New directive clears way for e-payment

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The National Bank of Ethiopia (NBE) issued a directive for the establishment of alternative financial firm that paves the way for e-payment system.
The directive “Licensing and Authorization of Payment Instrument Issuers Directive” that has become effective as of April 1, allow Ethiopians including the diaspora to establish ‘payment instrument issuers’ at a paid up capital of 50 million birr.
The directive article 3 sub articles B. 7 stated that a minimum paid up capital of 50,000,000 birr shall be contributed in cash and the amount shall be deposited in a blocked account with a bank in the name of the applicant payment instrument issuer.
The same article sub article B. 8 of the directive stated the maximum share an individual shall own on the payment instrument issuer company.
It stated that no person, other than the government, may hold more than 20 percent of the shares of a licensed payment instrument issuer, and B .9 of the same article also added that a company other than a government enterprise shall have a minimum of 10 shareholders.
The services that the new upcoming financial firms may undertake are cash-in and cash-out, local money transfers including domestic remittances, load to card or bank account, transfer to card or bank account. They will also be allowed to provide services like domestic payments including purchase from physical merchants, bill payments; over-the-counter transactions; and inward international remittances, according to the directive.
Based on written approval of the National Bank, a licensed payment instrument issuer under full responsibility of and written outsourcing agreement with a regulated financial institution and pension funds, may be allowed to provide micro-saving products, micro-credit products, micro-insurance products or pension products.
The directive indicated that to ensure maximum protection on transactions related to electronic account, all transactions shall have single factor authentication, like user created personal identification number; and two-factor authentication shall be applied for transaction amounts greater than 1,000 birr.
Regarding the payment the directive indicated that a payment instrument issuer shall put in place systems and procedures to keep and identify at least three categories upon opening of an electronic money account.

Mobile Apps.

Level 1 account shall be subject to a maximum account balance of 5,000 birr, an aggregate daily transaction limit of 1,000 birr and an aggregate monthly transaction limit of 10,000 birr.
For level 2 accounts shall be subject to a maximum account balance of 20,000 birr, an aggregate daily transaction limit of 5,000 birr and an aggregate monthly transaction limit of 40,000 birr.
The level 3 accounts shall be subject to a maximum account balance of 30,000 birr, an aggregate daily transaction limit of Ethiopian Birr 8,000 and an aggregate monthly transaction limit of 60,000 birr.
It added that the walk-in users shall be subject to a single maximum daily transaction limit of 500 birr.
An electronic account belonging to an agent shall have no amount limit for transactions made in relation to users.
According to the directive a licensed payment instrument issuer shall keep the total amount of electronic money float in the form of cash deposited in a bank and/or invest in any other safe government security as prescribed by the National Bank.
Besides that upon the request and written approval of the National Bank, a licensed payment instrument issuer shall open an electronic money float cash deposit account with a bank.
On the license application process the directive mentioned that applicants should come up with comprehensive document, which demonstrates applicant’s ability to manage the system and allocate required resources including analysis on gaps identified between the domestic and global payment instruments market, business plan at least for five years, and features and value proposition of the payment instrument to be issued, products and services, and organizational structure and responsibilities of the board of directors and the management with respect to the payment instrument to be issued.
The directive has also added that if applicants get green light, a pilot period will be implemented since the operation is new for the country.
The directive further stated that the National Bank, based on the proposal of the applicant may authorize a pilot period for the maximum of three month duration that might be extended for one more month as per the request of the applicant.
According to article 22 of Payment Instrument Issuers directive, an authorized or licensed applicant shall commence operation within six months after the date of authorization or license is made.
The directive has also added the qualification for board of directors with at least first degree and a minimum age 30 years.
Appointment of Chief Executive Officer (CEO) and Senior Executive Officers should be approved by NBE, which is common on other financial sectors, while the directive added that the CEO should have a minimum of ten years work experience in finance and payment areas and of which, five years shall be in senior executive position.
According to the statement of NBE the directive, signed by Yinager Dessie, the Governor of NBE, gives prominence to innovative payment instruments believing that they are important to increase the use of financial services.