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Legal Update

Draft Royal Decree To Supervise E-Payment Service Providers

10 July 2007
Mayer Brown JSM Legal Update

Summary

Business operators providing electronic payment and banking transaction services ("E-Payment Service Providers") have rapidly increased in number in Thailand without any efficient supervisory mechanism. There is a growing concern that incidents such as fraud and theft are damaging the public's confidence in the system, possibly affecting the credibility and acceptance of electronic payments and future financial and commercial growth in Thailand. The Electronic Transactions Commission therefore proposed the cabinet enact a Royal Decree on Supervision of E-Payment Service Providers B.E.

Full Update

Electronic Payment or E-Payment is a direct electronic transfer of funds from the purchaser's account to the merchant's account for payment of bills, goods or services. This is an alternative to making cash payment. Improvements to technology have made E-Payments a convenient, fast and efficient method of payment.

E-Payment Service Providers currently include financial institutions and non-financial entities. There is no specific law governing these E-Payment Service Providers. Existing laws such as the Banking Act B.E. 2505 and the Ministry of Finance's announcement on e-money business does not sufficiently prevent the risk of damage that may be caused by E-Payment Services.

To improve and efficiently enforce the laws and regulations on E-Payment Service Providers, the Electronic Transactions Commission has proposed a draft Royal Decree on Supervision of E-Payment Service Providers B.E. ......, by virtue of Section 32 of the Electronic Transactions Act B.E. 2544 (A.D.2001), to the Council of State for consideration and approval before passing it on to Parliament.

The draft is currently under consideration by the Council of State.

Highlights Of The Draft Royal Decree

The draft Royal Decree's main focus is on supervising E-Payment services, which is provided through various electronic means such as mobile phone payments, over the counter payments, payment kiosks and payments over the internet. In addition, it covers relevant businesses such as Transaction Switching, namely through ATM pool, EDC Pool (Electronic Data Capture), ITMX (International Bank Transaction Management Exchange), by credit card, debit card, with e-money or through settlement agents and settlement institutions.

Prior to providing E-Payment services in Thailand, the E-Payment Service Provider is required to notify, register with and obtain a licence from the Bank of Thailand ("BOT") based on the category of service as follows.

Category A

Service providers under this category are required to notify the BOT of their services which may include:

(1) E-money used to buy goods or pay for services from vendors
(2) Other services as designated by the BOT in the future

Category B

Service providers under this category are required to register their services which may include:

(1) Credit Card Network Service
(2) EDC Network (Electronic Data Capture)
(3) Switching Service
(4) E-money used to buy goods and/or pay for services relating to items specified in advance at specific shops and venues
(5) Other electronic services as may be specified by the BOT in the future

Category C

The service providers under this category are required to obtain a licence for provision of:

(1) Clearing or Settlement
(2) E-payment services
(3) Money Switching Services (multi system)
(4) Payment Agency Services
(5) E-money for buying goods and/or paying for services relating to items specified in advance at shops and venues
(6) Other electronic services as may be specified by the BOT in the future

Please note that this Royal Decree governs Thai entities and their overseas branches, and overseas entities and their branches located in the Kingdom of Thailand. The service providers under Categories A and B may be an individual person or a juristic person. The service providers under Category C must be a limited company or public company limited.

If the service providers under Categories A and B fail to comply with such regulation, the penalty that can be imposed includes imprisonment for a term not exceeding one year or a fine of not more than 100,000 baht, or both.

If the service providers under Category C fail to comply with such regulation, the penalty that can be imposed includes imprisonment for a term not exceeding two years or a fine of not more than 200,000 baht or both.

For further information, please contact:

Name:
Phone: +662 677 7555
Fax: +662 677 7599

Name:
Phone: +662 677 7555 ex222
Fax: +662 677 7599

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