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Rationality and irrationality of
EU Payments regulation
A closer look at institutional dynamics
Simon Lelieveldt
October 24, 2014
Jean Monnet Module on Europeanisation of the payment system
• 1989-1995: Postbank – ING
• 1996-2001: Dutch central bank / supervisor (DNB)
• 2002-2004: SL Consultancy (e-money focus)
• 2004-2011: Dutch Bankers Association (NVB)
• 2012 - : Independent Regulatory Consultant
• Expertise:
• Retail Payments and Retail Banking, switching bank services, regulation
and supervision of e-money: Chipper/Chipknip, Development of E-
money & Payment Services Directives, Single Euro Payments Area
(SEPA), Financial supervision and compliance (FATF etc)…..
Introduction - Simon Lelieveldt
Todays session…
• A preview of a (pending…) PHd study on the evolution of retail
payments….
- field research into creditcard adoption in NL
- experience as a practicioner in the payments regulation domain
- study of Dutch financial history
- institutional approach to development of regulation….
• As well as a practicioner trying to point out areas and questions of
interest for those studying changes in payments regulation
RealityModel
The world as we
would like it to be
The world as it is..?
Just some preliminary notes....
Institutional
change in theory
Institutional
change in practice
Rational Irrational ?
EU Payments regulations….
• Consumer protection rules (1987-2014)
• Competition Cases and regulation (1988-2014)
• Anti-Money Laundering Rules (1991-2014)
• Settlement Finality Directive (1998/2009)
• Electronic Money Directive (2001-2009)
• Regulation (EC) No 2560/2001 of the European Parliament and of
the Council of 19 December 2001 on cross-border payments in
euro
• SEPA and the Payment Services Directive (2009-2014)
• Payment Accounts Directive (2014)
First observations…?
Industry dynamics in payments
• The development of
payments is always
evolutionary
• The six major factors are:
• Growth of the economy
• Size/scale of market
• Applicable rules
• Status of technology
• Nature of demand
• Nature of competition
Nature of demand for retail payments
A hygiene factor
A hygiene factor…
…. is only relevant when it fails
…. is not a fun factor
It’s about something else primarily !
Historic paths of technology development
42
68
17
77
11
38
64
12
61
32
64
2
9
0
4
71
27
17
74
30
Francia
G
erm
any
Italy
N
etherlands
Spain
Cards
Cheques
Direct debits
Credit transfers
Size of market
Current technology
Nature demand
Applicable rules • Typical domestic
payment mix:
• giro vs cheque-
countries
• credit vs debit-cards
• Each country follows
its own technical path
• Old path remains
relevant also under
new technology
Payments follow the (internationalising) economy
Scale of market
Nature of demand
Economic growth
Internationalisation Nature of competition
(outsideEU)
Domestic percentage in retail payments
Domestic
Payment cards
Credit-transfers
Cheques
Cross-border
97 %
3 %
• Retail payments will remain a
domestic market as long as
customer behaviour is
domestic
• Further internationalisation is
the main trend !
Business models: more rational - unbundling
• Historical fee structures are
under pressure from new
entrants and outsiders
• Gradual move towards cost-
oriented fee structures for all
segments in the market
Nature of competition
Outsiders
New technologies
Niche focused
• Each product should be viable
• With transparant information
provisioning to the customer
25 856545
10
40
20
30
60
50
70
DE
IT
FR ES
US
BE
UK
NL
SEPL
Consumenten
Zakelijke markt
Inkomstenparticulieresegment
Inkomsten zakelijke segment
Bron: McKinsey
Applicable rules
No state support or cross subsidies
Economic growth
Interest rate
Geography
size of market
Demand:
dissatisfier
Suppliers pursuing
efficiency through econ.
of scale and innovation
Constitutional
Infrastructure:
-laws
-regulations
Retail payment
infrastructure:
-payment products
-clearing mechanisms
-settlement systems
Observation of
market leads to
consideration of
intervention
Information
Technology
Economy:
interest rate
Industry domain Constitutional domain
Regulators and
supervisors pursuing
regulatory agenda and
regulatory goals
Public policy
domain and
interactions
Legal
requirements
Institutional change… the lab experiment
It’s a survivors game, for everyone….
