New Regulation on Payment Service Providers

The Argentine Central Bank (the "BCRA" after its acronym in Spanish) issued Communiques "A" 6859 and 6885 on January 9 and January 30, 2020, respectively. These are the first BCRA regulations aimed at directly regulating the activity of FinTech entities, as long as they fall within the definition of Payment Service Providers ("PSP").

With Communique "A" 6859, the BCRA decided to take a proactive position by directly regulating FinTech, for which it has determined certain minimum requirements for operating as a PSP. Subsequently, with Communique "A" 6885 (together with Communique "A" 6859, the "Communiques"), the BCRA established, among other obligations, that PSPs must be registered with the "Registry of Payment Service Providers offering Payment Accounts" of the Superintendence of Financial and Exchange Institutions (the "SEFyC" after its acronym in Spanish) within 30 calendar days after March 1, 2020, the date in which said registry will be opened (the "PSP Registry").

The issuance of a specific regulatory framework directly applicable to PSPs means that the BCRA is attributing itself with the competence to issue this framework.

One of the first highlights of Communique 'A' 6859 is the definition it gives of PSP. It states that "a PSP is a legal entity which, without being a financial institution, performs at least one function within a retail payment scheme, in the global framework of the payment system, such as offering payment accounts - freely available accounts offered by a PSP to its customers to order and/or receive payments -".  This definition is also contained in Communique 6885.

With respect to payment schemes, Communique "A" 6885" defines them as those "systems of commercial, technical and/or operational rules that make possible transfers of funds or payments involving three parties: a payer, a receiver and one or more PSPs", clarifying that "a payment method may have one or more alternative payment schemes. Every payment scheme must have an administrator who defines these rules and is responsible for their adaptation to the legal and regulatory framework in force".

The BCRA also established that "payment schemes regulated by the Argentine Securities and Exchange Commission for the primary placement and/or secondary trading and/or clearing and/or settlement of securities [and] payment schemes whose purpose is the withholding and/or collection and settlement of amounts intended to cancel tax or other obligations with the State at any of its levels and agencies" are not considered retail payment schemes.

Communique 'A' 6859 has placed its focus on the use that PSPs can make of the funds credited by clients. In this regard, the rule clarifies that "customer funds credited to payment accounts offered by Payment Service Providers (PSPs) must be available, at all times, ¬with immediate effect upon request by the customer¬ for an amount at least equivalent to that credited to the payment account. To this end, the systems implemented by the PSP must be able to identify and individualize the funds of each customer. 100 % of the customers' funds must be deposited ¬at all times¬ in accounts in pesos in financial institutions in the country".

Communique 'A' 6859 states that “for the performance of transactions on their own account (payment of suppliers, payment of salaries, etc.), PSPs must use an "operational" (freely available) sight account other than the account where the customers' funds are deposited”.

With respect to the option of enabling the investment of deposited funds, the rule clarifies that "upon express request from the client, the amounts credited to payment accounts may be transferred for application to the performance of operations with "common money funds" in the country, with the payment account being debited. In the latter case, it will be required that the invested amounts be reported separately from the rest".

Furthermore, in addition to implementing the compulsory registration with the PSP Register, Communique 'A' 6885 took further steps in deepening the regulatory regime applicable to PSPs that offer payment accounts.

Among other aspects, the abovementioned regulation incorporated the provisions of Communique 'A' 6859 regarding the limitations on the use that PSPs may make of the funds accredited by clients and established certain transparency requirements that PSPs must comply with in the advertising of their services by any means.

According to Communique "A" 6885, PSPs must include in all their advertisements a clear and explicit mention that they are limited to offering "payment services and are not authorized to operate as financial institutions by the BCRA and the funds deposited in payment accounts do not constitute deposits in a financial institution nor have any of the guarantees that such deposits may have in accordance with the legislation and regulations applicable to deposits in financial institutions".

Likewise, PSPs must also comply with the information regime to be implemented, in addition to providing access to their facilities and documentation to SEFyC and making available to the BCRA the tools for real-time consultation and reporting that the General Sub-Management of Payment Methods determines for each type of provider and according to its volume of operations.

Communique 'A' 6885 incorporated PSPs offering payment accounts into the list of complementary services offered by financial institutions. The incorporation of PSPs into those rules means that financial institutions must comply with the minimum shareholding requirements laid down by them to invest in a PSP offering payment accounts.

Both Communiques determine that the sanctions provided for in articles 41 and 42 of the Financial Institutions Law must be applied to PSPs and the members of their governing, administrative and supervisory bodies for non-compliance with the rules issued by the BCRA to regulate their activity.