Explanatory Memorandum to COM(2013)547 - Payment services in the internal market - Main contents
Please note
This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2013)547 - Payment services in the internal market. |
|---|---|
| source | COM(2013)547  |
| date | 24-07-2013 |
The electronic payments market in Europe offers great opportunities for innovation. Consumers have already significantly changed their payment habits in recent years. In addition to the ever growing number of credit and debit card payments, the rise of e-commerce and the increasing popularity of smart phones have paved the way for the emergence of new means of payments. The benefits of better market integration and reduced fragmentation in this field at European level are substantial.
This initiative will allow consumers and merchants to benefit fully from the internal market, particularly in terms of e-commerce.The aim of the proposal is to help develop further an EU-wide market for electronic payments, which will enable consumers, retailers and other market players to enjoy the full benefits of the EU internal market, in line with Europe 2020 and the Digital Agenda. Such further integration is becoming increasingly important as the world moves beyond bricks-and-mortar trade towards a digital economy.
To achieve this and promote more competition, efficiency and innovation in the field of e-payments, there should be legal clarity and a level playing field, leading to downward convergence of costs and prices for payment services users, more choice and transparency of payment services, facilitating the provision of innovative payment services, and to ensure secure and transparent payment services.
These objectives will be achieved by updating and complementing the current framework on payments services; providing for rules that enhance transparency, innovation and security in the field of retail payments and improving consistency between national rules, with an emphasis on the legitimate needs of consumers. The proposed measures seek to do so in a technologically neutral manner that will remain relevant as payment services evolve further.
This proposal also incorporates and repeals Directive 2007/64/EC of the European Parliament and of the Council (the so called ‘Payment Services Directive’ or ‘PSD’) i which sets the basis for a harmonised legal framework for the creation of an integrated payments market, thus improving the level playing field and accessibility of the current payments framework for all stakeholders.
At a time when the distinction between payment institutions (subject to the PSD) and electronic money institutions (subject to Directive 2009/110/EC of the European Parliament and of the Council i, the second Electronic Money Directive or ‘EMD’) is increasingly blurred as technology and business models converge, a full modernisation of the digital payment framework resulting in the merger of both categories of actors and respective legislations would be optimal. This would however entail as a pre-requisite to review the EMD to ensure a coherent regulatory framework. Unfortunately, the late transposition by many Member States of the EMD has not allowed gaining sufficient experience with this Directive to evaluate it together with the Payment Service Directive and consider possible synergies in the review. A review of Directive 2009/110/EC is foreseen to take place in 2014.
Significant progress and integration of retail payments in the EU have been achieved over the past 12 years, with the current regulatory and legislative acquis on payments.
The legal framework established by the PSD, the cross-border payments Regulation (EC) No 924/2009 and the Second Electronic Money Directive have already resulted in significant progress regarding the integration of the European retail payments markets. The SEPA migration end-date Regulation (EU) No 260/2012 brought this development a step further by setting migration deadlines for pan-European credit transfers and direct debits, replacing national schemes for national and cross border euro payments within the EU (1 February 2014 for the Eurozone). This regulatory framework is complemented by ECJ case law and Commission decisions in the context of competition law in the field of retail payments.
The retail payments market is very dynamic and has experienced a significant innovation pace in the last few years. At the same time, important areas of the payments market, especially card payments and new means of payments, such as internet and mobile payments, are often still fragmented along national borders making it difficult for innovative and easy-to-use digital payment services to develop efficiently and to provide consumers and retailers with convenient and secure payment methods (with the possible exception of credit cards) at pan-European level to purchase an expanding range of goods and services. The latest developments in these markets have also highlighted certain gaps in the current legal framework for payments and market failures in the markets for card, internet and mobile payments to be addressed in this initiative.
The review of the European framework and notably the Payment Services Directive and the consultation on the Commission Green Paper ‘Towards an integrated European market for card, internet and mobile payments’[5] in 2012 have led to the conclusion that further measures and regulatory updates, including adjustments to the PSD, are required so that the payments framework can better serve the needs of an effective European payments market, fully contributing to a payments environment which nurtures competition, innovation and security.