MARKET PLAYERS
• want to survive
• want to grow bigger
• make (and copy) products /
services
• make headlines with profit
and loss / innovation
• will not enter a market and
then refrain from selling
• shape actions based on
historical events/trauma’s
REGULATORS
• want to survive
• want to grow bigger
• Make (and imitate)
regulations
• make headlines with rules
and market intervention
• will not study a market and
then decide not to intervene
(Katz)
• shape actions based on
historical events/trauma’s
Institutional dynamics
• At different levels in society, the individual firms/persons, groups of
stakeholders, cities, provinces, governments or regions are faced with
events and circumstances that lead to (institutional) changes
• Institutional changes may be: setting up an institution or enshrining
important rules into legal frameworks.
• Institutional change occurs at different levels
• Source: Kiser, L. L. and E. Ostrom (1982). The three worlds of action: a metatheoretical synthesis of institutional
approaches. pp. 179-222. In: Strategies of Political Inquiry. E. Ostrom. Beverly Hills, Sage.
Individual banks
and customers
Consumer Union and
Bankers Association
Government and Ministries
of Finance / Economic Affairs
Some basic routes for changing laws
• Top Down: an observer chooses to align and streamline the range of
diverging practices / rules in order to create a harmonized policy
(the intrinsic desire of any policy maker of any subject area)
• Bottom Up: a practical incident or problem in the operational domain
leads to a (knee-jerk) reaction by collective bodies and eventually
regulators
The power of the centre….
• Both the ECB and the European Commission are institutions that are
at the centre of developments
• The centre will in the end always win….
• Central bank discussions on:
• Target 1 (decentralised) – Target 2
• Domestic central banks responsible for retail payments…. -- now ERPB
The example of competitors –> first movers
• It is common sense and good practice to observe and learn from the
regulatory practices in other countries
• Yet, this may also result in a desire to be the first to market with new
legislation (NYC Bitlicense) to beat other legislators
• Drivers may originate from the supervisory bodies or Ministries within
governments
The power of a threat ….
• Legislator writes an analysis of developments and desired outcome of
the market
• Threatens the market/industry with regulation but allows timeframe
for self regulation
• Frightened and divided industry will work on self regulation
• Reuglators then use (and possibly tighten) the self regulation into a
formal legal framework that could otherwise hardly have been
developed
The power of institutional memories / deals
• Contraints for design of payment cheques in the Netherlands in the
1960s were based on central bank experiences in 1923
• In 1980 the central bank expressed desire to get its own payments
regulation law.. It struck a deal with the ministry of finance…. And had
to wait until 2014 for the deal to be effected (despite the fact that in
the mean time the payment services directive was effected)
The power of persons
• Sometimes an institutional change may be slowed down or move to
fast forward due to deciding constellations of power or specific
persons in charge
• Dual payment circuits in NL could have merged already in 1968 but
for strategic reasons one side chose not to do
• Thus we embarked on a project from 1986-1998 to merge the
technologies to the appropriate national scale
Observations on EU legislation - 1
• Consumer protection rules (1987-2014)
• Copying the US approach to cards (Reg E and reg Z)
• Competition Cases and regulation (1988-2014)
• Towards regulation of interchange fees… (as in other continents)
• Anti-Money Laundering Rules (1991-2014)
• Relevant topic but completely hijacked by the US after 9/11
• Settlement Finality Directive (1998/2009)
• Mostly technical stability provision to support euro-zone payment infrastructure
Observations on EU legislation - 2
• Electronic Money Directive (2001-2009)
• Compromise between central banks (wanting bank rules for new innovative
companies) and ministries of Economic Affairs (in favour of innovation)
• Mobile operators find out they are captured by regulation and seek exemption
• Having paid huge amounts of money for the licenses, they get their exemption
• payment transactions executed by means of any telecommunication, digital or IT
device, where the goods or services purchased are delivered to and are to be used
through a telecommunication, digital or IT device, provided that the
telecommunication, digital or IT operator does not act only as an intermediary
between the payment service user and the supplier of the goods and services;
Observations on EU legislation - 3
• Electronic Money Directive (2001-2009)
• Evaluation of directive:… the market has not taken off….
