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					    Prepaid Payment Systems

     A Discussion Paper
             By




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Prepaid Payment Systems: Global Business and Regulatory Environment

Most of the Prepaid Payment Systems can be classified as follows:
• Prepaid Cards
• Internet Accounts/Wallet/Purse
• Mobile Accounts/Wallet/Purse
• Remittance Cards (Domestic or International)

These products can be open or close ended or hybrid of two as classified below:


    New Payments Systems             Open-ended                     Close-ended             Semi-Open/Close ended

Prepaid Cards                 Bank Prepaid Cards with        Limited Usage prepaid cards   Prepaid Cards like No Frills
                              ATM withdrawal domestic        only for payments, without    Account      Cards       for
                              as well as International       Cash withdrawal               branchless banking with
                                                                                           KYC and prespecified limits

Internet Accounts/ Wallets/   Internet Bank Accounts,        Internet    Accounts     /    Internet    Accounts     /
Purse                         Internet Virtual Accounts      Wallets/Purse for specific    Wallets/Purse for specific
                              with     Cash    Withdrawal    usages   with   no   cash     usages      with     cash
                              across the globe               withdrawal                    withdrawal in to specified
                                                                                           bank accounts etc.

Mobile Accounts/ Wallets/     Mobile Banking Account         Mobile      Accounts     /    Mobile      Accounts     /
Purse                         with    all    features   of   Wallets/Purse for specific    Wallets/Purse for specific
                              traditional banking and cash   usages   with    no  cash     usages       with    cash
                                                             withdrawal                    withdrawal in to specified
                                                                                           bank accounts etc.

Remittance                    Across the globe; no limits    Pure Domestic                 Domestic or International
                                                                                           but with specified value for
                                                                                           specific transaction and
                                                                                           total during the year



Prepaid Cards

All prepaid programs operate on the same core premise: a positive balance is loaded into an
account associated with a card and drawn down through purchase activity (the value is not
literally loaded ‘on the card’ but is reflected into an account on provider’s server). Prepaid
programs are powerful solutions for facilitating access to and spending one’s money with
greater security and efficiency than cash or cheques. The institutions that issue the specific
prepaid products develop the detailed features including maximum and minimum value
limits, fees and terms of use.



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Prepaid programs can be open-loop or closed-loop:

− In an open-loop program, cards are accepted and processed across the globe at any
MasterCard / Visa or similar merchants across the globe besides these cards can also be
used to withdraw the money from the card using ATMs

− In a closed-loop program, acceptance is limited to specific geographic locations,
generally domestic. In some cases the card may be used by only a specific merchant,
merchants’ chain within a geographic area and at best immediate related merchant group.
An example is a gift card that is issued by merchants for use only in their store(s); calling
cards, prepaid mobile cards for airtime top and value added services would fall into similar
category.

− In hybrid “semi-closed” programs, a prepaid card may be accepted by a wider range of
merchants, such as within a specific shopping mall or across category of merchants like
online, mobile, voice for pre specified payment usage.

Prepaid cards can be reloadable or non-reloadable:

− Reloadable Cards offer the cardholder the ability to replenish the value on the card as
needs arise;
− Non-reloadable or single use cards are used until the balance is drawn down to zero and
then discarded.

Prepaid Cards can be used in a variety of ways:
Transit Pass;
Gift giving;
Voucher replacement;
Reimbursement to employees;
Business travel and expense management;
ePayments (payment on internet/mobile/phone);
Personal spending cards;
Payroll and employee incentives payment;
Promotions Scheme;
Insurance claims settlement;
Unbanked financial service;
Limited Value Remittance;
Young adult (age 16 and older) controlled spending.

Prepaid cards look and function like a credit card at the point-of-sale or on Payment
Gateway on Internet, Mobile or Phone. Merchants handle the card just as they would handle
a credit card. Most of the prepaid cards carry the same security protection features as
other Credit/debit cards.