In the Commission’s 2012 Communication “Single Market Act II – Together for new growth”[6], the modernisation of the legislative framework for retail payments has been identified as a key priority in view of its potential for new growth and innovation. The revision of the PSD and the preparation of a legislative proposal on multilateral interchange fees for card payments were defined as one of the key actions of the Commission for 2013.
This initiative is part of a broader package of legislative measures on payment services. It will complement and update the existing legal framework for payment services within the EU, and notably:
– Directive 2007/64/EC creating a harmonised legal framework so that payments could be made more quickly and easily through the whole EU, introducing more competition in payment systems and facilitating economies of scale. It also facilitated the operational implementation of the Single Euro Payments Area (SEPA).
– Regulation (EC) 924/2009 on cross-border payments repealing Regulation (EC) No 2560/2001 and extending the scope of the Regulation to direct debits. It eliminated the differences in payment charges for payment service users between national and cross-border payments in euro with in the European Union. It applies to all electronically processed payments.
– Regulation (EU) No 260/2012 setting migration deadlines for pan-European credit transfers and pan-European direct debits and replacing national schemes for national and cross border euro payments within the European Union.
– Directive 2009/110/EC on electronic money providing for the legal framework to issue and redeem e-money and brings the prudential regime for electronic money institutions in line with the requirements for payment institutions in the PSD.
– Regulation (EC) No 1781/2006 laying down rules for payment service providers to send information on the payer throughout the payment chain for the purposes of prevention, investigation and detection of money laundering and terrorist financing.
In addition to the legislative framework, a number of competition proceedings conducted at European and national level have addressed anti-competitive practices in the payment market.
The objectives of the proposal are fully coherent with the EU policies and objectives pursued by the Union. First, this proposal will improve the functioning of the internal market for payment services and more broadly for all goods and services given the need for innovative, efficient and secure means of payments. By facilitating economic transactions within the Union, this will also contribute to the attainment of the wider objectives of the EU 2020 strategy and the promotion of new growth. Second, this initiative supports EU policies in other areas such as data protection, administrative sanctions, anti-money laundering and terrorist financing and more in particular:
– The Commission's legislative initiatives regarding the Digital Agenda for Europe and notably the Commission's proposal for a legal framework on electronic identification and trust in services for electronic transactions and its proposal concerning measures to ensure a high common level of network and information security across the Union and the key priorities identified in the Communication on e-Commerce and online Services[10], which aim to achieve a Digital Single Market.
– The Commission's efforts to increase competition through establishing equal obligations, rights and opportunities for market players and facilitating cross-border provision of payment services.
– The Commission’s legislative proposal on interchange fees for card-based payment transactions and on the use of certain restrictive business rules and practices which is prepared at the same time and in close coordination with the present proposal.
– Directive 2011/83/EC on Consumer Rights[11] which aims at promoting a real business-to-consumer internal market and at striking the right balance between a high level of consumer protection and the competitiveness of enterprises, thereby limiting the discretion of merchants to apply charges on the use of payment instruments to the costs at hand.
Consultation of interested parties
On 11 January 2012, the European Commission published a Green Paper "Towards an integrated European market for card, internet and mobile payments”[12] which was followed by an extensive public consultation. The Commission received more than 300 replies from authorities, civil society, business federations and companies from different fields, representing a broad variety of stakeholders. An additional number of comments, position papers and contributions were received outside the consultation.
The comprehensive feedback by stakeholders[13] provided relevant information on some recent new developments and on possible requirements for changes to the existing payments framework. A public hearing in the same context took place on 4 May 2012 and was attended by some 350 interested stakeholders.
On 20 November 2012, the European Parliament adopted a resolution “Towards an integrated European market for card, internet and mobile payments[14]. The resolution acknowledges the objectives and integration hurdles identified in the Green Paper and calls for legislative action in different areas concerning card payments, while suggesting more caution regarding internet and mobile payments due to the lesser maturity of those markets. Furthermore, it calls for a reform of the Single Euro Payments Area (SEPA) governance model.
