(MENAFN- Trend News Agency) BAKU, Azerbaijan, May 2. The demands outlinedin the“Rules for carrying out payment operations and paymentinstruments” are a vital step to abandoning the use of physicalpayment cards in Azerbaijan, representative of the Bank of Baku andHead of the Expert Group on Payment Systems and Digital Banking ofthe Azerbaijan Banks Association (ABA) Tamerlan Rustamov toldTrend in an exclusive interview.
“First of all, these rules were adopted in order to apply therequirements of the laws of Azerbaijan,“On the Central Bank ofAzerbaijan,"“On non-bank credit organizations,” and“On paymentservices and payment systems.”
These rules, which define a variety of innovative techniques inthe digital payments ecosystem, for the first time outlined therequirements for credit transfers, direct debits, payment cards,and electronic money as payment instruments," Rustamov stated.
According to him, non-bank credit businesses will issue creditcards in compliance with these criteria.
“On this basis, non-bank credit organizations will providepayment accounts in accordance with the“Rules on opening,maintaining, and closing bank accounts” of the Central Bank ofAzerbaijan,” Rustamov said.
He noted that the rules replace the traditional concept of“payment order” with“credit transfer” and define requirements forlow-volume payment instruments. The general framework requirementsfor the execution of payment orders, individual collection orders,and instructions from tax and customs authorities wereretained.
"The regulations specify a payment instrument that allows thepayer, or user of the payment service, to perform a paymenttransaction with a payment card. We are discussing the requirementsfor card payment instruments while conducting payment transactionsvia a mobile device with the payment application installed. Withthe entry into force of these regulations, "Instructions onnon-cash payments and money transfers in Azerbaijan" and "Rules forthe issuance and use of payment cards" are recognized as no longerin effect,” Rustamov added.
According to him, ensuring information security in transactionswith payment cards was identified as a priority issue in the“Rulesfor the Issue and Use of Payment Cards," while the new rules havefurther expanded the scope of this requirement to apply to allpayment instruments.
“So, according to Article 3.17 of the rules, the transfer,collection, processing, and clearing of information on paymenttransactions performed within the country, as well as the technicalmaintenance of the issue and the acquisition of a means of payment,are carried out within the country.
In the previous edition, this requirement applied only toservice centers for payment card transactions. Currently, anyorganization, including a payment service provider and a paymentsystem operator, is subject to the law,” Rustamov said.
The expert noted that due to the further expansion of the use ofinnovative payment solutions and technologies in our country, suchas GooglePay and ApplePay, the exclusion requirement remains inthese rules.
“According to Article 3.18 of the rules, information ontransactions carried out within the country may be directlyexchanged between payment service providers, payment systemproviders, and payment system operators operating outside thecountry,” he added.
Rustamov noted that according to the rules, electronic money canbe issued only in two forms: identified or unidentified. Therequirements for electronic money, the identification of which isnot required, that is, their maximum amount and terms of use, arethe same as for small-volume payment instruments.
"The volume of payment transactions within one calendar monthfor a payment instrument of small volume and not requiringidentification should not exceed 300 manat ($176.47) or theirequivalents in foreign currency. The volume of funds stored in thisinstrument should also not exceed 300 manat or their equivalents inforeign currency. With the help of this payment instrument, theuser of which is only an individual, payments are made only withinthe country. Money transfers and cash withdrawals are not allowedwith this payment instrument.
Electronic money can be issued in national and foreigncurrencies. The requirement for the maximum amount of obligationsfor electronic money issued by payment service providers isdetermined by the Central Bank. This requirement can be determinedindividually for each payment service provider,” the expertadded.
The deputy director of the department also noted that electronicmoney is not considered a deposit. "In accordance with Article13.1.2 of the Law "On payment services and payment systems," whenproviding a person wishing to own electronic money with informationabout the issue of electronic money and the rules for their usebefore the issue of electronic money, it must be indicated thatelectronic money is not considered a deposit and is not insured inaccordance with the law of Azerbaijan“On deposit insurance” andthat no interest or other income is paid on these funds,” hesaid.
Rustamov emphasized that, for the first time in our country, inorder to further strengthen the competitive environment in thepayment card market and eliminate possible negative consequenceswhen implementing projects to pay for Internet services andcashback projects, regulation of trade codes of business entities,known as the MCC code, was provided.
“Upon request, the buyer must set the merchant code (MCC code)of the business entity in accordance with the business entity'sarea of activity during the card-based payment transaction.
Also, the buyer must provide, without modification, the tradecode of the economic entity for authorization and clearing of thesame card-based payment transaction. Therefore, changing thesecodes and subsequently presenting them in a different form duringclearing has a direct negative impact on the calculation ofinterbank service fees and the profitability of the issuer,” hesaid.
According to the expert, according to another innovation,displaying payment card details on the card itself is no longermandatory.
“However, the issuer must make available to the card user thisdata, namely the name of the issuer, the payment card number, itsexpiration date, contact details of the issuer acceptingapplications, or the operator of the payment system serviced by theissuer, within 24 hours. This requirement is an important step onthe way to eliminating physical dependence on payment cards in oursociety and completely eliminating physical cards in the nextstage.
This strategy will provide further support for the growth ofmobile banking services. Furthermore, the guidelines do not includeany restrictive criteria for corporate cards. I anticipate that thenext strategic era will significantly expand the usage of corporatecards as a payment mechanism,” he said.
Rustamov pointed out that, according to the requirements of therules, the accounting of funds for payment transactions carried outby this payment instrument can be carried out by the issuer in ageneral (consolidated) account.
“Issuers can maintain records of prepaid cards identified forparticipation in payment systems, including the Instant PaymentSystem, through separate payment accounts. This will allow paymentsto be made by applying the IBAN (International Bank Account Number)to the payment account to which the prepaid payment instrument islinked. According to this requirement, legal entities andindividual entrepreneurs can carry out transactions usingprepayment instruments.
Accounting for these payment transactions should be keptindividually and not in a general (consolidated) account,” heconcluded.
To note, the Board of the Central Bank of Azerbaijan approvedthe“Rules for the Implementation of Payment Operations and PaymentInstruments” in early April.
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