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Interchange: How evolving regulation may impact Payment Cards
Interchange: How evolving regulation may impact Payment Cards
Interchange: How evolving regulation may impact Payment Cards
Interchange: How evolving regulation may impact Payment Cards
Interchange: How evolving regulation may impact Payment Cards
Interchange: How evolving regulation may impact Payment Cards
Interchange: How evolving regulation may impact Payment Cards
Interchange: How evolving regulation may impact Payment Cards
Interchange: How evolving regulation may impact Payment Cards
Interchange: How evolving regulation may impact Payment Cards
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Interchange: How evolving regulation may impact Payment Cards

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Presentation by Kate Johnson, Senior Associate at Osborne Clarke, on 3 April at the International Payments Summit 2014

Presentation by Kate Johnson, Senior Associate at Osborne Clarke, on 3 April at the International Payments Summit 2014

Published in: Business, Economy & Finance
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  • 1. osborneclarke.com 0 International Payments Summit 2014 Interchange: How evolving regulation may impact Payment Cards Kate Johnson, Senior Associate 3 April 2014
  • 2. osborneclarke.com 1 Agenda European Interchange Regulation: State of Play • Overview of MIF Regulation (as proposed): ‒ Interchange fees ‒ Business rules • Points under amendment
  • 3. osborneclarke.com 2 MIF Regulation Overview • Regulation, not a Directive • Immediate entry into force (once published) • Two key elements: ‒ sets caps on interchange fees ‒ details a series of business rules applicable to payment card schemes and related contractual (typically licensing) arrangements • Scope and definitions are key
  • 4. osborneclarke.com 3 MIF Regulation Interchange fees - Overview • Sets immediate caps on interchange fees: ‒ cross-border debit card transactions: 0.2% per transaction ‒ cross-border credit card transactions: 0.3% per transaction • Extends cap after 2 years to ALL debit/credit card transactions (i.e. including domestic transactions) • Caps apply only to payment card transactions carried out within the EU where both payer's and payee's PSP are established in the EU • Interchange fee caps do not apply to: ‒ limited networks ‒ commercial cards ‒ ATM cash withdrawals ‒ 3-party payment card schemes
  • 5. osborneclarke.com 4 MIF Regulation Interchange fees – Points to note • Provisions apply to PSPs, not card schemes directly • Definition of interchange fee is broad: ‒ "interchange fee or other agreed remuneration with an equivalent object or effect" ‒ any net compensation received by an issuing bank is treated as part of the interchange fee • Similarly, definition of card based payment transaction is broad • Debit card transactions include prepaid card transactions • Charge cards? • 3-party schemes caught where third party PSP is licensed
  • 6. osborneclarke.com 5 MIF Regulation Interchange fees – Points under amendment • Transitional period – now (cross-border) and 2 years (domestic); or just 1 year (both cross-border and domestic) • Scope – application to (business and) commercial cards; 3- party schemes below a threshold; newly established schemes; etc • Cap – debit: the lower of 7 euro cents or 0.2%; Member States may set lower caps; definition of "net compensation" adjusted • MIFs – no higher for cross-border than domestic; applicable fee is the Member State where acquirer is situated
  • 7. osborneclarke.com 6 MIF Regulation Business rules - Overview Co-badging Steering rules Unblending Honour All Cards rules Separation of scheme and processing Licensing MIF Regulation
  • 8. osborneclarke.com 7 MIF Regulation Concluding remarks • Much of PSD is outcome-focussed, whereas MIF is directed at a perceived mischief – no certainty as to desired outcomes • Business rules reflect various regulatory objectives – their implications are far-reaching • MIF Regulation is part of a broader evolution of cards and payments legislation – expanding space
  • 9. osborneclarke.com Private & Confidential 8 Further reading • Payment Services Directive http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32007L0064:EN:NOT • Electronic Money Directive http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32000L0046:EN:NOT • European Commission’s Green Paper: Towards an integrated European market for card, internet and mobile payments http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:52011DC0941:EN:NOT • European Commission's draft proposal for a Network and Information Security Directive http://ec.europa.eu/information_society/newsroom/cf/dae/document.cfm?doc_id=1666 • ECB's Recommendations for the Security of Internet Payments http://www.ecb.int/pub/pdf/other/recommendationsforthesecurityofinternetpaymentsen.pdf • Single Market Act II http://ec.europa.eu/internal_market/smact/docs/single-market-act2_en.pdf • European Commission's proposal for a Payment Account Directive http://ec.europa.eu/internal_market/finservices-retail/inclusion/index_en.htm • European Commission's July 2013 package of draft legislative proposals for a revised PSD and a new Interchange Fees Regulation http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2013:0550:FIN:EN:PDF • ECB's Recommendation for the Security of Mobile Payments https://www.ecb.europa.eu/paym/cons/pdf/131120/recommendationsforthesecurityofmobilepaymentsdraftpc201311en.pdf • ECB's Recommendation for the Security of Internet Payments https://www.ecb.europa.eu/pub/pdf/other/recommendationssecurityinternetpaymentsoutcomeofpcfinalversionafterpc201301en.pdf
  • 10. osborneclarke.com 9 osborneclarke.com 9 Contact details – Kate Johnson Kate is a Senior Associate who specialises in payment services. She advises on the regulatory environment affecting payments, as well as structuring and contractually documenting significant and transformational payments projects. She is also a consumer credit specialist. Kate has experience of working with clients at all levels of the payments industry: payment service providers, technology providers, mobile networks operators, physical and virtual retailers, schemes, industry bodies. She has particular expertise in “new generation” payment services, such as mobile payments (including NFC), online payments, prepaid, virtual currencies and micro-payments, but also regularly advises on more traditional payments infrastructure and technology, merchant acquisition and aggregation, and money remittance. Kate’s recent work includes advising on a collaboration between Wirecard and an international mobile network operator for a pan-European NFC mobile payment product, assisting Wirecard with its acquisition of the prepaid cards portfolio of Newcastle Building Society and subsequently helping Wirecard Card Solutions obtain its licence from the Financial Conduct Authority as an Electronic Money Institution and co-ordinating widescale, multi-jurisdictional surveys for new payments initiatives for various high profile digital businesses. Kate trained at Osborne Clarke and joined the Financial Institutions Group upon her qualification in March 2006. Since qualification Kate has undertaken two client secondments: the first to PayPal in 2006, and the second to Wirecard in Munich, Germany in 2013. Kate Johnson Senior Associate T+44 (0) 20 7105 7230 kate.johnson@osborneclarke.com TMT Team of the Year 2012 The Lawyer Awards IT Firm of the Year 2012 JUVE Awards

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