Open­ing up the online pay­ments mar­ket, so as to re­duce fees and fraud risks

Financial Mirror (Cyprus) - - FRONT PAGE -

Up­dat­ing EU rules on pay­ment ser­vices will cut the cost of pay­ing bills, by en­abling new mar­ket play­ers to use mo­bile and online tools to make pay­ments on a client’s be­half, MEPs said vot­ing a law on Thurs­day. These rules, in­for­mally agreed by MEPs and min­is­ters last May, also aim to make online pay­ments safer, by lay­ing down data pro­tec­tion and li­a­bil­ity rules for all online pay­ment ser­vice providers.

The law now needs to be of­fi­cially en­dorsed mem­ber states be­fore it can en­ter into force.

“The EU pay­ment ser­vices mar­ket re­mains frag­mented and ex­pen­sive, cost­ing EUR 130 bln, or over 1% of EU GDP, a year. The EU econ­omy can­not af­ford these costs, if it wants to be glob­ally com­pet­i­tive,” said lead MEP An­to­nio Ta­jani (EPP, IT), adding that “the new reg­u­la­tory frame­work will re­duce costs, im­prove the se­cu­rity of pay­ments and fa­cil­i­tate the emer­gence of new play­ers and in­no­va­tive new mo­bile and in­ter­net pay­ment meth­ods.”

The draft law was ap­proved by 578 votes to 29, with 52 ab­sten­tions.

A payer us­ing an online ac­count will have the right to use pay­ment soft­ware, de­vices and ap­pli­ca­tions pro­vided by an au­tho­rised third party and to have pay­ments ex­e­cuted on his or her be­half by this provider. For ex­am­ple, pay­ers who have no credit or debit card will be able to au­tho­rise new mar­ket en­trants such as SOFORT in Ger­many, Trustly in Scan­di­na­vian coun­tries or IDEAL in the Nether­lands to use their bank de­tails to make pay­ments from their ac­counts.

Pay­ment ser­vice providers’ charges should not ex­ceed their di­rect costs. Ad­di­tional charges for us­ing pay­ment in­stru­ments, such as credit and debit cards, for which banks’ “in­ter­change” pro­cess­ing fees are al­ready reg­u­lated, will be pro­hib­ited.

A bank ser­vic­ing a payer’s ac­count could deny a third party ser­vice provider ac­cess to it only for ob­jec­tively jus­ti­fied

by EU and sub­stan­ti­ated se­cu­rity rea­sons which have been re­ported to the su­per­vi­sory author­i­ties. This safe­guard should pre­clude any pos­si­bil­ity of banks “block­ing” the mar­ket for new pay­ment ser­vices.

Third-party pay­ment ser­vice sup­pli­ers, for their part, would be re­quired to en­sure safe au­then­ti­ca­tion of the user and re­duce the risk of fraud. They would have to en­sure that a user’s per­sonal pay­ment data transit through the safe chan­nels and that they are shared only with the user’s con­sent.

In the event of an unau­tho­rised pay­ment be­ing made from his or her ac­count, the holder should not lose more than EUR 50 if the pay­ment in­stru­ment was lost, stolen or mis­used. A ser­vice provider that fails to act to pre­vent such a fraud af­ter a no­ti­fi­ca­tion of a loss, or does not re­quire strong cus­tomer au­then­ti­ca­tion when nec­es­sary, could be deemed li­able for its client’s losses and or­dered to rem­edy the fi­nan­cial dam­age.

The pay­ment ser­vices di­rec­tive (PSD2) is the most re­cent set of EU rules on pay­ments, which also cov­ers online pay­ment ser­vices. In 2012, the sin­gle euro pay­ments area (SEPA) was in­tro­duced re­quir­ing banks to com­ply with SEPA rules that en­ables their clients to use a sin­gle bank ac­count to make euro pay­ments to and from all SEPA coun­tries, the 28 EU mem­ber states plus Ice­land, Liecht­en­stein, Nor­way, Switzer­land and Monaco. This makes pay­ments faster and cheaper with no dif­fer­en­ti­a­tion be­tween na­tional and cross­bor­der euro pay­ments.

In 2014, the in­ter­change fees were capped and sur­charg­ing pro­hib­ited for con­sumer cards un­der the Mul­ti­lat­eral In­ter­change Fees (MIF) reg­u­la­tion for card-based pay­ment trans­ac­tions.

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