Regulatory Guidelines for Prepaid Instruments in Bangladesh: Ensuring Financial Inclusion and Consumer Protection

Prepaid instruments (PIs), such as cash vouchers, gift cards, and wallets, are integral to the digital payment ecosystem, offering consumers convenient and secure transaction methods. With that in mind, the Bangladesh Bank has established guidelines to regulate the issuance of PIs by non-payment system entities. The aim is to discipline prepaid transactions used as marketing tools by private enterprises, including e-commerce companies and shopping centers.

Below are the key points of the guidelines:

Prohibited use

The legal framework prohibits their use for illegal activities such as online gambling, betting, and purchasing virtual currencies.

PI categories

• Closed PIs: Issued by any legal entity registered under the Company Act, 1994, these can be used for payments within the issuer’s ecosystem (e.g. closed-loop gift cards).
• Semi-closed PIs: Also issued by registered legal entities, these are used for payments at a group of registered sellers (e.g. mobile wallets).
• Open PIs: Issued only by banks, non-bank financial institutions, mobile financial service providers, and payment service providers, these are not covered by the current guidelines.

Eligibility criteria

Entities seeking to issue PIs must meet specific conditions, including demonstrating financial stability and compliance with anti-money laundering regulations.

Issuance process

• Application: Entities must submit an application to the Bangladesh Bank, detailing the proposed PI, security measures, and compliance procedures.
• Approval: The Bangladesh Bank reviews the application, and upon approval, the entity is authorized to issue PIs.

Restrictions and reporting

PIs are subject to usage restrictions, such as transaction limits and validity periods. Issuers are required to maintain records and report transactions to the Bangladesh Bank regularly.

Supervision and penalties

The Bangladesh Bank supervises PI issuers to ensure compliance with the guidelines. Non-compliance can result in penalties, including fines and revocation of authorization.