• So until today …pre paid mobile phone money works as electronic money
but is out of the woods of regulation….
• Very interesting case of regulatory capture where the regulator allows
itself to be captured not by the incumbent industry but by a non-
regulated industry that uses its channels via Ministries of Transport and
Communications.
• The debate continues on during the PSD2-talks and review of EMD2
Observations on EU legislation – 4
• Regulation (EC) No 2560/2001 of the European Parliament and of
the Council of 19 December 2001 on cross-border payments in
euro
• Overstepping the formal legal reach, but supported by political momentum the EC stepts
into price regulation for banking transfers
• Underlying thought is to force banks into more efficient and proper conduct in the
payments market
• Bigger banks see opportunity to outsmart smaller local retail banks with their panEU
processing centres and align with EU Commission to develop EU standards
• Complex game of bigger/smaller banks slowly moving forward towards technical
harmonisation
• Request of banks to make harmonised legal framework is joyfully honoured by European
Commission - leads to the PSD
Observations on EU legislation – 5
• Payment Accounts Directive (2014)
• Classic example of power of the civil servants at Commission
• Set up joint group of experts – promise an impact assessment
• Skip impact assessment and throw longstanding desire for panEuropean
switching into policy plans for EU market
• Wait and slowly move the process forward, duck the impact assessment issues
• Time a draft legislation one year before EP dissolves and hope that they wish to
get political momentum/impact with it
• Directive 2014/92/EU on the comparability of fees related to payment accounts,
payment account switching and access to payment accounts with basic features
• Goal achieved: in the SEPA-harmonized area where one bank account is enough
there is now also the opportunity to open bank accounts in each member state
Rationality and irrationality
• The institutional process is rational in the sense that there is a
institutional power rationale and dynamics at work that has similar
characteristics time and over again
• The outcome is irrational in the sense that the proclaimed
considerations / intentions do not always match with the end result in
terms of legislation
Thank you !
Settlement Finality Directive(s) - 1
Which rules?
• Directive 98/26/EC of 19 May 1998 on settlement finality in payment and
securities settlement systems and Transfers (Settlement Finality Directive)
• Directive 2009/44/EC of the European Parliament and of the Council of 6 May
2009 amending Directive 98/26/EC on settlement finality in payment and
securities settlement systems and Directive 2002/47/EC on financial collateral
arrangements as regards linked systems and credit claims
Settlement Finality Directive(s) - 2
Main reason:
Elimination of the zero-hour rule that should apply when certain
payments are revoked/reversed given that a company or person is
declared insolvent
A technicality, but an important one….
Trigger:
Ensuring financial stability (mostly domestic focus)
Bank
Users
Central bank
Settlement
Transport and clearing of,
Payment instructions
Users
Market for payment services and products
Users
Bank
Payment products
Payment products, clearing and settlement
Users
Payment products
Clearing house
Market for clearing
and settlement
DNB
bank A bank Bretail
payments
Customers
l
netting
BuBa
ECB
retail
payments
bank C bank D
netting
International setup
Domestic
Settling payments individually (gross)
bank A bank C
bank B bank D
40
2060
30
7090
10
80 50
Number of settlement payments: 9
Totale value of payments: 450
bank A bank C
bank B bank D
40
40
30
20
70
50
Number of payments to settle : 6
Total value of payments : 250
Settling payments via netting
bank A bank C
bank B bank D
Number of payments to make: 3
Totale value of (split) payment : 130
Clearing
house
130 30
100
Settling payments via multilateral netting
Settlement Finality Directive - 3
• What does it do?
