An extensive legislative and regulatory package has been recently announced by the European Union. In this guest blog, Jean-Stéphane Gourévitch shares his thoughts on the potential impact to the payments industry in the EU/ EEA and, possible new threats and risks for incumbents and opportunities for innovation and new entrants.
Jean-Stéphane Gourévitch has over 20 years of International and European experience at senior management levels. For more details see the full article on his website.
In July this year Commissioners Barnier (Internal Market and Services) and Almunia (Competition) joined forces to present an extensive Legislative and Regulatory package that will impact the payments industry in the European Economic Area, creating new threats and risks for incumbents and hopefully open competitive opportunities for new entrants and innovators.
The package is organised around two key policy initiatives:
Firstly, a draft new Payments Services Directive (or PSD 2) reviewing the original PSD from 2007, to be adopted by the Council and the European Parliament.
Secondly, a draft regulation to be adopted by the Council and the European Parliament on interchange fees for card-based payments transactions that also contains a number of important provisions and changes relating to separation of activities of card schemes, consumer rights, and rules relating to card payments.
1. The New Payments Services Directive (PSD 2)
The revised Payment Services Directive brings a number of new substantial and important elements to the 2007 Directive but also retains key measures such as “passporting”.
It aligns the provisions, including those relating to security, fraud prevention and consumer rights applicable to all types of Payments Services Providers (PSPs), whether digital or non-digital.
It also reviews the definition of payments services to adapt these to new digital and mobile payments, opening new areas for competition. The Commission hopes the new Directive will promote the emergence of new players and the development of innovative mobile and internet payment services and solutions in Europe. They further hope this will improve the overall EU global competitiveness in these sectors. Member States will have two years after adoption of the Directive to comply with it.
2. The proposed regulation from the European Parliament and the Council on interchange fees and other fundamental changes
The Regulation creates a regulated area and a non-regulated area for debit and credit cards. The Regulation caps Multilateral Interchange Fees in the regulated area, as regards both Credit and Debit cards. It seeks to hold these to a very low level, first for cross border transactions and after 2 years for all transactions, including domestic ones.
Furthermore, the proposed Regulation introduces some major changes in the rules governing card schemes. It mandates structural separation between the different functions traditionally integrated. For instance scheme management, payments authentication and processing would be separated. This aims at injecting more competition by increasing transparency, protecting consumer rights and supporting innovative payments.
The European Commission hopes this package will be adopted by the European Parliament and the Council of Ministers and implemented before end of March 2014. It is an ambitious programme with potentially far-reaching consequences as part of an ambitious political agenda.