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Prepaid Types can also be defined as follows:

•   Close Loop (B2B: Channel Collection) (B2C: Gift, Travel, ePayments Account; Single
    purpose one time use like prepaid mobile, calling cards etc.)
•   Open Loop (B2C: e-money related products like multipurpose reloadable card with
    redemption, ATM, Remittance features etc.)
•   Other Hybrids: (Payroll, Transit, Government Disbursements, insurance)

Following are some of the key information shared by International Prepaid Card Forum on
Prepaid Card Industry:




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Prepaid Cards are issued under two models i.e. The Bank Led Model and Non-Bank Led
Model.

The Bank Led Model where the cards are issued by Bank, but distributed through a retail
agent through specific program manager (“Agent Network”). Under this model, an Agent
Network, instead of a bank branch completes the formalities of acquiring the customer.
Any customer stored funds and the debit/credit are held and controlled by a bank. The
agent is allowed to participate in funds in and funds out on behalf of the bank. Most of
these cards are open loop cards with features like ATM withdrawal etc.


The Non-bank Led Model where the cards are issued by independent Payment Service
Provider through its network of the retail agents. The Agent Network completes the
formalities of acquiring the customer. The Funds debit/credit are responsibility of the
Payment Service Provider. Most of these cards are Close Loop cards or Hybrid Cards with
specific services like payments, transit, insurance, gift, remittance etc. Banks are generally
used for Treasury Management in some cases.




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Following is the summary of the study of various countries status for Prepaid Card Payment
systems and their Regulatory status in summary form; country wise specific details are
added as Annexure 1: Prepaid Payments Systems and Regulatory Status in Various
Countries


    Country       Key Existing        Regulation   Bank Led     Non-bank        Non-bank      Key Products
                    Relevant            under       Models     led Models        Agent          category
                   Regulation        implementa                                 Network
                                       tion (?)                                  status

Australia     Guidelines on                                    Paymate,       Western        Payments,
              Authorisation of                                 PayPal,        Union          remittance,
              Providers of                                     Bpay                          mobile, card
              Purchased Payment                                                              based, stored
              Facilities (by                                                                 value
              Australian
              Prudential
              Regulation
              Authority)

Brazil        No direct regulation                 Mpayment                   Agent based    Payments;
                                                   of Visa                    simplified     Remittance;
                                                                              bank
                                                                              account

China         No clear regulation    PBOC                      PayPal,        UMPay          IC Cards for
              specific to payments   working on                AliPay,        (mobile)       transit, online
                                     implementat               99Bill, QQ                    payments, online
                                     ion of PSO                                              escrow, mobile
                                     regulations                                             payments, Utility
                                     covering                                                prepaid cards,
                                     payments                                                emoney related
                                     (non-bank                                               products; Gift
                                     model)                                                  Cards

Hong Kong     Hong Kong Joint                                  Octopus,                      Remittances,
              Financial                                        PayPal,                       stored value,
              Investigations Unit                              Alipay                        card based,
              (Remittance                                                                    online payments
              Business)

Kenya         Not directly                         Wagepoint   M-Pesa by                     Remittance;
              regulated by                                     Safaricom                     other payments
              specific payments
              related regulation

Malaysia      Directly Regulated                   Maybank     PayPal,                       E-money,
              by the Central Bank                              Malaysia                      electronic
                                                               Online,                       payments, stored
                                                               Tune-                         value,
                                                               money                         remittances




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Pakistan                              Regulations   Initial     Experiment
                                      under         focus on    s on
                                      implementat   bank led    nonbank
                                      ion for       model       led models
                                      emoney and                as well
                                      payments

Philippines    Not directly                         Smart       Gcash         Telco led      Payment;
               regulated by Central                 Money                                    Remittance;
               Bank. Regulated                                                               mobile related
               through Seven                                                                 VAS
               Member Board

Russia         Not directly                                     Webmoney
               regulated

Singapore      Regulated directly                   Maybank     Ezlink,                      Card based,
               by Central Bank                                  PayPal                       internet based,
               under Stored Value                                                            mobile payments
               Funds Regulation

South Africa                                        Mazansi     Wizzit;
                                                    Account     MTN Mobile
                                                                Money;
                                                                Net1

