Project Bakong – An Alternative Technology Platform to Enhance Payment Systems
The National Bank of Cambodia (“NBC”) is mandated to: (1) formulate, implement and monitor monetary and exchange rate policies; (2) regulate and supervise financial institutions; (3) oversee payment systems in the country; (4) enhance interbank payments with the aim of maintaining the stability of the financial sector; and (5) contribute to high and sustainable growth. With the promotion of a safe and efficient payment system being one of the bank’s key priorities, several development initiatives had been undertaken over the past few decades to improve the payment system capabilities. These efforts include the implementation of the National Clearing System (“NCS”), FAST system (“FAST”) and Cambodian Shared Switch (“CSS”). The latest addition to the payment landscape is Project Bakong – a project that explores the use of an alternative technology platform to further enhance payment systems in the Kingdom of Cambodia. This Project was explored as part of an effort to address the lack of interconnectivity and interoperability and attain efficiency (reduced cost, increased speed, and enhanced security) within the current payment system. Project Bakong also aims to promote financial inclusion and ease cash payments in Cambodian Riels (“KHR”).
Currently, there are 11 banks in Cambodia who are participating in this project, and more are expected to join, including several financial institutions. The participating banks shall have a Bakong settlement account at the NBC. This Project aims to be the central platform where all users can make payments under the same system, allowing end users to pay with ease using their respective banks. The user’s balance in a Bakong account is considered as a cash equivalent and will be recorded in the participant’s Bakong settlement account at the NBC. Under this project, end users have two separate accounts for KHR and USD to allow for transactions in both currencies, respectively. Though converting from one currency to another through transfer is not possible within the system, the end user’s banks can provide foreign exchange services.
Furthermore, the NBC has issued a Prakas No. 349 dated 26 June 2020 on Launching of Use Rule and Procedure of Bakong System. This Prakas serves the purpose of launching the project system and to outline the rights and obligations of the related parties as well as other precautionary measures to ensure the sustainability and safety of using the system. All relevant parties such as institutions and units are bound by the rules and procedures of the Prakas. Any person using system without having obtained consent from the NBC shall be punished in according the Law of the Kingdom of Cambodia.
With regard to Prakas No.350 on Launching of Use of Bakong System’s Logo, its purpose is to permit the use of the system’s logo and to feature it on banking and finance sectors and in system transactions, as well as giving member institutions the right to use it. The Prakas aims to maintain uniformity of the use of the logo in public, ensure the rights of institutions and units and system efficiency, and to protect the benefits of members of the system. Members of the system publishing the logo shall do so in accordance to the Prakas.
This alert is for general information only and is not a substitute for legal advice.