Resolution JPRM-2024-029-M: Reforming the Standard Regulating Payment Means and Systems in Ecuador and Fintech Activities

RESOLUTION NO. JPRM-2024-029-M THE MONETARY POLICY AND REGULATION BOARD

CONSIDERING:

That, Article 226 of the Constitution of the Republic of Ecuador prescribes that public servants and persons acting under state authority shall exercise only the competencies and powers attributed to them in the Constitution and the Law;

That, Article 227 of the same instrument states that Public Administration constitutes a service to the community governed by principles of effectiveness, efficiency, quality, hierarchy, coordination, planning, among others;

That, numeral 1 of Article 302 determines that: “Monetary, credit, exchange rate, and financial policies shall have as objectives: 1. To supply the necessary payment means for the economic system to operate efficiently”;

That, the first clause of Article 303 of the Magna Carta determines that the formulation of monetary, credit, exchange rate, and financial policies is the exclusive faculty of the Executive Branch and shall be implemented through the Central Bank of Ecuador;

That, numerals 1 and 13 of Article 36 of the Organic Monetary and Financial Code, regarding the functions of the Central Bank of Ecuador, establish: “1. Instrument policy in the monetary sphere, to promote the sustainability of the monetary and financial system in accordance with the provisions of this Code; (…) 13. Exercise control over payment means; and, the oversight and supervision of auxiliary payment systems, fostering efficiency, interoperability, and innovations in this area; (…)”;

That, Article 47.1 of the aforementioned Code created the Monetary Policy and Regulation Board as part of the Executive Branch, responsible for the formulation of monetary policy, and the highest governing body of the Central Bank of Ecuador;

That, Article 47.6 of the same Code, regarding the functions of the Monetary Policy and Regulation Board, among others, establishes: “1. Formulate policy in the monetary sphere and observe its application by the Central Bank of Ecuador, to preserve the integrity and sustainability of the dollarization monetary system and the financial system, in accordance with the provisions of this Code; (…) 7. Formulate policy for the operations of the Central Bank of Ecuador; (…) 12. Regulate the central payment system, as well as the regulation, permission, registration, oversight, and supervision of auxiliary payment systems; (...) 26. Those others conferred by law. (...)”;

That, Article 47.7 of the aforementioned Code states: “Acts of the Monetary Policy and Regulation Board enjoy the presumption of legality and shall be expressed through resolutions that shall have mandatory force (…)”;

That, Article 99 of the aforementioned Code details what other payment means are, including electronic payment means comprising payment transfers;

That, Article 101 of the same Code states: “Electronic payment means shall be implemented and operated by the Central Bank of Ecuador and operated by entities of the national financial system and duly qualified agents of the auxiliary payment system in accordance with the regulations issued by the Monetary Policy and Regulation Board in accordance with international standards on the regulation of electronic payment means. All transactions carried out with electronic payment means operated by those who perform Fintech Activities shall be settled and, if applicable, cleared at the Central Bank of Ecuador, in accordance with the procedures established by the Monetary Policy and Regulation Board. The use of electronic, telematic, or similar payment means, implemented by the national financial system, shall be encouraged, tending towards the reduction of costs for these and other services provided by such entities. All transactions carried out with electronic payment means shall be settled and, if applicable, cleared at the Central Bank of Ecuador, in accordance with the procedures established by the Monetary Policy and Regulation Board”;

That, the first and second clauses of Article 103 state: “The national payment system comprises the set of policies, norms, instruments, procedures, and services through which resource transfers managed through payment means and the settlement of values are effected, directly or indirectly, among its various participants. The national payment system is integrated by the central payment system and the auxiliary payment systems. The Central Bank of Ecuador shall establish the requirements for authorization, operation, registration, and information disclosure of these systems. The corresponding tariff regime shall be regulated by the Monetary Policy and Regulation Board (…)”;

That, Article 104 states: “The central payment system is the set of policies, norms, instruments, procedures, and services articulated and coordinated, under the charge of the Central Bank of Ecuador, through which resource transfers of its participants are effected, as well as their clearing and settlement. The Monetary Policy and Regulation Board shall establish the requirements and conditions for access to the central payment system.”;

That, Article 105 of the aforementioned Code provides: “Auxiliary payment systems are the set of policies, norms, instruments, procedures, and services articulated and coordinated, public or private, authorized by the Central Bank of Ecuador, established to effect resource transfers, money remittances, or clearing among their various participants”;

