Revision of the Payment Services Directive and follow-up to the European Commission Green Paper ‘Towards an integrated European market for card, internet and mobile payments’
On 24 July 2013 the European Commission (the Commission) published a ‘payments legislative package’ (see ‘related links’ below), which includes the Commission proposals for a revised Payment Services Directive ( ) and a new Regulation on interchange fees for card-based payment transactions. According to the related Commission press release (see link to the ‘payments legislative package’ below), “the review of the European Union ( ) payments framework, especially the PSD, and the responses to the Commission's Green Paper ‘Towards an integrated European market for card, internet and mobile payments’ in 2012 [the Green Paper; see ‘related links’ below], led to the conclusion that further measures and regulatory updates, including adjustments to the PSD, are required. This would help the payments framework to better serve the needs of an effective European payments market (...).”
The Green Paper was published by the Commission in January 2012 for a three month consultation. At that time, the Commission announced that it would determine the need for action on the various issues raised in the Green Paper in the summer of 2012, based on the feedback received. In June 2012, the Commission published the feedback statement (see ‘related links’ below) which consolidates the responses received during the consultation.
The PSD was implemented in most Member States by 1 November 2009. Article 87 of the PSD requires the Commission to present a report on the implementation and impact of the PSD together with proposals for its revision by 1 November 2012. The ‘Report from the Commission to the European Parliament and the Council on the application of Directive 2007/64/EC on payment services in the internal market and on Regulation 924/2009 on cross-border payments in the Community’ was published together with the proposal for the on 24 July 2013 (to view the report, refer to the ‘payments legislative package’ below).
Next steps in the legislative process and timelines
The vast majority of European laws are adopted jointly by the European Parliament and the Council of the representing Member States under the so-called ordinary legislative procedure. This legislative procedure gives the same weight to the European Parliament and the Council of the in a wide range of areas (see the link to the European Parliament Website below). Directives, such as the forthcoming , lay down certain end results that must be achieved in every Member State. National authorities have to adapt their laws to meet these goals; i.e. have to implement an Directive, but are free to decide how to do so. National implementation measures are texts officially adopted by the authorities in a Member State to incorporate the provisions of an Directive into national law (see the link to the European Commission Website ‘Application of Law/Directives’ below). Regulations, such as the proposed Regulation on interchange fees for card-based payment transactions, are the most direct form of law. As soon as they are passed, they have binding legal force throughout every Member State, on a par with national laws. National governments do not have to take action themselves to implement Regulations (see the link to the European Commission Website ‘Application of Law/Regulations’ below).
The proposal for the and, separately, the Regulation on interchange fees for card-based payment transactions will have to be adopted by the European Parliament and the Council of the ; i.e. the legislator. According to the ‘Frequently Asked Questions’ published by the Commission with the ‘payments legislative package’, the Commission counts “on the European Parliament (Economic and Monetary Affairs Committee ‘ECON committee’) and the Lithuanian Presidency1 [of the Council of the ] to launch the negotiations work on the measures as soon as possible after the summer with a view to reach an agreement on the Commission’s proposals by Spring 2014.”
This timeline seems ambitious but it is assumed that this tight planning reflects the Commission’s desire to have the ‘payments legislative package’ adopted by the legislator prior to the European Parliament elections in 2014.
Based on that timeline and considering that the Commission proposes that Member States are given two years to implement this revised Directive into national law, the forthcoming could take effect at the earliest in 2016. Considering that an Regulation has binding legal force throughout every Member State, the new Regulation on interchange fees for card-based payment transactions would enter into force at a date to be determined by the legislator.
key policy considerations with regard to the integration of and innovation within the euro payments market
The ‘payments legislative package’ published by the Commission in July 2013 reflects, among other things, the Commission’s assessment also articulated with the Green Paper that there would be ‘gaps’ with regard to competition, choice and innovation in the area of card, mobile and internet payments. With its response to the Green Paper (see ‘related links’ below), the clarified that it does not support a number of related assumptions and suggestions put forth by the Commission. The 's response outlines, among others, the following key policy considerations which, in the view of the , should be observed when determining further action impacting card, mobile and internet payments:
- Regulatory intervention should not undermine the innovative capacity of the European payment sector and its competitiveness in the global marketplace.
- Ensuring a level playing field for all players active in the European marketplace from a competitive, regulatory and supervisory perspective must be a public policy priority.
- Integrity and customer trust are key in payments and should not be compromised.
- Payments should be run as a business in a market economy.
To obtain an overview of payments innovation globally, the Committee on Payments and Settlement Systems (CPSS)2 established the Working Group on Innovations in Retail Payments (the Working Group). The Working Group focused on fact-finding, in order to define the most relevant developments and to identify the major factors driving and hampering innovation. In 2012, the CPSS published the report ‘Innovations in Retail Payments’ (see ‘related links’ below). In his contribution to the Newsletter, Dirk Schrade, Chairman of the Working Group, commented: “One big question remains: how will the payment landscape develop? Will it be a revolution or an evolution? In Europe, there are factors speaking in favour of the latter. The infrastructure is already well developed, many innovations are, therefore, incremental improvements of well-established products (...) it is of utmost importance that European regulators set up a clear, transparent and reliable framework for future developments in the field of payments. Last but not least, it should guarantee a level playing field between all payment service providers, whether within or outside the banking area, and should strike a balance between competition and cooperation as well as between economic freedom and consumer protection.” (For details, refer to the ‘related article in this and previous issues’ below.)
