In order to achieve financial inclusion through different services, State Bank of Pakistan has planned to regulate fintech and companies dealing with electronic money or Electronic Money Institutions (EMIs) throughout the country.
An entity that wants to become an EMI shall hold an initial capital of Rs. 200 million. Existing PSOs/PSPs that intend to become an EMI and undertake e-money business shall hold an additional capital of Rs. 100 million.
Scope of Services for EMIs
Traditionally payment instruments in Pakistan are issued by banks with negligible participation of non-banking entities. New technological innovations are now enabling non-banking sector to deliver innovative and efficient payment services to consumers at much lower cost.
Entities who issue e-money are known as Electronic Money Institutions (EMIs) that offer innovative, user-friendly and cost effective low value digital payment prepaid instruments like wallets, prepaid cards, and contactless payment instruments including wearables.
These innovative payment instruments have been instrumental in promoting cashless payments like merchant checkouts, e-commerce, transportation and toll payments etc.
EMIs may engage in the following activities:
- Issue e-money payment instrument.
- Distribute e-money payment instruments
- Redeem e-money payment instruments.
- Any other activity permitted by SBP.
E-money shall be used to make payments for goods and services, bill payments, fund transfers and cash deposits and withdrawals from e-money accounts.
EMI shall not conduct the business of banking including the acceptance of funds from public for the purpose of lending, investments or any speculative activity.
EMI shall take approval from SBP before offering any e-money products/services to customers including cross-border payments.
EMI shall neither pay interest/returns to customers in connection with the length of time e-money is held by consumers nor shall offer anything that adds to the monetary value of e-money.
EMI shall not issue e-money payment instruments at a discount i.e. issue e-money payment instruments that has a monetary value greater than the funds received from customers.
Dealing with Customers
EMI shall activate e-money payment instruments only after verification of customers’ particulars from NADRA as well as after pre-screening for designated and proscribed persons for all types of initiation of customer relationships or allowing use of financial services.
EMI shall take consent of customers of the terms and conditions of e-money payment instruments including the charges/fee associated with such instruments. The copy of terms and conditions shall also be made available to customers through various channels like email, website, brochures, mobile phones, IVR etc.
Transaction Limits for Customers
EMI shall ensure that the aggregate monthly load limit of an e-money payment instrument shall be Rs. 100,000 on CNIC verification (NADRA VeriSys) and Rs. 200,000 on biometric verification from NADRA.
The aggregate monthly load limit of an e-money payment instrument shall be Rs. 25, 000 on CNIC verification and Rs. 50,000 on biometric verification of customer by EMI’s agent.
Cash deposit and cash withdrawal limits for e-money holders shall maximum be Rs. 10,000 per day subject to biometric verification from NADRA.
Regulatory Requirements for EMIs
EMIs at all times shall maintain ongoing capital of 10% of the average outstanding e-money whichever is higher. EMIs shall maintain at all times, at least ten percent (10%) of the required capital or any other amount prescribed by SBP from time to time, as security deposit at SBP-BSC Office.
Five percent (5%) of the security deposit will be kept in a non-remunerative current account with the SBP Banking Service Corporation and five percent (5%) in the form of Government security to be kept under lien at SBPBSC.
Regulations for Electronic Money Institutions
The central bank issued a draft Regulations for Electronic Money Institutions . It invited potential stakeholders and companies for suggestions, comments and input for further improvement in the regulations and the system.
These regulations are primarily aimed at removing entry barriers for non-banking entities by providing them a guiding as well as an enabling regulatory framework for the establishment and operations of EMIs. These regulations also address potential risks in order to ensure consumer protection in line with legal framework of the country while promoting financial inclusion.