Taiwan passes new e-payment legislation

A new legislation on electronic payment has been passed by Taiwan's Legislature on 16 January 2015 and is expected to drastically change the business landscape of e-payment services in Taiwan. Before the newly-enacted Act Governing E-payment Institutions (the "E-Payment Institutions Act") comes into effect, an e-payment service provider could only operate its business on the traditional model under which it is only allowed to receive and make payments on behalf of clients for actual internet transactions. Furthermore, non-bank entities that operate e-payment services cannot offer stored value services or facilitate money transfers unrelated to actual transactions. The E-Payment Institutions Act opens up the market of electronic payment to non-bank entities, allowing them to provide virtual accounts through which clients can store funds and to transfer funds electronically. An entity which (1) uses an internet or electronic payment platform as intermediary to accept users to register and open an account for recording fund transfer and stored value, (2) uses electronic devices to transmit information of receipts and payments via connection, and engage in any of the following types of business is subject to the E-Payment Institutions Act: i) acting as a collection and paying agent for actual transactions; iI) accepting stored value; or iII) making fund transfers among e-payment accounts", provided that an entity which merely acts as a "collection and paying agent for actual transactions" with the balance below a certain threshold (still to be announced by the regulator, the Financial Supervisory Commission "FSC") is not subject to the E-Payment Institutions Act. An entity that engages in the business regulated under the E-Payment Institutions Act must be a company limited by shares organized under the Company Law of Taiwan. In order to run a full-range of e-payment services, the company must have a minimum paid-in capital of NT$ 500 million (approximately US$ 16.7 million). If the company only wishes to conduct business as a collection and paying agent for actual transactions, the minimal paid-in capital requirement is NT$ 100 million (approximately US$ 3.3 million). Before an offshore entity conducts any type of e-payment services subject to the E-Payment Institutions Act, it should apply to establish an e-payment institution which satisfies all requirements as stated in the paragraph above. Further, without prior approval of the FSC, any individual or company is prohibited from cooperating with or assisting any offshore entity in operating the businesses prescribed under the E-Payment Institutions Act. We understand that the FSC only intends to grant this type of approval to limited entities, such as holders of the license granted under the E-Payment Institutions Act or Act Governing Issuance of Electronic Stored Value Cards, banks and licensed information processing services providers. Regarding stored value services, the E-Payment Institutions Act provides stored value cap for each account and the maximum amount for each fund transfer among e-payment accounts is NT$ 50,000 (approximately US$ 1,666). 2 An e-payment institution is prohibited from using the personal data it possesses for marketing activities for third parties and should abide by the obligations prescribed by the E-Payment Institutions Act, including confidentiality of customers' data, allocation of the reserve to the Central Bank of Taiwan, arrangement of escrow account or performance guarantee in respect of the stored value, proper management of financial and business matters, consumer complaint handling, internal control and audit and reporting financial documents to the FSC, etc. Additionally, an e-payment institution shall allocate an insolvency fund from its revenues. When an epayment institution faces financial difficulty and becomes insolvent, the insolvency fund, as a third party, may settle the debts owed to the consumers and assume the consumers' rights to the extent of the amount paid from the payment date. Currently, the FSC is deliberating on the ancillary regulations to supplement the E-Payment Institutions Act. The effective date of the E-Payment Institutions Act will be separately announced. For more information, please contact H. Henry Chang, Owen Chio, Evangeline Wang and Serena Cheng.