Tanzania       Directly Regulated
               by the Central Bank

Thailand       Regulated by                                     Paysbuy,                     Online
               Central Bank with                                The Smart                    payments, stored
               specific Act and                                 Card,                        value, mobile
               Guidelines                                       Payment                      payments
                                                                Solutions,
                                                                Advanced
                                                                Mpay, True
                                                                Money Co

USA            Brief summary: Annexure Country Wise Regulations in CD




Most of the developed countries where the regulations are being provided for the Payments
Systems have been on the basis of the Risk. These possible risk categories have also been
defined as Open Payment Systems, Closed Payment Systems and Semi Open/Close Systems.
These systems have been classified based on risk parameters like Identification, Value
Limits, Geography, Funding in, Funding out, Usage Limits, Currency Denomination.




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      Risk Parameters         Open-ended                     Close-ended               Semi-Open/Close ended
Identification          Anonymous                    Identity available in form of   Basic KYC available directly
                                                     KYC                             or indirectly
Value Limits            Generally no limit           Specified limit                 Limits May or may not be
                                                                                     specified, but for specified
                                                                                     usages
Geography               International Transactions   Clear Geographic usage          May      have     Geographic
                                                     mostly pure Domestic            Details but for specific
                                                                                     usages within Geographic
                                                                                     boundaries specified
Funding-in Options      All options including cash   Primarily bank accounts or      Pre specified and Bank
                                                     bank instruments                instruments
Funding-out Options     Globally anywhere in all     Not possible or only in bank    Possible but with additional
                        forms including ATM Cash     account                         formalities      and      for
                        withdrawals                                                  specified purposes
Usage Limits            No Limits                    Prefixed            annual,     May or may not be specified
                                                     transaction and periodic        but for specific usage only
                                                     limits
Currency Denomination   Local currency but highly    Only Local currency non         Local Currency but strong
                        liquid like USD and easily   liquid and non convertible      currency like USD, Euro
                        convertible    in   other
                        currencies



Level I: Basic Registration and Information for the Central Banks to have direct access on
the growth and information which may be required from time to time in their function as
Monetary Authority. Such regulation is primary for the Payment Systems which are low risk
and primary close ended systems.
Level II: At Level II certain Payment Systems may be regulated based on the different
payment instrument and services they deliver in their respective country and they may have
different requirement for different payment systems for different instrument they run.
Some of them may require specific licensing subject to certain terms and conditions, some
specific identity related regulation like KYC, Certain limits on value of transactions or
reporting in case of transactions above certain specified values. These primarily are Hybrid
Payments System.
Level III: Open Loop Prepaid Payment Systems which have elements of ‘Systemically
Important Systems’ as specified by CSPP may be regulated at Level III which may be more
close to current banking system compliances, however while regulating such payments
systems only specific services and products that qualify as nature of ‘Systemically
Important’ should be regulated as Level III and other services which are not of the same risk
or criticality should be regulated at appropriate level.




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Countries like Singapore, Australia, and whole EU region where New Payment systems are
very popular have provide adequate detailed guidelines to differentiate and regulate the
Payment Systems based on their ‘Systemically Important’ nature and ‘Possible Risks’.

    Various studies conducted by International bodies on Prepaid Payments Systems both Bank
    Led or Nonbank Led through Agent Network has been found successful and some of the
    key observations are as follows:

•    Prepaid Payment Systems can dramatically reduce the cost of delivering financial
     services to poor people and the unbanked.
•    Prepaid Payment Systems are used mainly to facilitate small payments or to pay bills,
     and not for savings or credit thus reducing possible risks drastically.
•    Poor, Unbanked and Underserved people have begun using Prepaid Cards and similar
     systems as an alternative to banking for financial services mainly in programs Led by
     Bank, including in countries like India.
•    Banks or Nonbanks view agent networks as key to achieving their business strategy and
     access to consumers in Poor, Unbanked and Underserved Category. (Retail Chains, Cyber
     Café, Post Offices)
•    Prepaid Payment Systems provide mechanisms to identify the funds owner more
     effectively.
•    Prepaid Payment Systems Track the utilization, frequency etc providing BETTER END USE
     Monitoring, with audit trail to detect money laundering and any such suspicious activity.
•    Prepaid Payment Systems Offer Regulators an opportunity to estimate the total CASH
     being used for an END USE- something which cannot be done with CASH to CASH.
•    E-commerce and M-commerce industry may only be INCLUSIVE if supported with Prepaid
     Payment Systems. Banking services penetration today is far lower than cellular services
     and failure to provide for a non-bank option will restrict the ability for the underserved
     to participate in emerging payment services. Soon, DTH, etc will exceed the penetration
     on banking services as well.
•    Prepaid Payment Systems can help individuals build up a credit or commerce history to
     enable FINANCIAL institutions look into appropriate solutions for them.


