1. REGULATION AND SUPERVISION OF PAYMENT SYSTEMS IN PERU José Luis Vásquez Paz Jefe del Dpto. Análisis del Sistema de Pagos Banco Central de Reserva del Perú Brasilia, September 2014

2. PERU: BACKGROUND Source: International Monetary Fund Average Growth (2004 – 2013) Average Inflation (2004 – 2013) 6.64.1 2.96.3 553 PERULATAM 226 -29 -15 Economic growth and price stability enhance confidence in the means of payment, reducing both costs and risks to economic agents.

3. THE ROLE OF THE CENTRAL RESERVE BANK OF PERU (BCRP) IN PAYMENT SYSTEMS

4. Market forces do not necessarily ensure the public objectives of safety and efficiency. Participants do not always assume all risks and costs associated with clearing and settlement. Factors like economies of scale, barriers to entry, etc. can potentially limit competition and create a dominant market position, which in turn may lead to lower service quality and higher prices. WHY SUPERVISION?

5. WHY THE CENTRAL BANK? Payment systems are the basic infrastructure through which money flows across the economy, thereby facilitating the exchange of money for goods, services, and financial assets. They are instrumental in the implementation of monetary policy. A failure in the payment systems can affect the stability of financial firms and markets.

6. SYSTEMICALLY IMPORTANT PAYMENT SYSTEMS (SIPS) Supported by adequate National legislation (Payment Systems Law and BCRP Circulars) International Standards (Principles BIS)

7. SYSTEMICALLY IMPORTANT PAYMENT SYSTEMS (SIPS)

8. PAYMENTS HAVE GROWN FASTER THAN GDP Source: BCRP

9. PREFERENCE FOR ELECTRONIC PAYMENTS Operations in ACH (% share)

10. TIMELINE 1997 / 1998: Early studies (International Monetary Fund) 2000: Introduction of RTGS and ACH. 2005: Introduction of Securities Settlement System (funds). 2009: Law of the Payment Systems (Law 29440). 2011: New RTGS. 2013 / 2014: New studies (IMF and World Bank)

11. PILLARS OF THE PAYMENT SYSTEMS LAW Finality. Governance/Transparency. Supervision/Scope and Powers.

12. PRINCIPLES FOR SUPERVISION Transparency. International standards. -Core Principles (2001): adopted -Principles for FMIs (2012): work in progress Effective powers and capacities. Consistency. Cooperation with other authorities.

13. SUPERVISION TOOLS Monitoring: is performed by collecting information. Evaluation: Regarding observance of the Law and Bylaws. Induce changes: In case of problems of the administrative agencies, or problems with participants, or the existence of potential for improvement. Inspections on site.

14. CENTRAL BANK REGULATORY SCOPE

15. FINANCIAL INCLUSION 15 The creation of a Commission to design the National Strategy for Financial Inclusion (ENIF), promotes both greater access and use of quality financial services. The ENIF should promotes financial inclusion through the implementation of coordinated actions (the public and private sectors) in the context of the preservation of financial stability.

16. E- MONEY AS A FINANCIAL INCLUSION TOOL E-Money has the potential to provide access to payment services to a large segment of the population, avoiding the costs and risks of cash. Relies primarily on mobile telephony, which has a wide coverage across populations and regions in the country. Facilitates access to payment services by low-income and/or rural population segments.

17. E-MONEY LAW Purpose: Regulation of the issuance of e-money and for EEDEs. Definition: e-money is a monetary value as represented by a claim on the issuer: - stored in an electronic medium, - accepted by entities or persons other than the issuer, - issued for an amount equal to the proceeds received, - convertible to cash, - not a deposit and does not accrue interest.

18. 18 E-MONEY LAW Issuance: Only entities supervised by the Superintendence of Banking, Insurance Companies, and Pension Funds (SBS), including “Empresas Emisoras de Dinero Electrónico” (EEDEs). EEDEs: -Their main purpose is the issuance of e-money. -May not grant credit against the funds received. -Carry out only operations related to their main purpose. -Required to comply with the provisions on the prevention of money laundering and the financing of terrorism.

19. E-MONEY LAW Consumer protection - Trust fund. - Data protection. - Contracts Telco regulation

20. BYLAWS 20 Authorization Constitution Prohibition to extend loans Prudential measures Role of bank agents Aggregators Operations Res. SBS 6283-2013 Operations Res. SBS 6283-2013 EEDEs Res. SBS 6284-2013 EEDEs Res. SBS 6284-2013 Bank Agents Res. SBS 6285-2013 Bank Agents Res. SBS 6285-2013 Authorized operations Simplified accounts Contracts Trusts

21. INICIATIVES IN MOBILE PAYMENTS IN PERU Mobile payment initiatives (currently at a stage of development) are led primarily by financial companies. Mobile Payments - Banks - Using Smartphones or other devices E-Money - Bank and non-bank entities. - Prepay cards (can use also cellphones) - Agent network Platform of E-Money (Bank Association) 21

22. ECOSYSTEM Dispersión Créditos Seguros Tradicional Cooperativa Microfinancieras Aceptación Y Agentes Micropagos Nóminas, Beneficios, Servicios profesionales Gobierno Servicios Públicos Giros y Remesa s TOP MED BASE Venta Directa Source: Asociación de Bancos del Perú

23. PLATFORM Switch Channels ASBANC Wallet Platform Switch Bancos Red de Agentes Operador 1 Operador 3 Operador 4 Operador 2 Agentes Financieros Tarjetas de crédito Switch ASBANC-Ericsson Wallet Platform Canales Source: Asociación de Bancos del Perú

24. FINAL REMARKS Payments systems regulation in Peru follows the international standards and ensures -through a careful supervision- the compliance by the systems administrators with the law and bylaws. Peru has implemented the regulatory framework for E-Money as a tool for financial inclusion. Both regulation and supervision evolve with innovation and new international standards.