That, Article 108 of the aforementioned Code states: “The Central Bank of Ecuador is the clearing and settlement agent of resources in the central payment system and the settlement agent of resources in auxiliary payment systems. These auxiliary systems, as well as entities of the national financial system, shall remit with the periodicity and in the manner determined by the Monetary Policy and Regulation Board the details and results of the clearing processes to be settled. (…)”;

That, Article 109 of the aforementioned Organic Code determines: “The Central Bank of Ecuador shall exercise oversight and supervision of auxiliary payment systems and their administering entities, as well as any payment infrastructure or monetary resource transfer infrastructure acting in the market, to ensure the correct functioning of the channels, instruments, and payment means processed through them. The Monetary Policy and Regulation Board shall adopt regulations to determine the operation, governance, risk control, and financial requirements that auxiliary payment systems and their administering agencies must comply with. Administrators of auxiliary payment systems, including any payment infrastructure or monetary resource transfer infrastructure, for their operation must have authorization from the Central Bank of Ecuador, and shall be obligated to remit the information requested by it and within the timeframes determined by it (...)”;

That, by Resolution No. JPRM-2024-006-G, of March 15, 2024, the Monetary Policy and Regulation Board resolved to submit for public consultation the draft Standard of Interoperability in Immediate Low-Value Payment Systems;

That, by Resolution No. JPRM-2024-018-M, of September 4, 2024, the Monetary Policy and Regulation Board issued the “Standard that regulates payment means and systems in Ecuador and the Fintech activities of its participants”;

That, it is necessary to establish the responsibilities and standards with which participants of the Auxiliary Payment System will interoperate within payment networks, guaranteeing the immediate transfer of resources between clients;

That, the Monetary Policy and Regulation Board, in an extraordinary session by virtual modality, on December 31, 2024, reviewed the proposal sent via memorandum No. BCE-BCE-2024-0296-M of December 30, 2024, by the General Manager of the Central Bank of Ecuador to the President of the Monetary Policy and Regulation Board; as well as, Technical Report No. BCE-GSIMP-2024-021 - BCE-GMPSN-2024-030, of December 27, 2024; and, Legal Report No. BCE-GJ-018-2024, of December 29, 2024; and,

In exercise of its functions and in attention to Article 47.7 of the Organic Monetary and Financial Code, the Monetary Policy and Regulation Board resolves:

REFORM THE “STANDARD THAT REGULATES PAYMENT MEANS AND SYSTEMS IN ECUADOR AND FINTECH ACTIVITIES OF ITS PARTICIPANTS” CONTAINED IN RESOLUTION NO. JPRM-2024-018-M

ARTICLE 1.- In TITLE II.- NATIONAL PAYMENT SYSTEM, following Article 18, add as Article 18.1 the following:

“Article 18.1.- Definitions: For the purposes of this Title, the following definitions shall be considered:

1. Service Level Agreements: Agreements that establish quality, availability, and performance standards in payment services, defining measurable parameters and objectives to evaluate compliance;

2. Payment Network Administrators: Entities responsible for the efficient, secure, and reliable functioning of the payment network, which allows the transfer of money among its members. Participants of the Auxiliary Payment System, previously authorized in the clearing service that processes payment transfers; and the Central Bank of Ecuador with respect to the Instant Payment Network (RPI), may fulfill this role;

3. Auxiliary Payment System Administrators (ASAP): Those joint-stock companies, limited companies, branches of foreign companies registered in Ecuador, or public sector entities that, without being part of the financial system, are authorized by the Central Bank of Ecuador, to operate and/or channel payment means by providing the services established in this resolution. These entities are under the oversight and supervision of the Central Bank of Ecuador;

4. Payment Aggregation: Service that links, on behalf of an acquiring entity, established commercial entities in Ecuador, through their service and technological infrastructure to accept electronic payment means, collecting on behalf of such commerce the product of the settlement of authorized payments, to transfer or credit them in favor of the commerce. The payment aggregator must celebrate the corresponding agreements or contracts, both with the establishments and with the acquiring entities;

5. Payment Channels: The paths used by clients and users of participants of the Auxiliary Payment System to effect monetary transactions or payments, whether physical or electronic. Physical channels include tellers, ATMs, and point-of-sale terminals, where in-person transactions are carried out. Electronic channels comprise mobile applications and online payment platforms that use technological devices to allow operations with electronic payment means and electronic wallets. Payment channels can be own or managed by third parties, depending on the operational model adopted;

