Upgraded rules governing prepaid card businesses are set to take effect. Recently, to strengthen financial legal system development, the People’s Bank of China (PBOC) drafted the Measures for the Administration of Type II Stored Value Account Operations (Draft for Public Comments) (hereinafter referred to as the Measures) and released it for public consultation.
Type II stored value account operations refer to multi-purpose prepaid card businesses. Multi-purpose prepaid cards are issued by specialized card issuers (non-bank payment institutions). They can be used across regions and industries. As a useful complement to universal cashless payment instruments such as bank cards and mobile payments in specific consumption scenarios including supermarket retail, catering services, industrial parks, commercial districts and public transport, multi-purpose prepaid cards help enrich the supply of payment services and develop a tiered, complementary and mutually beneficial payment ecosystem.
With the development of multi-purpose prepaid card businesses, new phenomena have emerged in the market. While innovative practices facilitate public life, irregularities and risk incidents have also occurred. It is therefore necessary to revise and improve institutional rules in response to market developments and regulatory needs.
Authoritative market experts pointed out that the introduction of the Measures will further clarify business boundaries and regulatory requirements, foster a multi-purpose prepaid card market featuring clearer responsibilities, more standardized operations and better services, and enable merchants and consumers to use relevant services with greater confidence.
Compared with the Measures for the Administration of Prepaid Card Businesses of Payment Institutions issued in 2012, the Measures include four major adjustments. First, it improves the operational rules for multi-purpose prepaid cards. Prepaid card payment institutions are required to strengthen customer identification, fully implement management responsibilities for contracted merchants, enhance transaction information management and raise transaction transparency.
Second, balancing risk prevention and the demand for convenient payments, prepaid card payment institutions will be permitted to carry out online business operations, with supporting risk control requirements put forward.
Third, risk management requirements are tightened to continuously improve the risk prevention and control system covering multi-purpose prepaid card businesses and related funds.
Fourth, to support the sound development of the industry, prepaid card payment institutions are required to build proprietary acceptance networks. Overall, while adapting to business classification, responding to market demands and maintaining the general continuity of the existing regime, this round of revisions further improves the uniformity and operability of the rules governing multi-purpose prepaid card businesses.
In addition, in view of the “pre-charging before consumption” feature of multi-purpose prepaid cards, the Measures place consumer rights and interests protection at the core of institutional arrangements, with provisions focusing on transparent rules, fund security, information protection and accountability mechanisms.
On strengthening disclosure obligations and rule publicity: Prepaid card payment institutions must provide card purchasers with the multi-purpose prepaid card charter or sign agreements with them, and publicize such documents via business premises, official websites, mobile applications and other channels to safeguard customers’ right to know.
On improving inquiry and loss reporting services: Prepaid card payment institutions shall provide free services for cardholders to query the list of contracted merchants, card balances and transaction records generated within the past 12 months. Emergency loss reporting services shall be available to holders of registered multi-purpose prepaid cards.
On reinforcing information security management: Prepaid card payment institutions shall process user information in accordance with law, publicize user information processing rules, and specify the purposes, methods and scope of information processing to boost information security for card users.
On tightening accountability: Institutions that fail to comply with requirements such as pre-purchase disclosure and provision of inquiry services shall bear corresponding legal liabilities, lifting the violation costs for prepaid card payment institutions.
(Author: Du Chuan, Yicai Global)