Payment Systems Regulations in most of the countries are at evolution stage across the
globe with exception to countries like Singapore, Australia and European Union where such
Prepaid Payment Systems are regulated by well developed matured laws and where most of
the products are well matured and accepted. Like Ezylink in Singapore, Oyester in UK.

Most developing countries are in process of putting together a regulatory framework for
Payments and Settlement Systems, Emoney, Mobile Banking, and Information Technology
related laws. These are some of the basic framework for new business models and payments



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systems. Most of the countries where the regulations are specified in form of Act,
Guidelines and Guidance following matters are covered by such Regulations/Guidelines:

     •   Applicability of the Laws/Regulation
            o Specific players, systems who are covered by the Laws
            o Specific categories which are exempt or conditions for exemptions
            o Type of regulation based on size and scale of the payment system like small
               money license in EU for eMoney issuers who issue eMoney products up to
               certain values.
     •   Authorisation for existing or new players
            o Authorization process and applicability
            o Process for Existing and New Players
     •   Conditions for Authorisations
            o Power and specific additional conditions that may be asked to be complied by
               regulator at the time of Authorisation
     •   Reporting Requirements
            o Systems that are required to Report
            o Systems that may not need Authorisation but may still need to Report on
               matters like suspicious transactions and general payments system providers’
               regular financials and other relevant information from time to time
            o Monthly, Annual Reports and their Format
     •   Incorporation related and entity type etc
            o Matters related to which entities are entitled to run Payments Systems
            o Some countries insist that Payments System should be run by company
               incorporated in the same country and must have specific corporate structure
               i.e. Public/Private entities only.
     •   Matters related to Ownership of Payment System/Provider
            o Certain countries insist on certain structure on ownership i.e. Domestic etc.
     •   Corporate Governance Related
            o Most of the countries expect the Payment System Providers to ensure high
               corporate governance requirement
            o This could be in terms of representation of independent directors
            o Various committees with independent representatives
            o Regular reporting of the financials and publishing of the same to authorities
               from time to time
            o Internal Audit requirements besides Statutory Audit

     •   Treatment of Funds: Deposit, Advance; Accounts Payable
            o Most of the countries treat the money collected for Prepaid Account/Card as
               Accounts Payable or Advance against future payments.




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     •   Risk Management and Internal Control: Operational Risk; Fraud; System Security;
         disaster recovery; data backup; System integrity
            o Most of the countries provide regulatory guidelines and requirements around
                ensuring regular uptime of the services and ensuring the integrity of the
                system, security and adequate arrangements by Payments System Providers to
                have Data Backup and Disaster Recovery System.
            o Adequate internal controls to mitigate risk against Fraud etc are responsibility
                of the Payments System provider
     •   Information and Accounting System: Reporting requirement for regular reports,
         internal and statutory audit for authenticity of the reports
            o Very few countries talk about Accounting System being used by Payments
                System Provider however insist on adequate Auditing of Reports and Financial
                statements by appropriate internal and statutory auditor to ensure
                authenticity of the information and reports
     •   Minimum Capital Structure
            o Few countries regulation provides power to regulator to specify minimum
                capital structure or additional capital requirement to be added as special
                condition at the time of authorization on case to case basis if deemed
                appropriate by the regulator.