• Designate specific large value systems and retail payment netting and
settlement systems and institutions that participate,
• Payments that are done via these designated systems are final and
cannot be unwound due to insolvency proceedings
Settlement Finality Directive - 4
• Renewal – update via Directive 2009/44/EC
• Motivation:
• Account for interoperable – interconnected systems (security settlement)
• Ensure usage of credit claims as collateral
• Remarks ?
• No upcoming changes planned, but might be relevant for payment
institutions and electronic money institutions
Agenda
• 1800-1930:
• Settlement Finality Directive (1998/2009)
• Electronic Money Directive (2001-2009)
• Consumer protection rules (1987-2014)
• SEPA and the Payment Services Directive (2009-2014)
• Anti-Money Laundering Rules (2005-2014)
• Competition Cases and regulation (1988-2014)
• 2000-2100:
• Industry dynamics in payments
• Case: regulating bitcoin in Europe?
Electronic Money Directive - 1
Which rules?
• DIRECTIVE 2000/46/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of
18 September2000 on the taking up, pursuit of and prudential supervision of the
business of electronic money institutions (First EMD)
• DIRECTIVE 2009/110/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL
of 16 September 2009 on the taking up, pursuit and prudential supervision of the
business of electronic money institutions amending Directives 2005/60/EC and
2006/48/EC and repealing Directive 2000/46/EC (Second EMD)
Electronic Money Directive - 1
• Main reason
• Allow niche-businesses to operate e-money products under a
specialised credit-institution regime
• Triggers
• Development of chipcard-money, Internetbased e-money
Emergence of digital or e-money (1990s) - 1
• Initial regulatory response:
• Protecting the (value of) fiat currency
• Buying pre-paid value is the equivalent of taking deposits
Emergence of e-money (1990s) - 2
• International coordination:
• Reports on security /impact of electronic money (1996)
• Local regulatory differences:
• US: Money transmitter based frameworks vs national
legislation
• EU: discussion on restriction to banks or opening up the
market
• Electronic Money Directive: specialised credit-institution
Emergence of e-money (2001) - 3
• Early topics:
• Pegging the value to fiat currency (1:1 conversion)
• Is electronic money ‘in the cloud’ also e-money or should
it reside on a chip ?
• Do pre-paid funds from mobile operators constitute e-
money, yes or no?
Further development of e-money
• Licenses for companies such
as Paypal, Google,
• Strong concentration of e-
money industry in the UK
• Stepwise development of pre-
paid market and regulation
Electronic Money Directive - 2
• What does it do (in 2000) ?
• Create specific supervisory regime for companies that issue electronic
money (minimum harmonisation)
• Competent board of directors, integrity of systems, lower own funds (€ 1
million ) requirement, security measures etc.
• Requires redemption and ensures 1:1 conversion
• Waiver regime for smaller companies and limited networks
• Restricts business to e-money only
Electronic Money Directive - 3
• What’s remarkable - Evaluations / Assessments of the first EMD?
• Little uptake in the market ….
• Paypal started and …. mobile operators were excluded
• Scope confusion for mobile phone money (hybrid issuers) was a problem
• Exemption phrasing in later times:
• monetary value used to make payment transactions executed by any
telecommunication, digital or IT device where the goods or services are
delivered to and used through such a device, but only where the operator
of the device does not only act as an intermediary between the user and
the supplier.
Electronic Money Directive - 4
• What changed in the Second E-money Directive?:
Revised definition and exemption; mobile money is out
EMI no longer credit-institution, but separate institution
Lower own funds (€ 350.000)
Prohibition on paying interest
No issuing via agents
Other business activities allowed (including provision of credit)
Full harmonisation
Electronic Money Directive – 5
• What’s up next?
