National Payment System Legislation  

This article provides further information on the reform of the National Payment System (NPS) with a focus on the legislation.  The National Payment System Act, 2021 “The Act”, was unanimously supported and passed by Parliament on 12 February 2021.  The Act and the NPS Regulations came into effect on 30 September 2022 and is part of the reform of the Payment System in Fiji which is being undertaken by the Reserve Bank of Fiji (RBF), with technical assistance from the World Bank/International Finance Corporation.

The key objective of the Act is to empower the RBF to develop and implement a NPS framework that promotes security, stability, efficiency, competitiveness and protection of all participants and consumers using the payment system.

RBF Functions

The Act outlines the RBF’s functions as follows:

• develop and implement policies for the modernization of the NPS;
• license payment service providers and operators;
• determine conditions, standards, rules or procedures in accordance with the Act and ensure they are duly applied;
• determine any further implementing measure regarding any licensed entity and their activities and ensure that the measures are duly applied;
• facilitate the clearing and settlement of securities;
• provide for payment services, including the issuance and management of payment instruments;
• act as a forum for the consideration of matters of policy and mutual interest concerning the NPS ; and
• perform any other function relating to payment, clearing and settlement systems or the issuance of payment instruments.

The RBF is also empowered by the Act to issue regulations, directives and policies which provide more detailed rules to assist and achieve the broad objectives stipulated by the Act.  The National Payment System Regulations 2022 “The Regulations” was approved and published in the Government of Fiji Gazette following consultations with key industry players in April 2022. The Regulations stipulate details of the licensing regime and outlines obligations for licensed entities.

Financial Stability and Supervision

The stability of Fiji’s financial system is among the prime responsibilities of the RBF.  The Act vests powers with the RBF to oversee, regulate and supervise payment and settlement systems in Fiji. It allows RBF to combat liquidity, credit, counter-party, operational, legal and systemic risks and any other risks affecting the reliability of the NPS, and indirectly the whole financial infrastructure.  As part of this responsibility, the RBF is to develop and implement rules to promote a stable, safe, efficient and a competitive financial system. The RBF has authority to license payment service providers and operators, similar to its current responsibility for licensing financial institutions such as commercial banks, insurance companies and RFEDs.  Once licensed by RBF, these providers will need to meet a range of obligations and standards on an on-going basis, including the submission of reports and meet minimum requirements for capital and governance. Monitoring compliance with these requirements will also be part of the RBF’s supervisory role.  The Act covers all activities associated with sending, receiving and processing orders of payment and transfers of money, the issuance and management of payment instruments, payment, clearing and settlement systems and payment service providers operating entirely or partially in Fiji.

Financial System Efficiency and Financial Inclusion

In addition to a stable financial system, an efficient financial system is essential for economic growth and stability. The Act empowers RBF to foster transparency and provide fair access to payment system including access to non-banks and other third party providers to enable a competitive environment.  As per the requirements of the Act, the RBF must ensure interoperability and integration of systems of different providers in the NPS. Its responsibility also includes the effective protection of the users of payment services and ensure that it is accessible even to the currently unbanked population and ultimately promote financial inclusion.  The RBF also has the ability to make decisions on payment, clearing and settlement systems or the issuance of payment instruments to modernise and make the payment system efficient while promoting digital means of payment in Fiji.

Co-operation, Consultation and Enforcement

Collaboration and consultation is critical in any undertaking spanning the entire country. An important feature of the Act is the establishment of the National Payment System Council which is to be chaired by the Governor and requires at least 4 other members representing payment system players and stakeholders. This is to ensure industry consultation is part of the process in regulation and oversight of the industry. To ensure compliance, the Act empowers the RBF to issue orders and directives and if necessary, follow this up with administrative penalties for various forms of non-compliance. The RBF may also impose penalties or direct institutions to take certain actions or cease certain activities depending on the seriousness of the breach and its assessed real or potential impact. In conclusion, the NPS Act and Regulations are an important part of the Payment System reform in Fiji, as it serves as the umbrella legislation for all payment systems operating in Fiji.

• The legislation is available for download on the RBF website under National Payment System.

• To view an educational video on the NPS legislation, please go to the RBF YouTube channel and click on Understanding the NPS Legislation.

• NPS Legislation Infographic.

Reserve Bank of Fiji

22 October 2022