1. Prepaid Payment Systems in India

The Prepaid Payment System in India has been in existence for long primarily with the
beginning of Calling Cards by MTNL (Virtual Calling Cards – VCCs), Voice Over IP (VOIP)
Cards, and Long Distance Calling Cards, Prepaid Mobile Recharge Cards. Most of these were
from Telecom industry to provide the customer access to telecon services as per customers’
affordability i.e.; in different denominations, and also to keep them within control of their
budget. Corporate Gift Vouchers and Food Coupons have been in existence for long for
various tax-related benefits and incentives. Gift and Discount vouchers/coupons have been
in place for long by various branded outlets, superstores and malls across the country. The
recent entrant has been general purpose reloadable prepaid cards for payments on
internet, mobile and phones and recently on POS. Most of these are targeting domestic
customers in India from middle class families who want to control their budget and risks.

Few years back Oriental Bank of Commerce also had launched India’s first prepaid card with
MasterCard which was open-loop since customer could acquire the card with limited KYC
and also withdraw money from ATM. Recently most of the banks have launched various
formats of prepaid cards like Gift Card and Travel. Travel Cards are primarily targeting
customers who travel abroad and instead of carrying Travellers’ Cheques Travel Cards are
promoted for its ease and convenience and reduction in risk for these customers.


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Nonbank prepaid card products are regulated by country’s general laws like Contract Act,
Consumer Protection Act etc. Indian Parliament has recently passed the Payments and
Settlement Systems Act 2007. This Act has provided authority to the Reserve Bank of India
(RBI) to regulate Payments and Settlement Systems in the country. It is proposed to
regulate most of the open loop prepaid payments by the RBI and a guideline can be
provided for close loop card with requirement to provide various information from time to
time in view of Public Interest and ensuring the integrity of these payment systems.


2. Prepaid Payment Systems: Industry Observations on Regulatory
   Framework


Matters of Prepaid Payment System which may need to be covered by
regulations/Guidelines in interest of the Industry and the country are as follows:

•    Applicability of the Laws/Regulation

It is important to ensure that any system that holds customer funds has adequate controls
to protect those funds. For Open Loop Prepaid Systems which provide funds out,
redemption or international remittance services may be covered by the proposed law, such
products may be on either the Bank Led Model or permit Payment Systems under the
Payment and Settlement Act which can demonstrate adequate controls, capital and
liquidity requirements to ensure the protection of customer funds.

Where the risks are lower, such as in a Close Loop Prepaid Payment System which are
providing specific payment services to limited merchants and there is no cash redemption
may be exempted from licensing under a regulation, and be required to register and comply
with general guidelines for their registration and annual information for data collection
point of view should be provided.

Hybrid Prepaid Payment System also be exempted from licensing under a regulation, but
they should be asked to register and in some case be authorized, operating under a regular
code of conduct and basic guidelines. They may be asked to provide additional information
from time to time in proportion to the risk.

•    Authorization for existing or new players

Authorization for existing or new players of Open Loop Prepaid System should be applicable
and accordingly appropriate rules may be provided. Adequate time and support should be
provided for existing players whose track record is proven to good in terms of their


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deliverables and settlement with parties to authorize them on time bound basis to ensure
that no uncertainty is created for existing consumers and merchants participating in
existing system. New Players must seek Authorization before commencing the business of
Prepaid Payment System.

•    Conditions for Authorisations

Conditions for Authorizations should be pre-specified to provide adequate opportunity for
Payments Players to comply with the same in advance while submitting the application for
authorization.

•    Reporting Requirements

Prepaid Payments Systems which requires Authorization (Open Loop) may be subject to
regular reporting of specific information in pre-specified formats on monthly and annual
basis.

Prepaid Payments Systems not requiring Authorisation and only being registered may also
provide specific information like Financial Statements in pre-specified format on annual
basis and for any specific matter in case required by Regulators on time to time basis.
These reports should be primarily for Payments Statistics and in general interest of
consumer protection.

•    Incorporation related and entity type etc

It is advisable that only corporate entities which are subject to high governance standards
be permitted to operate Prepaid Payment Systems.

•    Corporate Governance Related

Regulatory may advise all Prepaid Payment Systems Open/Close/Hybrid to be subject to
Strict Corporate Governance Requirements to ensure that the business of these systems is
run in a transparent manner and uses best practices.

