Guidelines for White Label ATM and Merchant Acquiring Services (June 2020, Issue 3)

June 11, 2020, by Tanvir Quader

Recently, on 31.05.2020, the Payment Systems Department (PSD) of the Bangladesh Bank has issued the Guidelines for White Label ATM and Merchant Acquiring Services “WLAMA Guidelines”. Typically, white label Automatic Teller Machines (ATMs) are owned and operated by independent third parties, as opposed to being owned and operated by banks or financial institutions. Therefore, a white label ATM does not contain the name or logo of a bank or a financial institution, rather it may contain the branding of such a third party or other advertisement.


The WLAMA Guidelines were issued with the aim of expanding and introducing the services of ATMs and Point of Sales (POS)/Quick Response (QR) code machines to the customers based in the rural areas of Bangladesh. Accordingly, in exercise of the powers conferred under section 7(A)(e) of the Bangladesh Bank Order 1972 and section 49(1)(e) of the Bank Companies Act 1991, the Bangladesh Bank has promulgated the WLAMA Guidelines to allow non-bank private sector entities to set up the necessary infrastructure throughout the country for providing the said services to the customers of banks, mobile financial services (MFS) providers, payment service providers (PSP) and any other institution as may be approved by the Bangladesh Bank.


Some of the salient features of the WLAMA Guidelines are as follows:


  • Incorporation – The WLAMA Guidelines requires a WLAMA license seeker (i.e. white label ATM and/or merchant acquisition service provider) to be incorporated in Bangladesh under the Companies Act 1994. Furthermore, such a company’s memorandum of association must contain relevant objects clauses specifying the types of services that the company intends to offer.


  • Capital requirements – If an entity intends to provide white label ATM services only, it needs to have a paid-up capital of Taka 45 crores (or BDT 450 million). For providing both white label ATM services and merchant acquisition services, in addition to the said paid-up capital requirement, the entity also needs to provide a bank guarantee of Taka 10 crores (or BDT 100 million) in favour of the Bangladesh Bank. Where an entity intends to provide only merchant acquisition services, it needs to have a paid-up capital of Taka 10 crores (or BDT 100 million) and provide a bank guarantee of Taka 10 crores (or BDT 100 million) in favour of the Bangladesh Bank. It is interesting to note that the WLAMA Guidelines also stipulates that the BDT 100 million bank guarantee for providing merchant acquisition services may be required to be enhanced at a later stage, if the acquisition business grows.


  • Licensing – An entity intending to provide WLAMA services will have to obtain a Payment System Operator (PSO) license under the Bangladesh Payment and Settlement Systems Regulations 2014. Furthermore, the entity must designate a scheduled bank as a Settlement Bank and submit to the Bangladesh Bank a memorandum of understanding (MOU), along with the WLAMA license application, signed between the proposed WLAMA service provider and the Settlement Bank.


In recent years, the idea of expanding the network of ATMs through independent non-bank operators and taking it to the rural population for the ultimate goal of greater financial inclusion has found quite a foothold in many developing nations, particularly given the banking system’s high operational costs in setting up and maintaining ATMs. It appears that the Bangladesh Bank has also introduced the WLAMA Guidelines with the same aim in mind – affordable financial inclusion for the rural populace. To this end, the Bangladesh Bank has, in contrast with comparable jurisdictions of the subcontinent, taken a step further by bundling together merchant acquisition services along with white label ATM services, in the same guidelines. While the white label ATM services endeavour to expand ATM services to the rural financial services customers, merchant acquisition services aspire to expand card and other digital transaction capabilities (both in-store and e-commerce), with a particular focus on the rural areas. Accordingly, the WLAMA Guidelines requires the WLAMA licensee to deploy a minimum of 100 ATMs and 1000 POSs/QRs per year, maintaining the urban to rural deployment ratio of 1:3.


The Bangladesh Bank’s endeavour, which aspires to complement the present government’s Digital Bangladesh agenda, in this globally prevailing challenging time, is indeed welcome. In time, the WLAMA sector also has the potential to bring in new foreign direct investments into Bangladesh from interested foreign parties.


Written by Tanvir Quader, Partner at Vertex Chambers

† Disclaimer: The opinions and comments expressed in this Blawg are not to be regarded or construed as legal advice by and from Vertex Chambers or any of its members. It is highly advisable that any person should seek independent legal advice before relying on any of the contents of this Blawg.