On March 26 2018, the Brazilian Central Bank enacted amendments to the existing regulation on payment methods, proposing more flexible rules on payment arrangements, payment institutions and on interchange fees charged to issuers of debit cards. The Central Bank expects these changes to foster competition among market players and as a result provide reduced debit card costs for end users.
Under existing Central Bank rules, interchange fees that can be charged to issuers of prepaid and post-paid accounts (that is, debit cards and credit cards, respectively) are treated equally. Circular 3,887 now establishes maximum limits on interchange fees that may be charged by merchant acquirers (entities accountable for enabling merchants to accept payment instruments) to issuers of prepaid accounts: (i) 0.5% for the average of interchange fees, weighted by the amount of transactions calculated on a quarterly basis; and, (ii) 0.8% as a maximum percentage charged for any transaction.
This new regulation follows an international trend already observed in several developed and developing countries. In the US and Mexico, for instance, maximum limits for interchange fees charged in debit cards transactions led to average cost reductions on such fees of 40% and 50%, respectively.
The maximum thresholds provided above do not apply to non-face-to-face transactions or to transactions carried out with corporate cards.
Circular 3,886 introduced the regulation of sub-acquirers, which are entities that allow the final recipient to accept the payment instrument (for example, a credit or debit card) issued by either a payment institution or a financial institution. Since sub-acquirers are not considered to be settlors of payment transactions, these entities will be only required to connect to the centralised payment settlement system (Câmara Interbancária de Pagamentos or CIP) if a minimum threshold of transactions exceeding BRL500 million ($146 million) in a 12-month period is met.
Circular 3,885 established new rules for the authorisation process with the Central Bank for payment institutions to operate as payment services providers. Payment institutions were subject to advance authorisation if linked to a regulated payment arrangement, regardless of the entity's size. Under the new rules, payment institutions are only subject to advance authorisation to operate if they individually meet certain thresholds: (i) executing payment transactions totalling a minimum of BRL500 million in a 12-month period; or (ii) holding deposits in prepaid accounts totalling a minimum of BRL50 million in average, considering the 30 largest daily balances in a 12-month period. As soon as the payment institution reaches any of these parameters, it must request the authorisation within 90 days.
The Central Bank released public consultations to assess the market's view on: (i) the establishment of governance committees in card network entities; and (ii) rules for converting sub-acquirers into merchant acquirers.
Similar efforts are being made towards fostering innovation and reducing the cost of credit transactions. Regulation of certain types of credit transactions carried out exclusively by means of electronic lending platforms (including peer-to-peer lending) is under review by the Central Bank, after the initial proposal underwent public consultation.
The Central Bank's efforts to foster competition among the various providers of payment methods, thus reducing debit card costs for end users, fits in with the Brazilian authorities wanting to stimulate financial inclusion through the regulation of mobile payment tools, credit unions, equity crowdfunding and electronic lending platforms.
|Maurício Santos||Vinicius Sahione||Alexandre Vargas|
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