6. Register of Participants of the Auxiliary Payment System: Corresponds to the registry carried out by the Central Bank of Ecuador with the list and detail of entities that have been authorized as participants of the Auxiliary Payment System, with their respective services and authorization dates, containing relevant information of the entity, at the discretion of the Central Bank of Ecuador;

7. Client: Natural or legal person who maintains a contractual relationship to access any of the services established in this Title;

8. Beneficiary Client: Client recipient who receives the resources subject to a payment transfer;

9. Ordering Client: Client who initiates and authorizes a payment transfer for the crediting of resources to a beneficiary client;

10. QR Code (Quick Response Code): Type of two-dimensional information encoding with specific and standardized fields, defined by the Central Bank of Ecuador, to facilitate payment transactions. QR codes can be dynamic or static. They are dynamic when they contain information that can be changed after being generated; and, static when they contain fixed information that cannot be edited or changed after being generated;

11. Commerce: Legal person or natural person with commercial activity, who has a Unique Taxpayer Registry (RUC);

12. Clearing: Process carried out to determine the net position in favor or against the members of the payment networks, which must be settled through charges to their current accounts at the Central Bank of Ecuador;

13. Payment Credentials: Set of data belonging to the client used to make or receive resources in an electronic transfer to make payments. These credentials comprise, at least, the account number or credit card number, the type of account, the identification number of natural or legal persons, and the linked participant;

14. Accounts: Refers to demand deposit accounts, electronic payment accounts;

15. Distributed Ledger: Data structure and operational model managed by payment networks, intended to store and manage keys, along with all relevant information associated with clients;

16. Members of Payment Networks: Private banks; public banks that perform intermediation and collect resources from the general public; savings and credit cooperatives; mutual savings and credit associations for housing; central boxes; neobanks; specialized societies for deposits and electronic payments (SEDPES); participants of the Auxiliary Payment System who are duly authorized in the “service for processing electronic payment means” on behalf of one or more financial entities; and, the Central Bank of Ecuador. Members act in a payment network with their technological infrastructure directly or provided by a third party, indirectly;

17. Beneficiary Member: Member of a payment network that allows its beneficiary client to receive resources from a payment;

18. Ordering Member: Member of a payment network that allows its client to order a payment;

19. Settlement: Exclusive function of the Central Bank of Ecuador, through which the results of the net positions of the clearing processes are canceled through debits or credits in the accounts that participating entities maintain at the Central Bank of Ecuador;

20. Key: It is the unique and public identifier that allows the client to link their payment credentials with their personal information, such as their identification number, cell phone number, or personal email address, to make or receive payments;

21. Inter-Network Operations: Those operations carried out between members of different payment networks;

22. Intra-Network Operations: Those operations carried out between members of the same payment network;

23. Real-time Payment: An electronic transaction through which resources are transferred almost instantaneously from the ordering account to the beneficiary account. The ordering client initiates the payment through the use of keys, QR codes, or payment credentials, regardless of the participants who provide the payment services. This process is carried out continuously, operating 24 hours a day, 365 days a year;

24. Participants of the Auxiliary Payment System: Refers to financial entities, auxiliary financial system service entities: transactional, payment, network, and ATM operators, and card administrators; financial technology services: neobanks and digital credit granting; specialized societies for deposits and electronic payments (SEDPES); and Auxiliary Payment System Administrators (ASAP), that, with prior authorization from the Central Bank of Ecuador, participate in the Auxiliary Payment System;

25. Payment Gateway: Technological platform that allows establishments to accept electronic payments from their clients or users. It acts as an intermediary between the establishments and payment service providers, facilitating the secure transmission of payment information and transaction authorization. The payment gateway is responsible for encrypting payment data, managing communication with payment service providers, and providing security and fraud prevention services;

26. Portability: Right of clients to transfer their keys to any member of a payment network, without losing functionality;

27. Processing of electronic payment means: Service provided by auxiliary financial system service entities to banks, savings and credit cooperatives, and mutual savings and credit associations for housing, to process payment means that allow clients or members of said financial entities to make payments, collections, and transfers. These auxiliary financial system entities cannot collect resources on their own. The deposits of these clients or members and their payment and transfer operations originated by this service shall be the responsibility of the depositing financial entities. Auxiliary financial system service entities must be qualified by the respective control body, in the categories of payments, transactional, or card administrators, and have authorization from the Central Bank of Ecuador to process the payment means explicitly established in the authorization resolution issued;