The consultation results called for important regulatory adjustments to the existing framework, in order to reinforce the effectiveness of the European payments market and contribute to a payment environment nurturing competition, innovation and security.
Regarding the review of the PSD and of the Regulation on cross-border payments in the Internal Market, and the potential need for a revision of both legal texts, the Commission engaged in additional work to obtain evidence in the field and to ensure full engagement of the different stakeholders.
The Commission’s review process on the impact of the PSD and the Regulation on cross-border payments in the Internal Market has been based on two dedicated external studies. These studies have provided the Commission with a comprehensive picture of the economic and legal consequences arising from the PSD. The first study, carried out by external consultants Tipik in 2011, provided a legal conformity assessment regarding the transposition of the PSD in the 27 Member States[15]. Over the course of 2012, a second study prepared by London Economics and iff in association with PaySys, analysed the impact of the PSD on payment services in the internal market and the application of the Regulation on cross-border payments in the Community. Furthermore, input by Member States and relevant market actors was gathered via the Commission's advisory committees in the field of payments policy, i.e. the Payments Committee (composed of representatives from EU countries) and the Payment Systems Market Expert Group (composed of market representatives from both the supply and the demand side). In addition, the Commission consulted further relevant stakeholders on particular issues as appropriate.
The Commission carried out an Impact Assessment[16], where it analysed the potential consequences of a lack of an integrated European payments market. Notably the following problem drivers were examined:
– Inconsistent application of the existing rules across Member States due to many options and often very general criteria of application. In particular, certain exemptions set out in the PSD appear too general or outdated with regard to market developments and are being interpreted very differently. Gaps in the scope of application also arise for payments with one leg of the transaction located outside the EEA and payments in non-EU currencies, leading to continued market fragmentation, regulatory arbitrage, and distortions of competition.
– Legal vacuum for certain newly emerged internet service providers, such as third party service providers offering online banking based payment initiation. These services represent a viable and often cheaper payment alternative to card payments, attractive also for consumers who do not dispose of cards. Most of these providers are currently not subject to the current legal framework as they do not hold funds at any moment. The legal vacuum risks impeding innovation and appropriate market access conditions.
– Lack of standardisation and inter-operability between different payment solutions (card, internet and mobile payments), in varying aspects and to different degrees especially at cross-border level, exacerbated by weak governance arrangements for the EU retail payments market.
– Diverse and inconsistent charging practices (for the use of a specific payment instrument applied by merchants) between Member States (where around half of EU Member States allow and the other half forbids surcharging) leading to confusion for consumers when they shop abroad or on the internet and an un-level playing field.
– In the area of payment cards, several restrictive business rules and practices distorting competition (regardings MIFs and rules on choice and flexibility of merchants regarding card acceptance).
The identified problems described above have resulted in consequences for consumers, merchants, new payment services providers and the payment services market as a whole.
The impact assessment concluded that the best policy options to improve the existing situation by (i) facilitating the emergence of a competitive level playing field between incumbents and new providers of card, internet and mobile payments, (ii) increasing the efficiency, transparency and choice of payment instruments for payment services users (consumers and merchants) and (iii) ensuring a high level protection of the latter would be, with respect to the PSD:
– To reinforce the SEPA project and to empower all stakeholders to take a more active role in the conception and realisation of the retail payments policy (governance);
– To facilitate standardisation through adequate governance framework and through the better involvement of the European Standardisation Organisations (standardisation);
– To ensure legal certainty in the field of interchange fees for card-based payments and provide clarity on an acceptable business model for current and future payment initiatives based on cards (interchange fees);
– To abolish restrictive business rules for card payments which lead to market distortions (interchange fees flanking measures);
– To harmonise the Member States policies on surcharging in line with the regulatory decisions on interchange fees (interchange fees flanking measures);
– To define conditions of access to the information on the availability of funds for third party providers, including payment initiation services (scope of the PSD);
– To adjust the scope and improve the consistency of the legislative framework (scope of the PSD);
– To improve the implementation of the existing PSD (PSD fine-tuning measures);
– To reinforce the rights of PSUs and safeguard the consumer rights in view of the regulatory changes (scope of the PSD, interchange fee flanking measures).
