Update on PSD transposition
According to the European Commission's most recent official update of 3 December 2009 supplemented by information from national banking communities, as of early January 2010 national PSD implementation has progressed as follows:
- 21 / Member States have now completed their transpositions.
- 3 Member States formally confirmed transposition to be delayed until later this year, however, these countries communicated clear revised target completion dates: Belgium (1 April 2010), Sweden (1 April 2010), and Finland (1 May 2010).
- Whilst Italy, Greece, Latvia and Poland also confirmed transposition to be delayed, these countries have not set precise target dates. However, the aim is to finalise the process within the first quarter of 2010.
- Estonia and Lithuania likewise missed the November 2009 deadline; the revised timeline for transposition in these countries has yet to be decided.
Best practice in case of late PSD transposition
Due to the fact that nine countries have yet to complete transposition, there is a clear risk that customers may experience a period of inconsistent treatment for cross-border payments involving one country which has implemented the PSD and another country which has not, as such a payment would be subject to different legal regimes.
To avoid this situation, it is recommended that banks operating in countries which have not yet transposed the PSD voluntarily adopt key PSD payment processing provisions on a self-regulatory basis in the interim period. In particular, banks are urged to respect the so-called "full amount principle", e.g. the PSD provision which obliges payment services providers to credit the full amount of the payment to the beneficiary customer without deducting charges unless otherwise agreed between the bank and the customer.
The PSD Expert Group established by the European banking industry initiated the process of identifying such best practices already in the fall of last year together with those national banking communities of countries which at the time were likely to miss the November 2009 deadline. The Swedish Bankers' Association in particular responded by introducing a "best practice" proposal addressing intermediary banks' behaviour with a view to ensure compliance with the above mentioned "full amount principle". It is hoped that banks in other affected banking communities will adopt a similar approach, where possible. Best practice should also extend to the role of the beneficiary bank, e.g. making it clear to beneficiary customers that deductions on incoming payments will only be applied if agreed between bank and customer.
Based on feedback received so far from the nine affected countries , the banking communities in Sweden, Greece and Estonia will - at least to some degree - adhere to best practices as agreed on country level during the period preceding final transposition legislation being in place. In Belgium, Finland, Italy, Latvia and Poland it is the decision of individual banks whether to comply with such recommendations. Lithuania has not yet concluded the approach of choice in this regard.
PSD in practice - emerging issues
Now that the PSD has come into force in most Member States it will be essential to monitor closely whether this piece of legislation indeed leads to the envisaged legal harmonisation of the European payments market. In the brief period since go-live of transposition laws in the countries mentioned above, a number of practical issues have materialised on occasion:
- Uncertainty as regards the application of several core PSD principles including - but not limited to - the question of what type of transaction constitutes a so-called "one-leg" transaction.
- Inconsistent usage of - and handling of - charging options (OUR/SHA/BEN) due to differing interpretations of the PSD's requirements.
- Significant and/or unexpected deductions/lifting fees applied by beneficiary banks without clearly having agreed those with their customers.
- Reference still being made in the inter-bank space to out-of-date conventions such as the inter-bank convention on payments (ICP) and the "Convention on a basic standard for euro retail cross-border credit transfers in the countries of the EU" (formerly known as "Credeuro").
- Introduction of "non-STP" fees or newly emerging "SHA-claims" being levied by some beneficiary banks. In this context it should be noted that the PSD was not intended to trigger the invention of new inter-bank charges in response to the abolition of the "OUR" charging option.
It is too early to say whether these instances actually constitute a trend or simply reflect temporary "teething problems" during a period of adjustment by banks and their customers to the new PSD environment. It might simply be the case that some of these practical issues result from a certain degree of confusion on how to deal with late transposition in some countries. Last but not least, this first snapshot might reflect differing assumptions on the correct interpretation of PSD provisions. Whatever the explanation, it is already clear that continued dialogue of the banking industry on a European level is essential to promote common interpretations of key PSD principles, to identify best practices and to ensure a positive and consistent end-customer experience.
Next steps of the PSD Expert Group
The PSD Expert Group continues to monitor the status of PSD transposition across the 30 / countries and results will be reported regularly in this Newsletter. In addition, the Expert Group is collating an overview of derogation usage and gold-plating on a country-by-country basis to be published shortly. A further edition of the PSD Guidance Document will be made available in the course of the first quarter 2010 with a view to
- Reinforce core PSD concepts and scope where there is evidence pointing to a lack of consistent understanding.
- Reiterate existing market best practice with regard to various PSD-related topics, including the usage and handling of charging codes.
- Incorporate proposals for additional market "best practices" in the light of practical market experiences since 1 November 2009 (including charging codes and principles, for example).
A link to the first edition of the PSD Guidance Document is included below.
It will also be necessary to arrange for the withdrawal of the ICP and former "Credeuro" conventions previously adhered to by the European banking industry given that these are no longer valid, not least as they refer to outdated EU legislation.
Finally, the PSD Expert Group will explore the case for the development of -level industry guidance on Regulation 924/2009/EC (Regulation on cross-border payments in the Community repealing Regulation 2650/2001/EC) to complement the existing PSD Guidance. Amongst others, such a publication might capture those residual concepts from the ICP and former "Credeuro" conventions which were not included directly in the PSD itself. Some of these residual concepts, however, might need to be maintained or built on once the ICP and "Credeuro" are withdrawn.
Following go-live of the PSD in November 2009 it is clear today: this topic is far from being concluded.
Ruth Wandhöfer chairs the PSD Expert Group and is a member of the Plenary.
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