National Payment Systems Act Philippines: Who Must Register with the BSP

Under the National Payment Systems Act (Republic Act No. 11127), all operators of payment systems must register with the Bangko Sentral ng Pilipinas (BSP). Section 10 of the law required operators existing at the time of the Act's effectivity to register within six (6) months, while those commencing operations afterwards must register in the manner and within the period prescribed by the Monetary Board. If a payment system is later designated by the BSP, its operator must secure a separate prior authority — registration alone is not enough.

What the National Payment Systems Act covers

The law's short title is "The National Payment Systems Act" (Section 1). It declares that payment systems are crucial parts of the country's financial infrastructure and must function safely and efficiently for the stability of the monetary and financial system (Section 2).

The BSP oversees payment systems in the Philippines and exercises supervisory and regulatory powers over them (Section 5). Its powers under Section 6 include designating payment systems, requiring operators of designated payment systems to secure prior authority, accrediting a payment system management body, and issuing rules through the Monetary Board.

Who is an "operator of a payment system"?

Section 4(l) of R.A. No. 11127 defines an operator as any person who provides clearing or settlement services in a payment system, or who defines, prescribes, designs, controls, or maintains the operational framework for the system.

A payment system, under Section 4(p), is the set of payment instruments, processes, procedures, and participants that ensures the circulation of money or movement of funds. A participant is the operator, issuer, service provider, or any other person involved in the payment system other than the end-user (Section 4(m)).

If a business provides clearing or settlement services, or designs and controls the framework through which funds move, it is likely acting as an operator and must register.

Registration under Section 10

Section 10 is the core registration provision. It required all operators of payment systems, as defined under Section 4, to register with the BSP within six (6) months from the effectivity of the Act. Operators that began business after the Act's effectivity must register "in such manner and within such reasonable period as may be prescribed by the Monetary Board."

In practice, the registration framework is now set out in the Manual of Regulations for Payment Systems (MORPS). Under the Payment System Oversight Framework, the BSP requires registration of all operators of payment systems in accordance with the guidelines under the MORPS. A registered operator that intends to operate within a designated payment system must still secure prior approval from the BSP.

Designated payment systems: a separate authority

A designated payment system is one that the BSP has designated as such under the Act and its implementing rules (Section 4(c)). Under Section 6(a), the BSP may designate a system if it poses or has the potential to pose systemic risk, or if designation is necessary to protect the public interest. The BSP's determination is conclusive, and the designation remains effective until revoked.

For designated systems, Section 6(b) requires operators to secure prior authority from the BSP. No person or entity may act as an operator of a designated payment system without it. The Monetary Board decides whether a person is acting as an operator without authority, and may examine, inspect, or investigate the books and records of that person or entity to resolve the issue.

What operators of designated systems must do

Operators of a designated payment system must incorporate as stock corporations, except payment systems operated by the BSP, and must meet the minimum requirements prescribed by the Monetary Board (Section 11).

Under Section 12, the Securities and Exchange Commission will not register the articles of incorporation of an operator of a designated payment system, or issue a license to do business, unless accompanied by a certificate of authority to register issued by the Monetary Board.

Section 13 requires prior Monetary Board approval before any person acquires shares in an operator of a designated payment system that would result in ownership or control, directly or indirectly, of more than ten percent (10%) of its voting stock. Without that approval, the transfer has no legal effect.

Penalties for operating without registration or authority

The Monetary Board may impose fines on any participant of a designated payment system, its directors and officers, and any person or entity determined to be acting as an operator without the requisite BSP authority. Under Section 19, fines may not exceed One million pesos (P1,000,000.00) for each transactional violation or One hundred thousand pesos (P100,000.00) a day for each continuing violation.

Under Section 20, a willful violation of the Act or its rules may be punished by a fine of not less than Two hundred thousand pesos (P200,000.00) or more than Two million pesos (P2,000,000.00), or imprisonment of two (2) to ten (10) years, or both.

Frequently asked questions

Do all payment system operators need to register with the BSP? Yes. Section 10 of R.A. No. 11127 requires all operators of payment systems, as defined under Section 4, to register with the BSP.

What is the difference between registration and a certificate of authority? Registration applies to operators of payment systems generally. A certificate of authority is required for operators of a designated payment system, which the BSP designates based on systemic risk or public interest.

What happens if an operator fails to register? The Monetary Board may impose fines on any person or entity determined to be acting as an operator without the requisite BSP authority, and willful violations may also carry criminal penalties under Section 20.

Practical takeaways

• Register first. All operators of payment systems must register with the BSP under Section 10 of R.A. No. 11127.
• Watch for designation. If the BSP designates the system, the operator must secure prior authority and incorporate as a stock corporation.
• Get approval for major ownership changes. Acquiring more than 10% of the voting stock of an operator of a designated payment system requires prior Monetary Board approval.
• Non-compliance is costly. Fines can reach P1,000,000 per transactional violation, with criminal penalties for willful violations.
• Coordinate with the BSP early. Operators are expected to engage with the appropriate oversight department on how they will comply.

Primary sources

The rules discussed above are drawn from the following primary sources. Where the firm's library holds the document as a PDF it is embedded here in full; the rest are cited by title.

Creation of Manual of Regulations for Payment Systems (MORPS) (Re-uploaded with Appendix)Open in Law LibraryDownload PDF

Payment System Oversight FrameworkOpen in Law LibraryDownload PDF

• REPUBLIC ACT NO. 11127 - AN ACT PROVIDING FOR THE REGULATION AND SUPERVISION OF PAYMENT SYSTEMS

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.