The impact assessment received a positive opinion of the Impact Assessment Board during a hearing of 20 March 2013. In accordance with the Board recommendations, several changes were made to the document, notably in:
– substantiating the urgency for the revision of the Payment Services Directive (PSD) as well as the reasons for regulating MIF through legislation,
– streamlining the presentation of impacts by focussing on the impacts of the most important options in the main text and moving less significant issues to annexes,
– better explaining the interdependencies between different options and packages.
Most of the proposed policy measures are addressed in the current proposal. This applies especially to the areas already covered by the current rules in the PSD, e.g. market access for TPPs, surcharging and rules for payment institutions. Other measures, in particular the regulation of MIFs and ancillary measures, will be addressed by a dedicated legislative proposal, submitted in parallel.
Some measures described above should be addressed through non-legislative means, for example issues relating to the involvement of European Standardisation Organisations and SEPA governance.
The SEPA governance arrangements in place, including the role of the existing SEPA Council, an ad-hoc high level governing body, which has been put in place under the co-chairmanship of the Commission and the European Central bank for an initial period of three years in order to improve stakeholders’ involvement in SEPA, need to be strengthened. To this end, the mandate of the SEPA Council needs to be clarified, its composition reviewed and a better balance of interest of the supply and the demand side established, to ensure effective advice to Commission and the European Central Bank as regards the orientation of the SEPA project in the future and to facilitate the creation of an integrated, competitive and innovative market for retail payments, in particular in the Euro area. The Commission will work with the European Central Bank to identify appropriate ways to address the tasks, composition, chairmanship and functioning of the governance arrangements around SEPA.
Contents
- LEGAL ELEMENTS OF THE PROPOSAL
- BUDGETARY IMPLICATION
- Grounds for and objectives of the proposal
- General context
- Existing provisions in the area of the proposal
- Consistency with other policies and objectives of the Union
- 2. consultations with interested parties and impact assessment
- Use of expertise
- Impact assessment
- Legal basis
- Subsidiarity and proportionality
- 5. Additional information
- Explanatory documents
- Detailed explanation of the proposal
The current proposal is based on Article 114 TFEU.
An integrated EU market for electronic retail payments market contributes to the aim of Article 3 of the Treaty on the European Union stipulating an internal market. Market integration is necessary to fully unlock a number of benefits for European citizens. These benefits include more competition between payment service providers and more choice, innovation and security for payment service users, especially consumers. An integrated payments market ultimately facilitates the cross-border provision of goods and services and thereby contributes to a genuine Single Market. The depth of revision of the Payment Services Directive is proportionate to the issues arisen to date. The Directive remains globally fit for purpose; at the same time, the EU legal framework needs to evolve to take due account of the latest technological and business developments in the area of retail payments.
By its nature, an integrated payments market, based on networks that reach beyond national borders, requires a Union-wide approach as the applicable principles, rules, processes and standards have to be consistent across all Member States in order to achieve legal certainty and a level playing field for all relevant market participants. Given the current fragmentation in the market, individual action at the level of Member States would not be able to achieve the aim of an integrated and efficient payment market for both domestic and cross-border goods and services.
The approach supports the further enhancement of the Single Euro Payments Area (SEPA) and is consistent with the Digital Agenda, in particular the creation of a Digital Single Market. It will promote technological innovation and contribute to new growth and jobs, in particular in the areas of e- and m-commerce.
The Directive has a budgetary impact as indicated in the Legislative Financial Statement attached to the proposal.
European Economic Area
The proposed act concerns an EEA matter and should therefore extend to the European Economic Area.
The proposed new Directive contains several adaptations to the existing Directive and certain new obligations for Member States with a fair margin of discretion with respect to the way these obligations are transposed in national law, such as the new provisions on security. Member States are therefore asked to provide explanatory documents in relation to the transposition measures to be adopted to allow the Commission to better identify the relevant national measures and monitoring the correct transposition of the Directive.
