To adapt to the development of electronic commerce, the Legislative Yuan of the ROC passed the Act Governing Management of Electronic Payment Institutions (the "Act") after three readings on January 16, 2015, which was then published by the President of the ROC on 4 February 2015. The Act provides clear regulations on third party payment services. We hereby summarize the major points of the Act as follows:
1. Scope of Electronic Payment Institutions: The Act applies to electronic payment institutions (which shall be in the form of companies limited by shares) which are involved in any of the following businesses approved by the Financial Supervisory Commission ("FSC"): (1) provision of third party paying and collecting services for actual transactions in respect of which the amount of payments so collected exceeds the threshold prescribed by the FSC; (2) collection of stored value; (3) the transfer of funds between electronic payment accounts; and/or (4) any other business approved by the FSC. Except for the electronic payment institutions approved by the FSC to conduct businesses other than those described above (i.e., banks, Chunghwa Post Co., Ltd., and electronic stored value card companies), an electronic payment institution should exclusively conduct business as described above.
2. Minimum Paid-In Capital: The minimum paid-in capital of an electronic payment institution is NT$500 million; provided, however, that the minimum paid-in capital of an electronic payment institution which only provides third party paying and collecting services for actual transactions is NT$100 million.
3. Trust, Performance Guarantee and Repayment Fund: Any and all payments collected through stored value services, as well as paying and collecting services, should be placed in a trust or fully covered by a performance guarantee issued by a bank. In addition, an electronic payment institution should set aside funds to establish a repayment fund. In the event that the electronic payment institution suffers financial difficulties, thereby becoming insolvent and breaching its contracts, the repayment fund can repay the consumers as a third party so that the consumers' rights can be protected.
4. Maximum Stored Value and Transfer Amount: The balance of the stored value cannot exceed NT$50,000, and each fund transfer between electronic payment accounts cannot exceed NT$50,000.
5. Offshore Institutions: If an offshore institution intends to conduct any business of an electronic payment institution, it should apply for, and obtain the approval of, establishing an electronic payment institution in Taiwan. In addition, without the FSC's prior approval, no person will be allowed to collaborate with any offshore institution, or assist any offshore institution, in actions relating to any business of an electronic payment institution.
6. Supervision and Management Mechanisms: In order to protect the users' rights, the Act also stipulates the following supervision and management mechanisms:
(1) An electronic payment institution that collects stored value exceeding the threshold prescribed by the FSC should set aside a sufficient reserve fund.
(2) The payments collected through paying and collecting services should be stored and kept in an exclusive savings account, and may not be used in any other way. A certain percentage of the payments collected through stored value services can be used for low-risk investments (such as purchasing government bonds).
(3) The FSC may, when necessary, limit the multiplying ratio of electronic payment institutions' paid-in capital or net value to the amount of payments that they are allowed to collect from users.
(4) An electronic payment institution should establish internal control and audit systems.
(5) The FSC may designate officials or engage appropriate institutions to inspect the operations, finances, and other relevant aspects of electronic payment institutions, or require them to submit financial related information and reports.
7. Grace Period: If an institution (which is not a bank or Chunghwa Post Co., Ltd.) has already conducted the paying and collecting services before the enforcement of the Act, and the total balance of the payments that it collected exceeds the threshold prescribed by the FSC, such institution should apply with the FSC for the approval of an electronic payment institution permit within six months of the enforcement of the Act.
In addition, there are 15 regulations authorized to be promulgated under the Act, and the FSC intends to complete the promulgation of such regulations within three months after the Act is published. How the Act will be applied and implemented in the future will depend on the contents of such regulations. If you have any questions, please do not hesitate to contact us.