Hong Kong to tighten regulation on retail payment systems

Hong Kong issued a public consultation paper on May 22 aiming to enhance the regulatory regime for stored value facilities and retail payment systems in the city.

The Banking Ordinance currently contains a regulatory regime for multipurpose stored value cards to regulate device-based stored value products. In light of the growing acceptance of innovative retail payment products and services, the Hong Kong government considers it necessary to expand the current regulatory regime to cover important retail payment systems and stored value facilities which are non-device based, including mobile and computer network-based accounts.

"The proposed regime will encourage innovation in retail payment products and services, and will enhance protection for users of such products and services," the Hong Kong government's Secretary forFinancial Services and the Treasury K C Chan said. The new regime will also contribute to the stability and effectiveness of the financial and payment systems in the city as a whole, he added.

The rapid development of retail payment products and services in the past few years has changed how goods and services are paid for. Monies services are expected to further emerge as a major means of paying small value transactions which are currently paid in cash.

There has been notable growth in the use of such products and services being offered to the public in the city. Typical examples are stored value payment cards, online stored value payment facilities, and mobile payment and internet payment services.

Peter Pang, Deputy Chief Executive of the Hong Kong Monetary Authority(HKMA), said that under the new regime, no person shall issue stored value facilities in Hong Kong unless it is a company incorporated in the city with a license granted by the HKMA.

"This requirement allows the HKMA to keep an eye on network-based stored value facility issuers who provide services from outside Hong Kong through, for example , the Internet, and to exercise effective supervision on such entities," he said.

To better understand the views of the industry players and the market conditions, the HKMA conducted a consultation from December 2012 to January 2013 with the Hong Kong Consumer Council and over 40 industry players including banks, credit card scheme operators and merchant acquirers. The Financial Services and the Treasury Bureau will work together with the HKMA to introduce the amendment bill into the Hong Kong Legislative Council after considering the comments received from the public.