Introduction

The Payment Systems and Stored Value Facilities Ordinance (the “Ordinance”), came into effect on 13 November 2015. The Ordinance introduced a licencing regime for stored value facilities (“SVF”) and a designation regime for retail payment systems (“RPS”). The Hong Kong Monetary Authority (“HKMA”) is empowered to licence and supervise the operation of SVF and to designate and oversee RPS in Hong Kong.

Definition of SVF

Any facility which may be used for storing the value of an amount of money paid into it under the facility’s rules and as a means of making payments for goods and services or other recipients under an undertaking of the issuers is a SVF covered by the Ordinance. It covers both device based SVF for storing the value in an electronic chip on a card or physical device; and non-device based SVF for storing the value on a network-based account to be accessed through the internet, computer network or mobile network.

Licence and Exemption

Unless a SVF is a facility that may only be used as a means of payment for goods and services provided by the issuers or is exempted from the provisions of the Ordinance, a SVF has to be licenced under the Ordinance. Exemptions under the Ordinance include a SVF used for certain cash reward schemes; used for purchasing certain digital products; used for certain bonus point schemes; used within limited group of good or service providers; or used within certain premises.

Apart from the issuance of a SVF, the facilitation of the issue of a SVF also requires a licence under the Ordinance. However, a SVF issuer licencee is not required to obtain a separate licence to perform a facilitator role or vice versa.  It will be a criminal offence to issue, or facilitate the issue of, a SVF without a licence granted by the HKMA and is liable on conviction on indictment, to a fine of HK$1,000,000 and to imprisonment for 5 years; or on summary conviction, to a fine at level 6 of schedule 8 to the Criminal Procedure Ordinance and to imprisonment for 6 months.

There are certain minimum criteria to be fulfilled by the applicants before a SVF licence will be granted by the HKMA, including but not limited to the following:

1.        the principal business must be the issue of SVF under a SVF licence;

2.        the paid-up share capital is not less than HK$25,000,000;

3.        each chief executive, director and controller of the applicant must be a fit and proper person;

4.        the applicant must have in place appropriate risk management policies and procedures for managing the risk arising from the operation of its SVF business;

5.        the applicant must have in place in the SVF scheme adequate and appropriate systems of control for preventing or combating possible money laundering or terrorist financing;

6.        the applicant must have in place adequate risk management policies and procedures for managing the float and SVF deposit to ensure that there will always be sufficient funds for the redemption of the stored value that remains on the facility;

7.        the applicant must redeem in full the total of the stored value that remains on the facility as requested by the user; and

8.        the operation rules of the SVF scheme must be prudent and sound and it must satisfy the HKMA regarding this.

Transitional period

The one-year transitional period will expire on 12 November 2016. During this period, certain provisions of the Ordinance have not come into effect. In particular, during the transitional period, pre-existing and new SVF issuers may continue its operations without contravening the sections under the Ordinance, but still subject to other relevant regulations and legislation, such as the Banking Ordinance and the Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) Ordinance.

The HKMA has issued guidance materials to facilitate the industry to apply for relevant licences and comply with the licencing requirements under the Ordinance. It is an offence to issue SVF without a SVF licence after the transitional period. Applicant is reminded to apply for the licence at an earlier stage to prevent the situation that the licence is granted after the transitional period expires. Prior to submitting the application, an applicant is encouraged to consult your legal advisers.