28. Payment Networks: Technological infrastructures with procedures and services, to channel electronic money transfers to effect real-time payments;

29. Instant Payment Network (RPI): Technological infrastructure with procedures and services, to channel electronic money transfers to effect real-time payments, administered by the Central Bank of Ecuador;

30. Key Resolution: It is the process by which the search for the key in distributed directories is carried out, to obtain the necessary information to verify the beneficiary client and make the payment;

31. Central Key System: Operational model managed by the Central Bank of Ecuador, designed to manage the necessary client information, facilitating payment interoperability through keys;

32. Payment Integrator System: Technological infrastructure, administered by the Central Bank of Ecuador, with procedures and services that manages key operations, processes and clears inter-network payment transfers, and remits the information required for settlement;

33. Transactional Switch for Payment Services: Technological system that facilitates the communication and routing of monetary transaction data among the various participants of the Auxiliary Payment System;

34. Resource Collection: Resource collection service provided by an entity participant of the Auxiliary Payment System to public entities;

35. Money Remittances: Service for the sending and delivery of money with the outside;

36. Real Time: Refers to the capacity a payment platform has to process and clear transactions almost instantaneously. The maximum time will be defined by the Central Bank of Ecuador;

37. Non-contributory monetary transfers: Economic aid granted by the National Government to families and individuals, such as bonuses, pensions, or others.

38. User: Natural or legal person who, without having a contractual relationship with a participant of the Auxiliary Payment System, uses the services provided for in this standard; and,

39. Beneficiary Validation: It is the process by which the ordering member of a payment verifies the payment credentials necessary to identify and confirm the beneficiary client;”

ARTICLE 2.- In TITLE II.- NATIONAL PAYMENT SYSTEM, in Article 19, following letter e), add the following:

“f) Payment Integrator System (SIP); and

g) Instant Payment Network (RPI).”

ARTICLE 3.- In TITLE II.- NATIONAL PAYMENT SYSTEM, replace CHAPTER 5.- INTEROPERABILITY, with the following:

“CHAPTER 5.- INTEROPERABILITY

SECTION I.- PRELIMINARY CONSIDERATIONS

Article 46.- Concept: Capacity that a payment infrastructure or service has to allow its users or clients to send and receive funds to or from any other user or client, regardless of the participants who provide the services and the payment means used.

Article 47.- Obligation to Interoperate: Entities participating in the National Payment System must interoperate between their platforms and infrastructures, complying with the rules and technical standards issued for this effect by the Central Bank of Ecuador, within the timeframes determined by it.

Article 48.- Interinstitutional Advisory Committee on Payments: The Interinstitutional Payments Committee is a permanent instance of consultation and coordination between the various entities of the public and private sectors, whose purpose is to provide technical inputs for the elaboration, approval, and/or compliance with resolutions issued by the Monetary Policy and Regulation Board and the corresponding administrative ones of the Central Bank of Ecuador. The Monetary Policy and Regulation Board and the Central Bank of Ecuador will determine roadmaps and strategies, in order to facilitate the development and stability of electronic payment systems and interoperability. Participants of the Auxiliary Payment System shall be obligated to comply with the commitments established in said roadmaps and strategies, within the framework of current regulations.

SECTION II.- INTEROPERABILITY FOR ELECTRONIC MONEY TRANSFERS IN REAL TIME

SUBSECTION I: PRELIMINARY CONSIDERATIONS

Article 48.1.- Object: Establish interoperability norms in the processing of electronic payment transfers.

Article 48.2.- Scope of Application: This subsection regulates the interoperability of payment systems for electronic money transfers to effect real-time payments.

SUBSECTION II: PRINCIPLES AND OBLIGATIONS OF INTEROPERABILITY FOR ELECTRONIC MONEY TRANSFERS IN REAL TIME

Article 48.3.- Principles of Interoperability: The principles governing interoperability are the following:

a. Accessibility: guarantee, continuously, equal treatment and access among the different payment networks, members, and clients, ensuring that there are no discriminations or preferences, and promoting inclusion and equity in access to services;

b. High level of service: ensure availability, security, and continuity of service, with adequate response times and compliance with service level agreements”