Regulatory Alerts2024-07-24
Rules for Dealing with E-Commerce Payment Service and Support Providers
The Saudi Central Bank (SAMA) issued this circular to clarify that technical connectivity and support services for e-commerce payments are ancillary and currently exempt from direct licensing, provided they secure SAMA Payments' technical approvals and avoid merchant contracting, settlement, and fund deposit activities. The directive mandates that banks and licensed payment service providers may contract with these unlicensed support companies after verifying their technical approvals and compliance with third-party outsourcing rules, including Mada system requirements. Furthermore, financial institutions must exclusively engage licensed payment service companies for core services and promptly notify SAMA if unlicensed entities provide related payment services.
Saudi Central Bank (SAMA) Circular
To: Respected Parties, Peace, mercy, and blessings of God be upon you,
Subject: Mechanism for Dealing with Companies Providing E-Commerce Payment Services or Supporting Such Operations.
Based on the authorities vested in the Saudi Central Bank under its system issued by Royal Decree No. M/36 dated 11/4/1427H, the Banking Control System issued by Royal Decree No. M/5 dated 22/2/1367H, the Payments and Payment Services System issued by Royal Decree No. M/26 dated 3/1/1443H, and the Executive Regulations issued on 24/11/1444H (repealed by Circular No. 4093.96 dated 16/12/1444H), and regarding Paragraph Nine of Article Seven of the Executive Regulations for the Payments and Payment Services System concerning services that are not considered related payment services, which states: "Services provided by technical service providers, including, for example, technical services," and with reference to SAMA Circular No. (4208.578) dated 18/11/1442H regarding the mechanism for dealing with companies providing or supporting e-commerce payment operations.
Therefore, the Saudi Central Bank confirms that connectivity and technical support services for e-commerce payment operations are considered ancillary to payment services, which currently do not require a license from the Saudi Central Bank. Companies providing these services must obtain all necessary technical approvals from SAMA Payments, and their services must be limited exclusively to connectivity and technical support, without including the following aspects:
- Direct contracting with merchants, registering them, and carrying out compliance procedures to verify the accuracy of merchant data and information in accordance with (Know Your Customer) principles and related requirements for combating money laundering, terrorist financing, and financial fraud.
- Finalizing settlement procedures and depositing funds into the merchant's bank account.
Accordingly, the Saudi Central Bank wishes to confirm the following:
- Banks and financial institutions must adhere to dealing exclusively with licensed payment service companies, and notify the Saudi Central Bank promptly if it becomes apparent that an unlicensed company is providing any related payment services.
- Banks, financial institutions, and related payment service providers may contract with companies providing connectivity and technical support services for e-commerce payment operations, after verifying that they have obtained all necessary technical approvals, and observing third-party outsourcing rules and related instructions and regulations, including the operational and technical requirements of the (Mada) system and the Mada fee guide.
For information and action, noting that this circular replaces Circular No. (4208.578) dated 18/11/1442H regarding the mechanism for dealing with companies providing or supporting e-commerce payment operations as mentioned above.
Yours sincerely, Yazeed bin Ahmed Al-Sheikh Deputy Governor for Supervision
Distribution Scope:
- Banks and financial institutions operating in the Kingdom.
- Payment service companies operating in the Kingdom.