Macau SAR: Turning payment tides
Riquito Advogados lawyers outline how the pandemic has accelerated the growth of mobile payments in Macau SAR
Changes in Macau SAR's financial services sector – which have only been expedited by the pandemic and other recent events – are hiding in plain sight, from cashless payment methods to the rise of AI [artificial intelligence] advisors and chatbot support.
Some of these changes are also reflected in Macau SAR's economic market, as residents explore new and unfamiliar payment instruments. These changes have prompted the publication of new regulations aiming at further protecting the interests of residents (namely Macau SAR's Cybersecurity Law, e-Governance Law, and amendments to the Cybercrime Prevention Law, which have all been published in the past year). Naturally, such regulations have further enhanced the residents and public bodies' trust of online payment services.
In light of the coronavirus outbreak, brick-and-mortar operations have recently witnessed a decline, in line with the Monetary Authority of Macau's recommendation for residents to use online banking solutions over traditional over-the-counter services. Meanwhile, government bodies that interact with the public are gradually adopting electronic payment systems, thus encouraging residents to prefer digital over physical means of payments. Such solutions include cashless and mobile payments.
Based on the statistical results for the second quarter of 2020 regarding mobile payments, one could state that mobile payments in Macau SAR are growing in popularity. Such a conclusion becomes evident upon comparison of the registered number of transactions quarter-to-quarter and year-on-year (a 49% increase and 576% increase, respectively).
Taking into account the currently available mobile payments' applications and financial institutions that promote such means of payment in Macau SAR, it becomes evident that the financial system is evolving, albeit in a relatively conservative fashion, especially considering the incorporation of new banks in Macau SAR that adopt a more modern and technology-based approach in their modus operandi.
It is undeniable that mobile payments are becoming increasingly popular as we witness the development of a more modern, technology-inclined, digital economy. In fact, considering the returns generated and transferred to Macau SAR pursuant to the Guangdong-Macau Development Fund (RMB400 million ($57.8 million)) and the future launch of a joint cross-border financial management project between the Macau Monetary Authority, the Hong Kong Monetary Authority and the People's Bank of China, it seems that a cashless future is in the making, as any assessment of Macau's financial system must take into account its integration in the Greater Bay Area.
According to the Financial System Act of Macau, only licensed entities may provide payment services, notably the issuance and management of means of payments such as e-wallets. However it must be noted that, despite the lack of specific regulation regarding e-wallets, e-money and virtual banks, some entities are authorised to provide e-wallet functionality to their clients, thus allowing them to perform mobile payments with previously deposited funds.
The 30-year-old Financial System Act seems to translate, at first glance, into an outdated financial system; however, although rules for virtual banking or payment institution licences are not expressly spelled out, businesses interested in delivering products and services in these sectors may be authorised to conduct their operations, provided that certain requirements are met.
Against this backdrop, it seems that the developing framework has laid the groundwork for a digital economy with diversified services and products, allowing Macau SAR's economic market to become ever more competitive, without neglecting anti-money laundering and know-your customer regulations which, unsurprisingly, modern technology may assist in enforcing.
João Nuno Riquito
Daniel de Senna Fernandes