Mongolia’s Banking Regulations Emerge as Central Bank Takes Lead
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In an effort to ensure stability, reliability, and efficiency in the country’s payment systems, the Central Bank of Mongolia has been instrumental in reforming the legal environment governing these networks. The Law on National Payment System, which came into effect on January 1, 2018, has established a framework for the operation of payment services and oversight of participants.
Key Provisions of the Law
The law empowers the Central Bank to:
- Define national payment system policy
- Issue licenses to participants who meet specified criteria
- Approve regulations related to oversight and issuance of payment instruments
- Monitor participant activities and perform inspections as required
Structure of Mongolia’s Payment System
Mongolia’s payment system is composed of three subsystems:
1. Real Time Gross Settlement (RTGS)
- Enables participants to transfer funds over MNT 3 million per transaction
- Facilitates large-value transactions
2. Automated Clearing House (ACH+)
- Transfers low-value payments of up to MNT 3 million
- Supports efficient processing of low-value transactions
3. Interbank Card Transactions through the National Electronic Transaction Center (NETC)
- Clears transactions on a net basis
- Final settlement takes place in the RTGS system
Regulatory Oversight and Compliance
The Central Bank has been assessing new payment instruments and services, issuing licenses where necessary, and conducting annual inspections to ensure compliance among banks and other payment service providers.
Impact of the Law on National Payment System
The introduction of the Law on National Payment System has led to increased competition in the payment system arena as non-bank financial institutions and other payment service providers have introduced new products and services using latest technology. The number of new payment instruments and services entering the market is increasing year by year, driven by the bank’s strategy to promote safe, reliable, and efficient operation of payment systems.
Evolution of Mongolia’s Payment Landscape
Mongolia’s payment landscape has evolved significantly over the years, with a range of payment instruments and channels now available to consumers. These include:
- Cash
- Internet banking
- Payment orders and invoices
- Mobile banking
- Payment cards
- Remittances
- E-money
- Billing services
Future Prospects
As Mongolia continues to develop its financial market infrastructure, it is likely that the country’s payment system will become increasingly efficient and accessible, with a growing range of innovative products and services available to consumers.