Honduras: The Legal Revolution of Electronic Payments

The finances in Honduras have undergone significant changes due to the adoption of emerging technologies over the years. This phenomenon, witnessed internationally, has led to the progressive integration of these innovations into Honduran society. In this context, new modalities for making payments and transfers have emerged, highlighting the prominence of electronic money and wallets. The convenience and efficiency of these methods for transferring, paying, and receiving money have led to the creation of specialized companies, known as Non-Banking Electronic Money Institutions (INDEL) and Electronic Payment Service Provider Entities (EPSPE). These entities have the exclusive purpose of facilitating commerce with electronic money through electronic wallets.

Since 2016, the National Banking and Insurance Commission (CNBS) has supervised these companies, starting with general regulations for INDEL. More recently, specifically in 2021, through legislative decree number 83-2021, a regulatory framework was established to oversee the organization, operation, and functioning of legal entities, both national and foreign, providing payment and transfer services, as well as regulating the services themselves.

In 2022, two key regulations were introduced: the "Regulation for Payment and Transfer Services through Electronic Money" and the "Regulation for Services offered by Electronic Payment Service Provider Entities." These regulations provide a clear framework for understanding the regulation of these institutions and entities in Honduras.

INDELs are legal entities, national or foreign, authorized by the Central Bank of Honduras (BCH) to provide electronic money and offer electronic fund transfers and payment operations for goods or services. These services are performed using electronic devices or computer systems that facilitate the circulation of electronic money through their transaction network.

The services that INDELs can offer include:

• Fund transfers and payment operations for goods or services using electronic money within the national territory.
• Activation of electronic wallets.
• Conversion of physical Lempira from credit cards, deposits in Financial System Institutions, or Credit Unions to electronic money and vice versa.
• Balance inquiry and transaction history.
• Sending and receiving national transactions with electronic money.
• Collection services for affiliated companies, payments to suppliers, and salary payments.
• Transactions for state institutions using electronic money.
• Accreditation of funds through international remittance transfer, where the INDEL acts as a payment agent for a money remittance company.
• Payments for online purchases.

To establish an INDEL, it is required to be exclusively a corporation (S.A.) with a minimum capital of one hundred thousand Lempiras (L 100,000.00). This minimum capital must be related to the average daily balance of electronic money enabled on its platform every six months.

It is noteworthy that the BCH carefully regulates and monitors the digital wallets issued by INDELs, which must comply with the following:

For users, non-banking electronic money institutions must implement rigorous controls to fully identify users of electronic wallets and ensure compliance with established limits. These limits vary depending on the type of operation, setting maximum amounts per transaction, accumulated in the month, and maximum wallet balances.

TYPE OF OPERATION	MAXIMUM AMOUNT PER TRANSACTION	MAXIMUM CUMULATIVE TRANSACTION AMOUNTS IN THE MONTH	MAXIMUM WALLET BALANCE	NUMBER OF TRANSACTIONS
Salary and pension credits, and receipt of family remittances	L25,000.00	L50,000.00	L25,000.00	No limit
Other Operations	L15,000.00	L30,000.00	L15,000.00	No limit

In the case of affiliated companies, there is no limit on the maximum amount per transaction, nor on the maximum amount and number of transactions accumulated in the month. An affiliated company is referred to as a natural or legal person that establishes a commercial relationship with an EPSPE to facilitate its collection management, payments to suppliers, transfers, salaries, or other compensations. However, non-banking electronic money institutions must conduct due diligence, monitoring, and timely tracking of operations carried out by these companies and are obliged to report their operations to the National Banking and Insurance Commission in accordance with the provisions issued by said institution.

On the other hand, EPSPEs are legal entities, national or foreign, that, through regulated technologies, offer transfer services without engaging in the activity of converting physical to electronic money and vice versa. The services they offer include:

• Payment gateways.
• Payments for purchases from affiliated companies.
• Payments for public or private services through collection.
• National transactions initiated with cash or through deposit accounts, digital or mobile electronic wallets, or payment credentials.
• Transactions with state institutions.
• Acquiring services.
• Acting as a payment agent for a money remittance company to disburse funds.
• Payments for online purchases.

In summary, the transformation of the Honduran financial landscape has been remarkable thanks to the introduction and regulation of INDELs and EPSPEs. Since the establishment of regulations in 2016 and the adoption of regulatory frameworks in 2021 and 2022, a clear legal framework has been established for these entities, promoting transparency and security in electronic transactions.

INDELs, authorized by the BCH, offer a wide range of services, from fund transfers to the activation of electronic wallets and payments in online commerce. The meticulous regulation by the CNBS ensures the full identification of users, establishes limits for transactions, and promotes due diligence in operations with affiliated companies.

On the other hand, EPSPEs, not subject to traditional banking laws, provide services such as payment gateways, payments for public services, and transactions with state institutions. Regulation imposed by the BCH and CNBS establishes specific requirements, such as biometric dual-factor authentication and the identification of the sender and beneficiary in transactions.

Both types of entities must comply with provisions that ensure the security and traceability of transactions, such as the implementation of authentication mechanisms, identity verification, and the maintenance of updated records. These measures not only aim to protect users but also to prevent potential illicit activities, marking a crucial milestone towards the integrity of the financial system in Honduras.

In conclusion, the implementation and regulation of INDELs and EPSPEs have significantly contributed to the modernization and efficiency of the financial system in Honduras. This not only provides users with more flexible and convenient options but also establishes essential measures to ensure the safety and transparency of all electronic transactions, thereby consolidating trust in the country's financial environment.