The following short summary aims to facilitate the decision making process by sketching the main modifications compared to the to be repealed PSD:
Article 2 – Scope: It is proposed to extend the scope both as regards the geographical scope and currencies being covered.
Article 2 i: The PSD’s provisions on transparency and information requirements will also apply in relation to payment transactions to third countries, when only one of the payment service providers is located within the European Union (so called ‘one-leg transactions’), as regards those parts of the payments transaction which are carried out in the European Union.
Article 2 i: The PSD’s provisions on transparency and information requirements will be extended to apply to all currencies and not, as currently, only to EU currencies.
Article 3 – Negative scope: This provision clarifies and updates the ‘negative scope’ provided for in the current Directive, which exempts a number of payments (related) activities from the scope of the PSD:
Article 3(b): The ‘commercial agent’ exemption has been amended to only apply to commercial agents which act on behalf of either the payer or the payee, and not to those which act for both payer and the payee. The exemption under the current PSD has increasingly been used with regard to payment transactions handled by e-commerce platforms on behalf of both the seller (payee) and the buyer (payer). This use goes beyond the purpose of the exemption and should thus be further circumscribed.
Article 3(k): The ‘limited network’ exemption has increasingly been applied to large networks involving high payment volumes and ranges of products and services. This clearly goes beyond the original purpose of this exemption, leaving large volumes of payments outside the regulatory framework and creating a competitive disadvantage for regulated market actors. The new definition, which is in line with the definition of limited networks set out in Directive 2009/110/EC, should contribute to reducing these risks.
Article 3(l): The current digital content or ‘telecom’ exemption is redefined with a more restricted focus as it will apply exclusively to ancillary payment services carried out by providers of electronic communication networks or services, as for example telecom operators. The exemption will apply for the provision of digital content furnished by a third party, subject to certain thresholds set out in this directive. The new definition should ensure a level playing field between different providers and address in a more efficient way the consumer protection needs in the context of payments.
Deletion of old Article 3(o): The exemption of ATM services offered by independent ATM deployers from the PSD led to the creation of ATM networks where consumers were charged high fees for ATM withdrawals. It appears that this provision has provided incentives to the existing bank-owned ATM networks to cancel their current contractual relation with other payment service providers in order to be able to charge higher fees directly on consumers. Consequently, this exemption should be deleted.
Article 9 - Safeguarding requirements: These requirements will be streamlined and the safeguarding requirements for payment institutions licensed under the PSD will be harmonised further, in particular reducing current possibilities for Member States to limit safeguarding requirements and reduce the number of possible safeguarding methods with a view to an enhanced level playing field and improved legal certainty.
Article 14 – European electronic access point within EBA: A unique electronic access point should provide for enhanced transparency of authorised and registered payment institutions by providing for the interconnection at Union level of national public registers.
Article 27 – Conditions: The possibility to use a ‘lighter regime’ for ‘small payment institutions’ will be expanded to cover a higher number of small institutions, given that some Member States have had negative experiences (such as insolvency) with small payment service providers with activities beyond the current threshold for the waiver regime. The purpose is to achieve the right balance and on the one hand, avoid unnecessary regulatory burden for very small institutions and, on the other hand, making sure that payment services’ users enjoy an adequate level of protection.
Article 29 – Access to payment systems: This Article fine-tunes the rules around access to payment systems by clarifying the conditions of non-direct access of payment institutions to payment systems designated under Directive 98/26/EC (Settlement Finality Directive) in a way comparable to the access used by smaller credit institutions.
