Payment Systems and Services Oversight Framework

The Central Bank of Egypt (CBE) has released a revised framework for overseeing payment systems and services. This update clarifies the goals of the supervisory policy, the principles and methods used, the range of application, and the necessary activities for ensuring efficient supervision of payment systems and services. The Central Bank of Egypt aims to establish a transparent system that allows payment system operators, participants, payment service providers, their users, and other relevant parties to have a clear understanding of the supervisory framework and meet the necessary regulatory requirements. This will also improve the effectiveness and efficiency of the bank’s supervisory policy.

The Central Bank of Egypt exercises supervision over payment system operators and service providers by granting licenses and approvals to eligible applicants. It is mandatory for entities, both domestic and foreign, that wish to operate payment systems or offer payment services to residents of Egypt to apply for a license from the Central Bank.

In order to issue the license, the Central Bank must verify that the applicant’s operations do not jeopardize the safety, efficiency, and security of the national payment system. Additionally, the applicant’s activities must align with the goals of supervision. The Central Bank also evaluates the applicant based on various criteria, such as minimum capital, legal structure, technical expertise, and financial stability. The applicant’s good reputation, as well as their governance and risk management capabilities, are also taken into consideration.

Banks intending to operate a payment system or offer payment services are not required to obtain a license from the CBE. However, they must seek approval from the CBE before commencing these activities, ensuring adherence to the laws and regulations set forth by the CBE for payment system operators and payment service providers.

The CBE possesses the power to modify the license or approval given to institutions that plan to operate payment systems or offer payment services. This includes the ability to add new services, operate more payment systems, or make alterations to the nature of the work or activities of the licensed institution. The CBE also has the right to request the required information from these institutions in order to monitor and assess their performance and conduct in payment systems and services.

When assessing a request to modify a license or approval, the CBE thoroughly examines and assesses the potential impact of the proposed amendment on the safety and efficiency of the system, service, or tool. Subsequently, the CBE evaluates the compatibility of the amendment with the supervision requirements and standards. Based on the findings of this study, analysis, and evaluation, the CBE has the authority to instruct the applicant to revise certain aspects of the proposed amendment before granting approval. Alternatively, if the proposed amendment fails to meet the safety and efficiency objectives, the CBE may deny approval.

Payment Systems and Services Oversight Framework

The Payment System is defined by the Central Bank of Egypt and the Banking Sector Law, as stated in Law No. 194 of the year 2020. It refers to a collection of methods and protocols used to transfer funds electronically between two or more parties, facilitating the payment, clearance, or settlement of financial obligations. Payment Services refer to services that encompass activities

such as managing account information, issuing, transmitting, receiving, or executing payment orders and transactions, regardless of whether they involve local or foreign currency. These services also include the issuance and administration of payment instruments and electronic funds.

Objectives of Oversight for Payment Systems and Services

Payment Systems and Services play a vital role in the economy and have a significant impact on its overall success. Efficient and reliable payment systems and services have the potential to significantly enhance the effectiveness, clarity, and security of financial systems. The Central Bank and Banking Sector Law grants the CBE the authority to regulate and supervise payment systems and services with the objective of:

i. Advocating for the integrity and effectiveness of payment systems and services.
ii. Addressing potential hazards that may result from disruptions in the operation or availability of payment systems and services.
iii. Ensuring the security and fostering public confidence in payment systems and services.
iv. Ensuring the provision of secure and economical payment products and services to users of payment services.
v. Implementing inclusive policies that guarantee equitable and transparent treatment for all participants and users, without any kind of discrimination.
vi. Assisting in the attainment of financial stability.

The extent of CBE’s supervision policy

The scope encompasses both bank and nonbank payment systems operators and participants, payment services providers and their agents, payment schemes and instruments, international electronic payment systems (including those outside Egypt that serve Egypt residents), and outsourced services (functions or activities performed by a third party on behalf of licensed entities).

When determining how to oversee payment systems and services, the CBE considers factors such as the kind, extent, and complexity of the activities, as well as the risks involved in their operations.

The Central Bank of Egypt will employ all necessary measures to fulfill its supervisory role, which may include, but are not restricted to, the following:

1. Establishing policies, rules, and regulatory requirements that align with international practices for controlling and supervising payment system operators and payment services providers.
2. Implementing the regulations for the functioning of payment systems.
3. The process involves granting licenses to payment system operators (PSOs) and payment services providers (PSPs), and approving modifications to the license to incorporate new payment services or systems, or to implement changes in the operations or activities of the licensed organization.
4. Overseeing and evaluating payment system operators (PSOs) and payment service providers (PSPs) to verify that they are following the rules and regulations.
5. Ensuring the prevention of market misuse or criminal malpractices, particularly in the realm of financial crime such as fraud.
6. Collaborating and sharing information with other capable authorities within Egypt or internationally.