• Evaluation of 2nd EMD to determine a.o.:
• Economic effects
• Scope effect of limited network rules and waivers
• Use of agents
• Cooperation between supervisors
Agenda
• 1800-1930:
• Settlement Finality Directive (1998/2009)
• Electronic Money Directive (2001-2009)
• Consumer protection rules (1987-2014)
• SEPA and the Payment Services Directive (2009-2014)
• Anti-Money Laundering Rules (2005-2014)
• Competition Cases and regulation (1988-2014)
• 2000-2100:
• Industry dynamics in payments
• Case: regulating bitcoin in Europe?
Consumer protection rules - 1
• Which rules?
• Europe could play an Ace: Communication: COM(86) 754 final BrusseLs, 12
January 1987
• Commission Recommendation 87/598/EEC of 8 December 1987 concerning a
European code of conduct relating to electronic payments
• Commission Recommendation of 17 November 1988 concerning payment
systems, and in particular the relationship between cardholder and card issuer
• Commission Recommendation 97/489/EC of 30 July 1997 concerning transactions
by electronic payment instruments and in particular the relationship between
issuer and holder
Consumer protection rules - 2
• Which rules - …. ?
• Directive 97/5/ec of the European Parliament and of the Council of 27 January
1997 on cross-border credit transfers
• Regulation (EC) No 2560/2001 of the European Parliament and of the Council of
19 December 2001 on cross-border payments in euro
• SEPA regulations and the Payment Services Directive (next block)
• Directive 2002/65/EC of the European Parliament and of the Council of
23 September 2002 concerning the distance marketing of consumer financial
services
Consumer protection rules - 3
• Main reasons for the rules are:
• Ensuring legal framework for electronic funds transfers (1988)
• Increased dissatisfaction with banks cross-border processing/cost
• Eliminating cold calling and unsolicited provision of financial services
Consumer protection - 4
• Triggers
• Introduction of the euro
• Continued irritation over banks behaviour and cost level
Milestone regulation: 2560/2001
• Prescribing fee levels for banks (identical for domestic and cross-border
payments)
• Had a major impact and became the stepping stone / stick to push banks
towards the creation of a Single Euro Payments Area
Consumer protection rules -
• Which changes are now in the making … almost finalised ?
• Forthcoming Payments Account Directive (2014):
Directive of the European Parliament and of the Council on the comparability of
fees related to payment accounts, payment account switching and access to
payment accounts with basic features (COM(2013)0266
Means:
Obliges use of harmonized terminology, fee information document, fee statement
Obliges payment service providers to facilitate switching, even cross-border
Allows consumers the right to open bank account in each member state
Consumer protection - 5
• What’s remarkable ?
• Creating SEPA (one bank account makes EU reachable) vs allowing customers
to open a bank account in each country
• So-called need for Directive on bank accounts and actual leeway for Member
States in implementation
• Scope of Bank Account Directive – to Payment Account Directive and halfway
back
• Not using revision of the PSD to change consumer protection and disclosure
rules
Agenda
• 1800-1930:
• Settlement Finality Directive (1998/2009)
• Electronic Money Directive (2001-2009)
• Consumer protection rules (1987-2014)
• SEPA and the Payment Services Directive (2009-2014)
• Anti-Money Laundering Rules (2005-2014)
• Competition Cases and regulation (1988-2014)
• 2000-2100:
• Industry dynamics in payments
• Case: regulating bitcoin in Europe?
SEPA and the Payments Services Directive - 1
• Which rules?
