility and open-mindedness required to enable room for experimentation, advancement, implementation and lastly, adoption.