•    Risk Management and Internal Control: Operational Risk; Fraud; System Security;
     disaster recovery; data backup; System integrity

Regulators may provide as general guidelines to be followed by all Prepaid Payments
Systems to follow best practices in matters related to Risk Management, System Security
and Integrity, Disaster Recovery, Data Backup and Consumer Service system.

•    Application Procedures for Authorisation and Registration


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Regulator, like most of the countries, may provide the following system to deal with
Application for Authorisation or Registration

     •   Preliminary Consultation: Provide names of appropriate officers and departments
         and their contact details, who shall be available to such Payment Service Provider for
         appropriate consultation, who may have various queries related to the Application
         and
     •   Application Procedures: Provide details of the application procedures and timelines,
         appropriate formats, rules etc.
     •   Submission of Application: Provide details of the persons to whom the application
         can be submitted and in various manner possible i.e. physical, electronic etc.
     •   Processing of Application and Authorisation/Registration: Provide details of
         internal general process being followed for processing of these application and
         general timelines and criterion on which basis Authorisation and Registration is
         completed.


In country like India where large population is unbanked and underserved Prepaid Path can
lead to faster Financial Inclusion due to some of the inherent features of Prepaid Payment
Systems like:

•    Payments only product focused on safety and convenience (Nonbank Led)
•    B2B Payment Collection product to enable 24*7 collections and also collections from
     remote areas (Nonbank Led)
•     Microfinance (loan disbursement)/Credit primary to act as enabler and risk
     minimization (Nonbank and Microfinance Institutions led)
•    Remittance (small money) Domestic for migrant population in Metro cities (Nonbank Led
     and Bank Led)
•    No Frill’s Account to work as bank account for poor and unbanked (Bank Led)




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3. Prepaid Payments Systems: Best Practices, Proposed Code of Conduct for
   Payments Systems

Principles of Business


(1) Integrity                          A firm must conduct its business with integrity.
                                       A firm must conduct its business with skill, care, and
(2) Skill, care and diligence          diligence.
                                       A firm must take reasonable care to organise and
(3) Management and control             control its affairs responsibly and effectively, with
                                       adequate risk management systems.

(4) Financial prudence                 A firm must maintain adequate financial resources.
                                       A firm must observe proper standards of market
(5) Market Conduct                     conduct.
                                       A firm must pay due regard to the interest of its
(6) Customer Interests                 customers and treat them fairly.
                                       A firm must pay due regard to the information need
(7) Communications with clients        of its clients and communicate information in a way
                                       which is clear, fair and not misleading.
                                       A firm must manage conflicts of interest fairly, both
(8) Conflicts of interests             between itself and its customers and between a
                                       customer and another client.
                                       A firm must take reasonable care to ensure the
                                       suitability of its advice and discretionary decisions
(9) Customers: Relationship of trust   for any customers who is entitled to rely upon its
                                       judgements.
                                       A firm must arrange adequate protection fir clients
(10) Client’s assets                   assets when it is responsible for them.
                                       A firm must deal with its regulator in an open and co
                                       operative ways, and must disclose to the FSA
(11) Relations with Regulators         appropriately anything relating to the firm of which
                                       the FSA would reasonably expect notice.



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The Threshold Conditions

Threshold Conditions 1-Legal Status             A firm carrying on e-money issuance must be a body
                                                corporate or a partnership.
Threshold Conditions 2- Location Of             A firm, which is a body corporate, constituted under
The Office                                      the law of any the united Kingdom must have its
                                                head office and, if it has one, its registered office in
                                                the United Kingdom. A firm which has its head office
                                                in the United Kingdom but is not a body corporate
                                                must carry on business in the United Kingdom.
Threshold Conditions 3 – Close Links            This condition requires us to be satisfied that any
                                                close links that a firm has with another person do
                                                not prevent effective supervision of that firm.
Threshold Conditions 4 – Adequate               This condition requires us to be satisfied that the
Resources                                       firm has adequate resources in relation to the
                                                regulated activity or activates for which it has
                                                permission or for which permission is being sought.
Threshold Conditions 5 - Suitability            This condition requires us to be satisfied that the
                                                firm is ‘fit and proper’ to be authorised and
                                                permitted to carry on the relevant activities.
Source: Consultation Paper on: The Regulation of Electronic Money Issuers by Financial Services Authority