• Regulation (EC) No 2560/2001 of the European Parliament and of the Council of
19 December 2001 on cross-border payments in euro
• Directive 2007/64/EC of the European Parliament and of the Council of 13
November 2007 on payment services in the internal market (full harmonization)
• Regulation (EC) No 924/2009 of the European Parliament and of the Council of 16
September 2009 on cross-border payments in the Community
• Regulation (EU) No 260/2012 of the European Parliament and of the Council of 14
March 2012 establishing technical and business requirements for credit transfers
and direct debits in euro
• 2013/0449(COD) - 09/01/2014 Legislative proposal to amend final deadline with
6 months
SEPA and the Payments Services Directive - 2
• Main reasons:
• Unified Europe requires further standardisation / harmonisation of legal
rules; incorporation of previous conduct rules in Directive,
• A separate supervisory regime required for payment institutions (like e-
money institutions, but only for transferring money),
• Desire to cut down processing times for payments (T+3 / T+1)
• Direct debit needed to be included in EU cost-equality rules
• IBAN had to be positioned as a central processing standard
• Agreement on interchange for direct debit (rejects)
• Need for a SEPA-deadline (which can’t be agreed privately)
SEPA and the Payments Services Directive - 3
• Triggers:
• Fear for further intervention by regulators lead to bank initiative to create
panEuropean payment mechanism
• Large banks saw opportunity to drive out smaller banks and standardise
back-end processing – European Payment Council
• Commission saw opportunity to further harmonise/standardise and get
leverage for Payment Services Directive
• European Central Bank used the dynamics to gain as much territory as
possible during the process
• A complex waltz/tango between:
• Large international banks – European Commission – European Central bank –
Domestically oriented banks – Bank associations – Consumer representatives
SEPA – Payment Services Directive - 4
• What do the rules do?
• PSD harmonized:
• Conduct / contract rules towards customers
• Creation of separate supervisory regime for payment institutions
• Execution requirements with respect to processing
• Regulations established:
• Equal fee level for all payment products
• Technical standards and leeway for interchange fee direct debit
• Deadline – and extension with 6 months of SEPA-deadline
SEPA – Payment Services Directive - 5
• Which changes underway?
• Revision PSD seeks to:
• include third party payment processors as a separate licensed entity
• further detail security requirements
• expand scope geographically (to one leg trx)
• redefine scope of exemptions (agents/limited networks)
• ensure access to bank accounts for payment institutions and e-money
institutions
SEPA – Payment Services Directive - 6
• What’s remarkable?
• Level of detail with respect to security definition (copy-paste ECB)
• No contract required for third party payment processor that acccesses bank
account of customer via its own technology
• Considerable role for European Banking Authority to further specificy security
requirements
Agenda
• 1800-1930:
• Settlement Finality Directive (1998/2009)
• Electronic Money Directive (2001-2009)
• Consumer protection rules (1987-2014)
• SEPA and the Payment Services Directive (2009-2014)
• Anti-Money Laundering Rules (1991-2014)
• Competition Cases and regulation (1988-2014)
• 2000-2100:
• Industry dynamics in payments
• Case: regulating bitcoin in Europe?
Anti-money laundering rules - 1
• Which rules?
• Third AML Directive: 2005/60/EC of 26 October 2005 on the
prevention of the use of the financial system for the purpose of
money laundering and terrorist financing (minimum harmonization)
• Regulation No 1889/2005 of 26 October 2005 n controls of cash
entering or leaving the Community
• Regulation (EC) No 1781/2006 of 15 November 2006 on information
on the payer accompanying transfers of funds (FATF-7)
Anti-money laundering rules - 2
• Main reasons:
• Complying with international agreements of the FATF
• Prevent/detect terrorism / criminal behaviour
• Relevant triggers:
• Al-Qaida attacks on New York
• Barriers to business for e-money providers
Anti-money laundering rules - 3
• What do the rules do?
• Cash-regulation: obligation to declare cash in transit > € 10.000
• FATF-7 regulation: add payer info to the funds transfer, verify payer
identity and addresss omitted information problems
• Third Directive: prohibition of money laundering/ terrorist financing;
no anonymous accounts; customer due diligence obligation and
simplified regime for low risk products ; casino rule; monitoring
obligations ; FIU ; no disclosure; identify ultimate beneficial owner /
politically exposed persons regime /
Anti-money laundering rules - 4
• Change underway?
• 4th AML Directive
• Reduction of simplified due diligence regime
• Alignment with latest FATF-insights (tax crimes are also crimes)
• Find ultimate beneficial owner
• Use risk based apporach – risk assessments at state level
• Delegation of rule-making to: EBA, EIOPA and ESMA
Anti-money laundering rules - 5
• What’s remarkable?