This author invites the legislator, i.e. the European Parliament and the Council of the , to take into account the views of the Working Group on what constitutes an innovation-friendly regulatory environment in the area of payments when reviewing the Commission’s ‘payments legislative package’. This might also help to achieve the policy objective articulated by the Commission with its Green Paper that innovation should act as a principal ‘integration driver’ in the European payments market and promote the global competitiveness of the European economy.
Commission proposal for a new Single Euro Payments Area governance structure remains pending
The notes that the ‘payments legislative package’ published by the Commission on 24 July 2013 does not include a proposal with regard to the future overarching Single Euro Payments Area ( ) governance structure. Recital 5 of the ‘Regulation ( ) No 260/2012 establishing technical and business requirements for credit transfers and direct debits in euro’ (see ‘related links’ below) tasks the Commission to “review the governance arrangements of the whole project before the end of 2012 and where necessary make a proposal. This review should examine, inter alia, the composition of the European Payments Council ( ), the interaction between the and an overarching governance structure, such as the Council, and the role of this overarching structure.” (The Council, which brings together representatives of both the demand and supply sides of the payments market including the , was established by the Commission and the European Central Bank in June 2010. For information, refer to the 'related links' below.)
The research by the CPSS Working Group ‘Innovations in Retail Payments’ cited above also found that cooperation “has always been key to the payments industry, as innovations often entail high fixed investment costs. In view of the fact that the payments business is a network industry, cooperation helps to make innovative products or services available to a high number of potential customers. (...) An innovation-friendly environment requires a proper balance between competition and cooperation of market players. Thus, it is of utmost importance that legislators give clear guidance on how cooperation can be achieved without provoking fears of anti-trust investigations.”
The explanatory memorandum of the Commission proposal for the published on 24 July 2013 states (page 8): “The governance arrangements in place, including the role of the existing 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 , need to be strengthened. To this end, the mandate of the 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 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 .”Â
In this newsletter it has been clarified many times that the European banking industry established the in 2002 in response to the regulators’ call to action. The purpose of the to date reflects the mandate handed down to the banking industry by the authorities more than a decade ago. At that time, the political drivers of the programme called upon the banking industry to bolster the common currency by developing, in close dialogue with the customer community, a set of harmonised payment schemes and frameworks for electronic euro payments. The delivered as requested. The is, however, not responsible for the overall management or implementation of the process.
In the January 2013 edition of the Newsletter (see ‘related articles in previous issues’ below), the Chair Javier Santamaría clarified: “The remains committed to contributing to the creation of an efficient and secure payments landscape, which responds to market needs. The invites the authorities to share their thoughts on how the and the banking industry could help in this regard in the future. In particular and with all due respect, the asks the various regulatory bodies offering opinions on the matter to (re-)align their expectations as to what exactly the banking industry, acting in the cooperative space of payments, should contribute to the further evolution of . This is a precondition for the , as one stakeholder group among many involved in the process, to evaluate the appropriate steps to be taken going forward.” This commitment and this plea remain valid today.
Etienne Goosse is the Secretary General.
Related article in this issue:
On the Difference between Innovation and the Wild West: How to Ensure the Security of Bank Customers’ Funds and Data with Payment Account Access Services. Convenience is a priority. Security is indispensable. Promoting payment innovation to the benefit of both payers and payees requires combining the two
Related articles in previous issues:
The 2013 Euro Payments Outlook: Communication by the European Commission on its Vision for SEPA 2.0 Remains Pending. Reflections on the merit of European Union regulatory action aimed at promoting integration, competition and innovation ( Newsletter, Issue 17, January 2013)
SEPA is Just a Piece in the Puzzle: Additional European Union Regulatory Initiatives Now in the Pipeline Will Have a Profound Impact on the Payments Market. European payments regulation is a moving target ( Newsletter, Issue 16, October 2012)
Committee on Payment and Settlement Systems’ Working Group Publishes Report ‘Innovations in Retail Payments’. Central bank research identifies market trends and elements geared to assessing what an innovation-friendly environment should look like ( Newsletter, Issue 15, July 2012)
‘Towards an Integrated European Market for Card, Internet and Mobile Payments’: Striking the Balance - Interoperability and the Access Dilemma. European Commission publishes feedback report on its Green Paper ( Newsletter, Issue 15, July 2012)
1 Lithuanian Presidency of the Council of the European Union 2013: http://www.eu2013.lt/en/.
2 The Committee on Payment and Settlement Systems (CPSS) contributes to strengthening the financial market infrastructure through promoting sound and efficient payment, clearing and settlement systems. The CPSS is a standard setting body for payment, clearing and securities settlement systems. It also serves as a forum for central banks to monitor and analyse developments in domestic payment, clearing and settlement systems as well as in cross-border and multicurrency settlement schemes. http://www.bis.org/cpss/.
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