4. Proposed Code of Conduct for Prepaid Payment Systems

1. What is the Issuer Code of Conduct for Prepaid Cards?
The Issuer Code of Conduct (“Code”) is designed to provide guidance to prepaid payment
product issuers (“Issuers”) in the development, marketing, distribution and sales of prepaid
payment products. The Code is based on a set of core principles agreed by the member of
Payments Committee of IAMAI and broad guidelines covering each stage of the life cycle of
prepaid payment product issuance.
All references to a “prepaid payment system” in this Code shall mean any prepaid payment
product (physical or virtual) including without limitation a card, e-voucher or code. The Code is
designed to be applicable to Issuers in India.

2. Key Principles of the Code:
• To promote and demonstrate fairness to the end-user customer
• To encourage simplicity and clarity in all communications and interfaces with the customer
• To develop good practices in communication which are accurate and accessible
• To provide transparency to the customer in all terms and conditions relating to the prepaid
payment system




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3. Code of Conduct:
The Code has been developed around three phases based on the life cycle of a prepaid payment
product.

A – Customer purchase of a prepaid payment product:
a) Marketing of prepaid:
• Target customer identification:
- As good practice Issuers should ensure that segmentation strategies for targeting purposes
positively exclude, where possible, any customer details for segments that should not be
targeted for certain prepaid types, e.g. children
• Advertising and promotional standards
-Issuers should encourage consistency throughout marketing campaigns to avoid
misrepresentation (this includes consistent use of images and text across all marketing
communications)
-Issuers should strive towards clarity and transparency of promotional messages across all
marketing campaigns to avoid confusion and misunderstanding
-Images and text should not offend public morality
b) Issuance/sale of prepaid:
• Customer due diligence (previously known as “Know your customer” or “KYC”) and anti-
money laundering (AML) requirements vary from product to product like Open Loop, Close Loop
or Hybrid. From the customer perspective the Issuer should have processes and communications
messages in place to ensure that the customer understands why and how these requirements
vary and provide clarity as asked by consumers.
• Terms and conditions relating to a prepaid service should be made available in a convenient
and reasonable manner depending upon the type of service and the expectations of the
customers such as in print or online, if required, to all customers.
• The Issuer should adopt best practices in transparency to the customer throughout the
application and prepaid service issuance process. This information should be clearly advised
before a prepaid card is actually sold/issued.
• Methods for reloading the prepaid service should be made clear to the customer when they
register or are issued with it
• The customer should be advised of any legal responsibilities or restriction regarding prepaid
service usage, e.g. the prepaid card should not be provided to children for certain purchases
• Terms and conditions should indicate whether the prepaid service has an expiry date
• It is recommended that the level of customer protection is shown in a question and answer
format in both product literature and terms and conditions, e.g.
-Do I lose money if the prepaid card is not used?
- What happens when I purchase something that goes wrong?
- If there is customer protection do I have to opt in or out?
-What happens if the prepaid card is lost or stolen?




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B - Usage of prepaid:
• Issuers should clearly disclose the company issuing the prepaid service.
• Issuers should ensure that the customer has reasonable opportunities to use the prepaid
service.
• As a matter of best practice Issuers should endeavour to provide a means for customers to
know the balance available to spend using their prepaid service, whether by SMS text, online,
telephone or at a physical POS or reload network.
• Customer help desk contact numbers or email customer support should be clearly disclosed to
the customers.

C– Termination or closure of the prepaid card:
• Issuers should develop rules and guidelines to communicate to the customer in the following
circumstances:
• Provide information regarding who can terminate/Cancel a prepaid card for the Issuer
    and/or customer

D - Advice to Prepaid Consumers:
− As prepaid services can vary significantly, read the terms of the offer fully
− Be sure to fully understand the fee structure;
− Be aware of any minimum or maximum value load requirements;
− Understand where the service/card is accepted.

E – Best Practice for Prepaid Businesses:




18                                                               Private and Confidential