• The obedience to more US centric FATF-interpretations perhaps…?
Agenda
• 1800-1930:
• Settlement Finality Directive (1998/2009)
• Electronic Money Directive (2001-2009)
• Consumer protection rules (1987-2014)
• SEPA and the Payment Services Directive (2009-2014)
• Anti-Money Laundering Rules (2005-2014)
• Competition Cases and regulation (1988-2014)
• 2000-2100:
• Industry dynamics in payments
• Case: regulating bitcoin in Europe?
Competition cases and issues - 1
• Which rules?
• Case (Decision 2001/2002) on MIFs on cross-border transactions on
Visa consumer credit and debit cards & on certain scheme rules
• Study (2005) on financial services in the European Union in retail
market products and payment cards and payment systems.
• Case (Decision 2007) on MIFs on cross-border and certain domestic
transactions on MasterCard consumer debit and credit cards
• Case (Decision 2010) on MIFs on cross-border and certain domestic
transactions on Visa consumer debit cards
• And… ……
Competition cases and issues - 1
• Main reasons for cases:
• Behaviour that is a barrier to true competition
• State support leading to unlevel playing field
• Desire for lower fees or elimination of barriers by new entrants
• Political desire to impose competition improving measures
Competition cases and issues - 2
• Main triggers:
• Complaints by market participants, consumer/merchant organisations
• Desire to eliminate different treatment per country
• Introduction and use of international schemes for the move to SEPA
(leading to possibly higher fees for merchants)
• Other regulatory bodies leading the way (Australia, US…)
• EC-desire to regulate in EU-rule and consolidate case-law
Competition cases and issues - 3
• Proposed MIF-regulation (2014)
• Places cap on debit-card payments (including pre-paid cards) to
become the lower of 7 eurocents or 0,2% of the payment transaction
value; cap for credit-card payments is 0,3% of value
• Increased interoperability and separation of schemes / processing is
required, EBA gets a role for standards
• Dual branding allowed
Competition cases and issues - 4
• Remarkable?
• The scientific community does not agree at all whether the concept of
interchange fees works or doesn’t work; it’s a war of beliefs
• Lots of technical discussions possible on level of fees vs alternatives,
tourist test etc.
• European Parliament forbids other ways to get revenue streams for
services to merchants

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Rationality and irrationality in EU payments 2014

  • 1. Rationality and irrationality of EU Payments regulation A closer look at institutional dynamics Simon Lelieveldt October 24, 2014 Jean Monnet Module on Europeanisation of the payment system
  • 2. • 1989-1995: Postbank – ING • 1996-2001: Dutch central bank / supervisor (DNB) • 2002-2004: SL Consultancy (e-money focus) • 2004-2011: Dutch Bankers Association (NVB) • 2012 - : Independent Regulatory Consultant • Expertise: • Retail Payments and Retail Banking, switching bank services, regulation and supervision of e-money: Chipper/Chipknip, Development of E- money & Payment Services Directives, Single Euro Payments Area (SEPA), Financial supervision and compliance (FATF etc)….. Introduction - Simon Lelieveldt
  • 3. Todays session… • A preview of a (pending…) PHd study on the evolution of retail payments…. - field research into creditcard adoption in NL - experience as a practicioner in the payments regulation domain - study of Dutch financial history - institutional approach to development of regulation…. • As well as a practicioner trying to point out areas and questions of interest for those studying changes in payments regulation
  • 4. RealityModel The world as we would like it to be The world as it is..? Just some preliminary notes.... Institutional change in theory Institutional change in practice Rational Irrational ?
  • 5. EU Payments regulations…. • Consumer protection rules (1987-2014) • Competition Cases and regulation (1988-2014) • Anti-Money Laundering Rules (1991-2014) • Settlement Finality Directive (1998/2009) • Electronic Money Directive (2001-2009) • Regulation (EC) No 2560/2001 of the European Parliament and of the Council of 19 December 2001 on cross-border payments in euro • SEPA and the Payment Services Directive (2009-2014) • Payment Accounts Directive (2014)
  • 7.