Article 55 and – Charges applicable: This rule will harmonise surcharging practices further, taking due account of Directive 2011/83 on consumer rights and of the Commission proposal for a Regulation (EU) XXX of the European Parliament and of the Council on interchange fees for card-based payment transactions, which is being presented in parallel. The flexibility under the current PSD, allowing merchants to request from the payer a charge, offer him a reduction or otherwise steer him towards the use of the most efficient payment means, with the qualifier that Member States may forbid or limit any such surcharging for its territory, has led to extreme heterogeneity in the market. Thirteen Member States have used this option to prohibit surcharges under the current PSD. The different regimes in place in Member States create problems and confusion for merchants and consumers alike, notably when selling or purchasing goods and services cross-border via the internet. The proposed prohibition of surcharging is directly linked to the capping of interchange fees according to the abovementioned proposal for a Regulation on interchange fees for card-based transactions. Given the significant reduction of the fees that the merchant will have to pay to his bank, surcharging is no longer justified for the MIF-regulated cards which will represent more than 95% of the consumer card market. The proposed rules will thus contribute to a better consumer experience when paying with a card throughout the Union and to a greater usage of payment cards instead of use of cash.
As regards cards not subject to the Regulation of interchange fees as per the abovementioned proposal on interchange fees for card-based transactions, i.e. corporate cards and three-party scheme cards, merchants will still be allowed to surcharge, as long as the surcharge corresponds to the real cost incurred, taking due account of Directive 2011/83. Articles 65 and 66 – Payment service provider’s and payer’s liability for unauthorised payment transactions: The proposed modifications will streamline and further harmonise the liability rules in case of unauthorised transactions, , ensuring enhanced protection of the legitimate interests of payment users. Except in case of fraud and gross negligence, the maximum amount a payment user could under any circumstances be obliged to pay in case of an unauthorised payment transaction will be decreased from the current amount of 150 EUR to 50 EUR. It will also clarify that late payments do not necessarily trigger a refund.
Article 67 – Refunds for payment transactions initiated by or through a payee: This rule clarifies the refund right for direct debit transactions bringing it in line with the SEPA Core Direct Debit Rulebook, provided that the good or service paid for has not yet been consumed. Under the current rules, different refund regimes apply regarding direct debits, depending on whether a prior authorisation has been given, the amount exceeds the amount expected or whether, alternatively, a further right had been agreed.
Article 85 – Security measures: The proposed rules address security aspects and aspects of authentication in line with the Commission proposal for a Directive of the European Parliament and Council on Network and Information Security.
Title I-V and Annex I point 7: Coverage of new services and service providers enabling access to payment accounts - The current PSD does not cover these actors insofar as they do not dispose of the payer’s or payee’s fund at any time. The fact that these TPPs are currently unregulated, at least in certain Member States, has raised security, data protection and liability concerns, despite the potential benefits brought by these services and service providers. The proposal brings third party service providers offering notably online banking based payment initiation services under the scope of the PSD (Annex I point 7). This should enhance new low cost e-payment solutions on the internet while ensuring appropriate security, data protection and liability standards. In order to be allowed to provide payment initiation services, TPPs would be required to get licensed or registered and supervised as payment institutions (Title II. Like other payment service providers, they will be subject to harmonised rights and obligations, and in particular security requirements (Articles 85 and 86). The envisaged rules will in particular address conditions for access to account information (Article 58)requirements regarding authentication (Article 87) and rectification of transactions (Articles 63 and 64) and a balanced liability repartition (Articles 65 and 66). New payment services providers will benefit from this new regime, regardless of whether they dispose of the payer’s or payee’s funds at any time.
Chapter 6 - Out-of-Court complaint and redress procedures for the settlement of disputes - shall enhance effective compliance with the Directive. The new measures update the requirements on out of court complaint and redress procedures and appropriate penalties.
Article 92 – Sanctions: In line with other recent proposals in the financial services sector, Member States will be obliged to align administrative sanctions, ensure that appropriate administrative measures and sanctions are available for breaches of the Directive and ensure that these sanctions are duly applied.
European Banking Authority – The Directive contains several areas where work by EBA in its capacity of contributing to the consistent and coherent functioning of supervision is foreseen (as referred to in Regulation (EU) 1093/2010). In particular, EBA will be asked to issue guidelines and draft regulatory technical standards in various fields, for example in order to clarify the rules on ‘passporting’ for payment institutions operating in several Member States, or to ensure the establishment of adequate security requirements.