The European Commission (EC) published the long awaited proposal for a revised Payment Services Directive (PSD2), and a proposal for the regulation of Multilateral Interchange Fees (MIF), on 24 July 2013.
In the accompanying press release Internal Market and Services Commissioner Michel Barnier described the current EU payments market as fragmented and expensive. ‘Our proposal will promote the digital single market by making internet payments cheaper and safer, both for retailers and consumers. And the proposed changes to interchange fees will remove an important barrier between national payment markets and finally put an end to the unjustified high level of these fees,’ explained Barnier.
E-Finance & Payments Law & Policy presents initial reactions from leading payments lawyers and a closer look at the detail of both proposals.
PSD2
Robert Courtneidge, Global Head of Cards and Payments at Locke Lord LLP:
"The first thing you will notice is the size of the draft – the current PSD has 63 Recitals and 96 Articles whilst PSD2 has an 11 page explanatory Memorandum followed by 76 Recitals and 109 Articles. The new PSD has brought in the EC’s Green Paper ‘Towards an Integrated European market of card, internet and mobile payments’ as well as the ECB’s recommendations for security of internet payments and the EC’s proposal for a Directive on Network and Information Security. This has made it more bulky but has also brought in additional areas for ‘discussion’ between Member States. This alone is likely to make it difficult to be agreed before the end of 2013.
Moving onto some of the detail we can first see the changes to the Negative Scope in Article 3. The ‘commercial agent’ exemption has been changed so that it only applies if you act for either the payee or the payer NOT both as it did before. The definition of limited network and limited good or services has been tighten significantly, although not as bad as in the leaked draft which suggested all limited networks would be reviewed by the home State regulator and if approved be put on a public register!
The ‘digital content’ exemption has also been limited and has financial limits of EUR50 for a single purchase and EUR 200 in any month – note this is again better than the leaked draft which suggested the exemption would be removed completely!
Finally the exemption for ATM providers has been removed entirely to bring them into the Payment Services Regime. In Article 55 we have new rules on surcharging, which state that if the MIF is capped under the new MIF Regulations then no surcharging can be applied by a merchant. This means it will only be the payment methods of three party schemes like Amex that will be able to be surcharged together with commercial cards (all of which are outside scope of the MIF Regs).
Chapter 5 looks at Operational Security and Authentication and requires compliance with the Directive on Network and Information Security as well as, in Article 87 looking at applying strong factor authentication to payment transactions."
John Worthy, Partner at Field Fisher Waterhouse LLP:
"The long awaited revision of the Payment Services Directive will bring a range of new players inside the regulatory net.
In its analysis of the European landscape, the EC recognises the dynamic nature of the payments services market and the significant innovation over recent years. At the same time, it highlights what it sees as ongoing fragmentation of markets along national borders, especially in internet and mobile payments. In order to address these challenges, it has brought forward a number of changes to the ambit of the PSD. So those affected may find themselves needing a licence or authorisation where none is required at present.
Among the more important changes are:
– the ‘limited network’ exemption has been redrawn, with a view to bringing large scale or high volume payments or payments for wide ranges of products and services into the regulated arena. While the intent is reasonably clear – to emphasise the limits to the networks in question – the terminology currently used in the draft PSD2 will present challenges in applying it in practice;
– the ‘digital services’ exemption, which some had expected to be removed, has been retained, but with tighter controls on its scope. The aim is to cover ancillary payment services connected with the sale of digital content carried out by telecoms providers and mobile network operators.
The new rules will set limits on the levels of payments for the exemption to apply – this will mean that some businesses currently using the digital services exemption will need a licence or authorisation going forward; and
– third party providers offering payment initiation services and account information platforms will be regulated for the first time. The aim is to encourage new low-cost internet payment solutions, such as mobile payment applications and bank to bank payment transfer services, under defined and controlled conditions."
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