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A customer uses the PayGo Wallet application on his smartphone.
A customer uses the PayGo Wallet application on his smartphone. Pha Lina

New rules for digital payments

The central bank has issued new regulations governing the licensing of payment services providers (PSPs), requiring that all firms providing online services to accept electronic payments have at least $2 million in registered capital, a move expected to increase the stability of the sector and encourage the consolidation of its smaller players.

A prakas signed by National Bank of Cambodia (NBC) Governor Chea Chanto on June 14 and released on June 20 establishes that all PSPs in Cambodia must obtain a licence from the NBC to operate. The licensed firms are required to demonstrate a minimum registered capital of 8 billion riel (about $2 million) and deposit 5 percent of their paid-up capital with the NBC.

PSP licences are valid for six years, with an annual licensing fee of 20 million riel ($5,000), according to the prakas.

The new regulations aim at better governance of third-party processors (TPPs) that act as intermediaries to complete payment transactions, and reflect the rapid growth of financial technology (fintech) solutions.

Chea Serey, director-general of the NBC, explained that any entity wishing to provide digital payment services, including banks and other financial institutions, must now first obtain a PSP licence.

“This prakas is targeted at the existing institutions that provide payment services or institutions that start to provide payment services,” she said. “This means that most of the existing institutions operating under a third-party processor licence would be required to be relicensed by the NBC.”

Some of the larger firms that operate as payment services providers include Wing, True Money, Asia Wei Luy and PayGo.

According to Serey, the new regulation aims to increase the security of digital transactions while enhancing fair competition and innovation in the fintech sector.

“Currently, innovation in payment areas is moving very fast, but the regulatory framework for payment systems in Cambodia is still behind and the scope of existing regulations cannot cover new payment innovation,” she said. “As a regulator of payment systems, the NBC needed to update and formulate new regulations according to the market’s needs.”

Tomas Pokorny, CEO of Pi Pay, a new payment solutions company that is currently in its beta-testing phase in Cambodia, said the prakas significantly raised the entry requirements for PSPs. Yet he said he expected the new regulations would have a positive impact in that they clearly delineate who can legally provide digital payments.

He added that previously, many entities, even nonfinancial ones, could offer payment services by satisfying the flexible requirements of a third-party processor licence, but now the sector will shift to more-established institutions.

“We believe that albeit this requirement is much higher than the previous relatively low fees for TPP licences, it is rather a good move,” he said. “I think it won’t hinder the expansion of fintech in general, but will rather boost further reclassification of the market.”

Pokorny said it was possible that the high minimum capital requirements would eventually lead to a consolidation of the sector, though he noted this could in turn increase competition in the market and benefit consumers. He added that even with the new prakas, Cambodia’s financial regulations remain some of the most advantageous of developing economies.

“It may raise higher financial requirements for financial operators, however, it also expands their possible service by allowing them to operate in a more innovative and flexible environment,” he said. “We believe it is a necessary step to bring Cambodia closer to the rest of Asean, where the fintech sector has been blossoming for the last couple of years.”

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