National Payment Systems Law comes into force

Sultan bin Salim al Habsi, Deputy Chairman of the Board of Governors of the Central Bank of Oman, issued Decision Number 1/2019 dated July 22, 2019 promulgating the Executive Regulations of the National Payment Systems Law, which was published accordingly in the Official Gazette on July 28, 2018, and which came into force on the following day.
The National Payment Systems Law was promulgated prior to this regulation in accordance with Royal Decree 8/2018. Besides being comprehensive and detailed, the executive regulations complement the legal framework governing payment systems in the Sultanate. Importantly, the legal framework is also the first of its kind across the region.
Since 2013, the Central Bank of Oman (CBO) has been working to develop a national strategy for payment systems. It began the exercise by assessing the ground situation and holding in-depth analysis and studies on the rapid developments in the payments and technology sectors, so that it can create and implement some of the most successful ways to develop this vital sector of the banking and financial system which supports modern financial technology (Fintech).
The legal framework is one of the main pillars for the establishment and operation of effective and safe payment systems in the country. Accordingly, the Central Bank of Oman issued the National Payment Systems Law in 2018, followed by the issuance of the Executive Regulation in 2019.
“This legal and regulatory framework will contribute in enhancing the work and operation of Sultanate’s payment infrastructure and systems established by CBO. This endeavour will ensure high quality, safe and fast payment services for customers, and extend these services to include those people and areas, which have not been covered by banking services so far, thereby ensuring financial inclusion,” said the apex bank in a press statement.
“This framework provides a significant platform for not only keeping up with the technological advancements, but also to attract innovators and customers to the financial and banking sector, which shall contribute in the further growth and development of the national economy in Oman,” it stated.
The Regulation includes 89 articles, divided into eleven chapters covering the following topics:
1. Licensing: The provisions of the Regulation are detailing the requirements and conditions of the licence, and the approvals granted by CBO to payment service providers, system operators, participants, settlement agents and all parties that form partnerships or act as agents of the licensees in line with the implementation of the policies of the payment systems targeted by the Central Bank of Oman.
2. Electronic Money: The Regulation provides all the necessary requirements for the issuance of electronic money as well as the rules for the regulation and supervision of it, and for CBO supervision/oversight of the use of the electronic money in the economy. Electronic money has become after the issuance of this Regulation an important payment tool that can be utilized.
3. Direct Debit: In order to keep abreast with technological developments and provide effective payment tools, this payment instrument has been created in the National Payment Systems Law. The Regulation provides the necessary and detailed provisions for the use of this instrument. It is expected that the use of direct debit will exceed that of paper cheque, which shall in help achieving the policy of reducing the use of cash in the payment process. This, in turn, will have a positive effect on the banking system in various financial transactions such as financing and payment through instalments.
4. Automation: The Regulation also includes a chapter on the automation and electronic cheques clearing, which is currently managed and operated by CBO.
5. The Central Bank Supervisory and Regulatory Authority: It is well known that the establishment of effective and secure payment systems requires to have in place a regulatory framework with clear powers and authorities, since the regulatory framework constitutes an important pillar for the payment system in any country. Accordingly, and since the law enshrines the necessary provisions to ensure the existence of this framework, the Regulation included the complementary and detailed provisions as required and referred to the Regulation by the law.
6. In addition, the regulations include several chapters and provisions dealing with those issues which the law provides for referral to the Regulation. This includes regulating the engagement of third parties and appointing agents, which will enhance the financial inclusion and the dissemination of payment services in many areas, as well as strengthen the partnership between financial, technological and other sectors, such as communications, in order to provide payment services to the public. The Regulation also includes a chapter on administrative sanctions, which is an important tool within the CBO’s supervisory and regulatory jurisdiction.
The National Payment Systems Law and its Executive Regulation supports the domain of financial technology (Fintech) in the Sultanate by issuing licenses to various non-banking institutions wishing to provide electronic payment services.