Central Bank creates Payment Initiation Service Provider and restricts rules on Transaction Volumes

​On October 22, the Central Bank of Brazil (BCB) issued BCB Resolution No. 24, amending BCB Circular No. 3,885, of March 26, 2018, to regulate the payment initiation service provider (iniciador de transação de pagamento) – a new type of payment institution introduced in the Brazilian Payments System; and establish new rules on transaction volumes applicable to payment institutions operating without authorization from the BCB, restricting the applicable regime, especially to electronic money issuers.

Payment initiation service provider (PISP)

BCB Resolution No. 24 defines the PISP as the payment institution that, without managing a payment account and without holding the funds transferred in the provision of the service at any time, provides the initiation service for a payment transaction ordered by the end user to an institution that holds a deposit or payment account.

For the BCB, the PISP will expand Open Banking, in which the provision of the payment initiation service does not depend on the PISP entering into agreements with the entities that hold deposit or payment accounts. Also, it will allow payments to be initiated through different institutions, as requested by the end user, regardless of where accounts involved in the transaction are located.

The BCB emphasizes that any PISP can command a Pix transaction in any institution that holds a deposit or payment account.

Institutions operating as PISP shall pay in and maintain a minimum share capital of BRL 1,000,000.00 (one million reais).

When providing the payment initiation service, a payment institution shall not:

• restore data related to the end-user credentials used to authenticate the payment transaction with the institution that holds the account;
• request from the end user any data other than that necessary to provide the payment initiation service;
• use, store or access data for any purpose other than providing the payment initiation service expressly requested by the end user; and
• change the amount or any other element of the payment transaction authorized by the end user.

Already considering a more restrictive approach in terms of volume requirements, prior authorization from the BCB shall be required from payment institutions wishing to provide payment initiation services. If the institution also provides payment services other than payment initiation, below the minimum volume, the application for authorization shall include such services.

The payment institution authorized to provide service as electronic money issuer, acquirer, or issuer of postpaid payment instrument shall be exempt from requesting authorization to provide payment services in any other categories, including payment initiation service, provide that its articles of association or by-laws already provide for such activity as part of the entity’s corporate purpose, and the payment institution communicates the BCB, ninety days in advance, its intention to start providing services in a new category. The opposite, however, shall not apply, and an institution only authorized as the PISP shall apply for authorization from the BCB to provide services in another category.

According to the BCB Resolution No. 24, the following institutions shall be exempt from authorization to operate as PISP: commercial banks; universal banks (bancos múltiplos) with commercial portfolio; savings banks; universal banks with credit, financing and investment portfolio; credit, financing and investment companies, or singular credit unions (exclusively to their members).

Players in the technology sector, on the other hand, and others intending to provide payment initiation services must necessarily obtain authorization to operate as a payment institution or fall into one of the exempted situations to provide the services mentioned in the rule.

New volume requirements

The BCB Resolution No. 24 rules represent the adoption by BCB of a progressively stricter regime as to volume requirements associated with mandatory authorization of electronic money issuers, resulting, in the long run, in mandatory authorization regardless of the financial volume of payment transactions or funds kept in a prepaid payment account. There are no substantial changes for issuers of postpaid payment instruments and acquirers. Please see below the new volume requirements for payment institutions:

1.    Electronic money issuers: new institutions intending to start operating as electronic money issuers after March 1, 2021, shall request prior authorization from the BCB. Institutions already providing such service on March 1, 2021, and do not yet have authorization from the BCB shall request authorization in the following situations:

• if, until December 31, 2021, the financial volume is greater than: BRL 500 million in payment transactions; or BRL 50 million in funds kept in a prepaid payment account;
   
• if, between January 1, 2022, and December 31, 2022, the financial volume is greater than: BRL 300 million in payment transactions; or BRL 30 million in funds kept in a prepaid payment account; and
   
• If, until December 31, 2022, the financial volume does not satisfy the requirements described in the previous items, a request for authorization to operate shall be filed between January 1, 2023, and June 30, 2023.

2.    Issuers of postpaid payment instrument / acquirers: mandatory authorization to operate still applies in case financial volume exceeds BRL 500 million in payment transactions.

The methodology for calculating minimum volumes remains the same, considering the sum of the transactions in which the institution has participated within the last twelve months; and the arithmetic mean of the thirty largest daily balances in electronic currency kept in prepaid payment accounts within the last twelve months.

For more information, check out Mattos Filho’s Banking and Finance practice.