Central Bank raises liability of card networks

Under the new framework, card networks—which act as the arrangement operators—assume greater responsibilities, though with some flexibility in determining the guarantees they require from other participants. The measures come a year after the Central Bank held a public consultation on the topic, prompted by issues involving the card administrator Credz and travel operator 123 Milhas.

A proposal to create an industry-wide guarantee fund, criticized by market players, was dropped from the final rule. A payment arrangement is a set of rules that enables a specific type of transaction. In the case of cards, the networks (such as Visa and Mastercard) define how participants interact, such as acquirers (the “POS machine” companies) and issuers (typically banks).

The resolution takes effect upon publication, but networks will have 180 days to request authorization for any regulatory adjustments needed to comply. Existing rules remain valid until the Central Bank approves the changes.

According to the Central Bank, the rule makes it explicit that the card network is responsible for ensuring payment of all transactions to the receiving user—without exception. This includes the obligation to use the network’s own funds if existing protection mechanisms prove insufficient.

“The network will be solely responsible for monitoring and managing the risks of arrangement participants. If protection mechanisms are insufficient, it must use its own resources to guarantee payment to merchants,” the Central Bank stated.

The debate over risk management in card arrangements intensified in 2023, after Credz ran into trouble and was ultimately acquired by DM, in a deal involving several market participants—including Visa—to avoid systemic fallout. Concerns also rose around Will Bank, controlled by the same group as Banco Master, prompting Mastercard to engage in talks to find a buyer for the fintech.

An executive from the card industry told Valor that while networks now face higher liability, the clarity is positive. “It’s now very clear that the networks are financially responsible for their arrangements, which should make the market safer,” he said.

A financial lawyer noted that by becoming “guarantors of last resort,” the networks now face credit risk exposure, a shift that could transform the industry.

The Brazilian Association of Credit Card and Service Companies (Abecs), which led private-sector discussions, said only that it is “analyzing the resolution together with its members.” Meanwhile, the Brazilian Association of Payment Institutions (Abipag) welcomed the rule, highlighting progress such as: “The guarantee that merchants will receive payment for all authorized card transactions; improved visibility into settlement processes; and greater transparency in fee collection.”

In earlier drafts, released in October 2023, the BC had suggested a shared guarantee fund financed by market participants. Abecs opposed that model, arguing instead for individualized risk management, where each participant’s exposure corresponds to its own risk profile, with resources held in escrow accounts. The Central Bank accepted this approach, mandating the creation of segregated accounts for settlement funds within each arrangement. However, each network will also be required to maintain its own guarantee reserve for extreme situations.

To balance risks within arrangements, the Central Bank limited the financial liability of other participants in chargeback cases to 180 days. After that period, if permitted under the arrangement’s rules, the card network assumes responsibility.

The resolution also prohibits networks from allowing participants to demand guarantees from one another and forbids acquirers or sub-acquirers from discriminating against specific issuers. In practice, this means risk management will now be fully centralized within the card network, which can no longer delegate oversight of sub-acquirers to acquirers.

“The new rule prevents networks from transferring sub-acquirer risk management to acquirers,” the Central Bank emphasized. According to Vicente Piccoli, partner at FAS Advogados, the rule represents a win for acquirers, freeing them from the duty of monitoring sub-acquirers. “The general trend is to strengthen the responsibilities of the arrangement operator, who has full visibility of the system and is best positioned to manage overall risk,” he said.

Larissa Arruy, partner at Mattos Filho, noted that the Central Bank gave networks a degree of discretion. “My main concern now is the potential market impact. The Central Bank is clearly trying to enhance security in the financial and payment ecosystem—these are positive steps, but the costs remain uncertain.”

For Kenneth Ferreira, a partner with the banking, transactions, and financial services practice of law firm Lefosse, the resolution is “very welcome,” as it harmonizes risk management practices, clarifies responsibilities, increases transparency, and protects financial flows to end users.

“It introduces new concepts, requiring continuous monitoring, stress testing, backtesting, and periodic policy reviews. A key change is that all sub-acquirers must join centralized settlement within 180 days, ensuring traceability of funds. Previously, smaller players were exempt, creating distortions,” he explained.