BSP proposes rules for addressing digital fund transfer issues

By Keisha B. Ta-asan, Reporter

THE BANGKO SENTRAL ng Pilipinas (BSP) is proposing rules to help protect consumers should they encounter issues in digital transactions amid the increased adoption of electronic payments.

The BSP has come up with proposed guidelines for reconciliation and dispute handling mechanisms for issues encountered in electronic fund transfers (EFTs) under the National Retail Payment System (NRPS) framework, a draft circular posted on the BSP’s website showed.

“With the increased adoption of digital payment services, the Bangko Sentral recognizes the need to ensure that BSP-supervised institutions (BSIs) that offer EFT services… provide appropriate and timely consumer recourse mechanisms on EFT issues lodged by their clients,” the BSP said.

It added that an industry-wide standard for those participating in the BSP’s automated clearing houses (ACH) on how to resolve consumer concerns will build trust and confidence in the use of online payment services.

Stakeholders are given until June 28 to give their feedback on the proposed circular.

If approved, the guidelines will cover domestic payments denominated in peso, including payments of goods and services, and remittances or fund transfers.

According to the draft rules, BSIs are required to adopt a mechanism that will immediately identify any unsuccessful fund transfer, which refers to money not credited to the intended receiver due to EFTs not reaching the clearing switch operator (CSO), unauthorized transactions, restrictions such as “dormant” or “closed” accounts, or timed-out transactions.

CSOs are required to implement a mechanism that will identify system, infrastructure, and other operational concerns that affect the delivery of EFT services. The CSOs must inform all concerned participants if an issue occurs.

“For instant retail payments and corresponding use cases, the corresponding amount debited from the sender’s account in unsuccessful transactions shall be credited back to said sender’s account within one hour from receipt of client instruction. The same timeframe shall also apply to multiple-charged transactions,” the BSP said.

Under the NRPS framework, the timeframe of a successful transaction from a sender to the intended receiver should be within only two to three seconds. For group transactions, the time for money to be transferred should not be more than two hours.

As part of this, a financial institution is required to provide a transaction notification to inform the sender about the status of the EFT.

The sender and the receiver will not pay any fees in the event of an unsuccessful transfer.

Financial institutions should also implement policies and procedures for providing consumer assistance to customers with unauthorized and erroneous transactions, the central bank said.

“These procedures should form part of their Consumer Protection Risk Management System and Consumer Assistance Mechanism, in accordance with existing BSP rules and regulations,” it added.

Erroneous transactions refer to EFTs sent to an incorrect beneficiary due to an error in encoding details by the sender.

The processing of complaints should also be handled in line with existing BSP laws, such as provisions set forth under the Financial Products and Services Consumer Protection Act or Republic Act No. 11765.

“Participants shall adopt a mechanism to timely identify scenarios that may result to disruption of operations and which may affect the availability of electronic payments facilities, including but not limited to operational risk factors such as technology, manpower, alternate site, and service providers,” the BSP said.

These scenarios may include natural disasters such as earthquakes, floods, typhoons, long-term power outages, fire, and technical malfunctions like system downtime and cyberattacks, among others.

Disruptions to operations must be reported to the BSP within an hour of the incident.

BSIs are also required to release statements to the public 15 minutes after an incident occurs.

The financial institutions should regularly update the public until the affected service is restored.

For any scheduled system maintenance activity affecting fund transfers, BSIs should inform the public at least three days prior.

“Participants shall adopt an effective monitoring mechanism to ensure compliance with the provisions stated herein. Respective self-assessment functions must consider review of compliance by concerned business units, and ensure adequate reporting to Board and/or senior management,” the BSP said.

All BSIs will be given one year to comply with the provisions of the circular, if approved.

A violation of any of the requirements set by the circular may lead to suspension of offering new digital financial products and services, revocation of the authority to provide digital services, and/or inability to settle through the real-time gross settlement system operated by the BSP.

Based on BSP data, the combined value of transactions done via the central bank’s automated clearing houses InstaPay and PESONet climbed by 30.1% to P3.8 trillion as of end-April from P2.92 trillion in the same period in 2022.

In terms of volume, total transactions made through the clearing houses grew by 28.5% to 247.77 million in the first four months of the year from 192.83 million in the comparable year-ago period.

PESONet and InstaPay are automated clearing houses launched in December 2015 under the central bank’s NRPS framework.

The BSP wants 50% of total retail transactions done digitally and to bring at least 70% of Filipino adults into the financial system by this year under its Digital Payments Transformation Roadmap.