Guidelines For White Label ATM And Merchant Acquiring Services (June 2020, Issue 3) –

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Bangladesh:

Guidelines For White Label ATM And Merchant Acquiring Services (June 2020, Issue 3)


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Recently, on 31.05.2020, the Payment Systems Department (PSD) of
the Bangladesh Bank has issued the Guidelines for White Label ATM
and Merchant Acquiring Services “WLAMA Guidelines”.
Typically, white label Automatic Teller Machines (ATMs) are owned
and operated by independent third parties, as opposed to being
owned and operated by banks or financial institutions. Therefore, a
white label ATM does not contain the name or logo of a bank or a
financial institution, rather it may contain the branding of such a
third party or other advertisement.

The WLAMA Guidelines were issued with the aim of expanding and
introducing the services of ATMs and Point of Sales (POS)/Quick
Response (QR) code machines to the customers based in the rural
areas of Bangladesh. Accordingly, in exercise of the powers
conferred under section 7(A)(e) of the Bangladesh Bank Order 1972
and section 49(1)(e) of the Bank Companies Act 1991, the Bangladesh
Bank has promulgated the WLAMA Guidelines to allow non-bank private
sector entities to set up the necessary infrastructure throughout
the country for providing the said services to the customers of
banks, mobile financial services (MFS) providers, payment service
providers (PSP) and any other institution as may be approved by the
Bangladesh Bank.

Some of the salient features of the WLAMA Guidelines are as
follows:

  • Incorporation – The WLAMA Guidelines requires a WLAMA license
    seeker (i.e. white label ATM and/or merchant acquisition service
    provider) to be incorporated in Bangladesh under the Companies Act
    1994. Furthermore, such a company’s memorandum of association
    must contain relevant objects clauses specifying the types of
    services that the company intends to offer.

  • Capital requirements – If an entity intends to provide white
    label ATM services only, it needs to have a paid-up capital of Taka
    45 crores (or BDT 450 million). For providing both white label ATM
    services and merchant acquisition services, in addition to the said
    paid-up capital requirement, the entity also needs to provide a
    bank guarantee of Taka 10 crores (or BDT 100 million) in favour of
    the Bangladesh Bank. Where an entity intends to provide only
    merchant acquisition services, it needs to have a paid-up capital
    of Taka 10 crores (or BDT 100 million) and provide a bank guarantee
    of Taka 10 crores (or BDT 100 million) in favour of the Bangladesh
    Bank. It is interesting to note that the WLAMA Guidelines also
    stipulates that the BDT 100 million bank guarantee for providing
    merchant acquisition services may be required to be enhanced at a
    later stage, if the acquisition business grows.

  • Licensing – An entity intending to provide WLAMA services will
    have to obtain a Payment System Operator (PSO) license under the
    Bangladesh Payment and Settlement Systems Regulations 2014.
    Furthermore, the entity must designate a scheduled bank as a
    Settlement Bank and submit to the Bangladesh Bank a memorandum of
    understanding (MOU), along with the WLAMA license application,
    signed between the proposed WLAMA service provider and the
    Settlement Bank.

In recent years, the idea of expanding the network of ATMs
through independent non-bank operators and taking it to the rural
population for the ultimate goal of greater financial inclusion has
found quite a foothold in many developing nations, particularly
given the banking system’s high operational costs in setting up
and maintaining ATMs. It appears that the Bangladesh Bank has also
introduced the WLAMA Guidelines with the same aim in mind -
affordable financial inclusion for the rural populace. To this end,
the Bangladesh Bank has, in contrast with comparable jurisdictions
of the subcontinent, taken a step further by bundling together
merchant acquisition services along with white label ATM services,
in the same guidelines. While the white label ATM services
endeavour to expand ATM services to the rural financial services
customers, merchant acquisition services aspire to expand card and
other digital transaction capabilities (both in-store and
e-commerce), with a particular focus on the rural areas.
Accordingly, the WLAMA Guidelines requires the WLAMA licensee to
deploy a minimum of 100 ATMs and 1000 POSs/QRs per year,
maintaining the urban to rural deployment ratio of 1:3.

The Bangladesh Bank’s endeavour, which aspires to complement
the present government’s Digital Bangladesh agenda, in this
globally prevailing challenging time, is indeed welcome. In time,
the WLAMA sector also has the potential to bring in new foreign
direct investments into Bangladesh from interested foreign
parties.

Originally published 11, June 2020

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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