  • 8. Industry dynamics in payments • The development of payments is always evolutionary • The six major factors are: • Growth of the economy • Size/scale of market • Applicable rules • Status of technology • Nature of demand • Nature of competition
  • 9. Nature of demand for retail payments A hygiene factor A hygiene factor… …. is only relevant when it fails …. is not a fun factor It’s about something else primarily !
  • 10. Historic paths of technology development 42 68 17 77 11 38 64 12 61 32 64 2 9 0 4 71 27 17 74 30 Francia G erm any Italy N etherlands Spain Cards Cheques Direct debits Credit transfers Size of market Current technology Nature demand Applicable rules • Typical domestic payment mix: • giro vs cheque- countries • credit vs debit-cards • Each country follows its own technical path • Old path remains relevant also under new technology
  • 11. Payments follow the (internationalising) economy Scale of market Nature of demand Economic growth Internationalisation Nature of competition (outsideEU) Domestic percentage in retail payments Domestic Payment cards Credit-transfers Cheques Cross-border 97 % 3 % • Retail payments will remain a domestic market as long as customer behaviour is domestic • Further internationalisation is the main trend !
  • 12. Business models: more rational - unbundling • Historical fee structures are under pressure from new entrants and outsiders • Gradual move towards cost- oriented fee structures for all segments in the market Nature of competition Outsiders New technologies Niche focused • Each product should be viable • With transparant information provisioning to the customer 25 856545 10 40 20 30 60 50 70 DE IT FR ES US BE UK NL SEPL Consumenten Zakelijke markt Inkomstenparticulieresegment Inkomsten zakelijke segment Bron: McKinsey Applicable rules No state support or cross subsidies Economic growth Interest rate
  • 13. Geography size of market Demand: dissatisfier Suppliers pursuing efficiency through econ. of scale and innovation Constitutional Infrastructure: -laws -regulations Retail payment infrastructure: -payment products -clearing mechanisms -settlement systems Observation of market leads to consideration of intervention Information Technology Economy: interest rate Industry domain Constitutional domain Regulators and supervisors pursuing regulatory agenda and regulatory goals Public policy domain and interactions Legal requirements
  • 14.
  • 15. Institutional change… the lab experiment
  • 16. It’s a survivors game, for everyone…. MARKET PLAYERS • want to survive • want to grow bigger • make (and copy) products / services • make headlines with profit and loss / innovation • will not enter a market and then refrain from selling • shape actions based on historical events/trauma’s REGULATORS • want to survive • want to grow bigger • Make (and imitate) regulations • make headlines with rules and market intervention • will not study a market and then decide not to intervene (Katz) • shape actions based on historical events/trauma’s
  • 17. Institutional dynamics • At different levels in society, the individual firms/persons, groups of stakeholders, cities, provinces, governments or regions are faced with events and circumstances that lead to (institutional) changes • Institutional changes may be: setting up an institution or enshrining important rules into legal frameworks. • Institutional change occurs at different levels • Source: Kiser, L. L. and E. Ostrom (1982). The three worlds of action: a metatheoretical synthesis of institutional approaches. pp. 179-222. In: Strategies of Political Inquiry. E. Ostrom. Beverly Hills, Sage.
  • 18. Individual banks and customers Consumer Union and Bankers Association Government and Ministries of Finance / Economic Affairs
  • 19. Some basic routes for changing laws • Top Down: an observer chooses to align and streamline the range of diverging practices / rules in order to create a harmonized policy (the intrinsic desire of any policy maker of any subject area) • Bottom Up: a practical incident or problem in the operational domain leads to a (knee-jerk) reaction by collective bodies and eventually regulators
  • 20. The power of the centre…. • Both the ECB and the European Commission are institutions that are at the centre of developments • The centre will in the end always win…. • Central bank discussions on: • Target 1 (decentralised) – Target 2 • Domestic central banks responsible for retail payments…. -- now ERPB
  • 21. The example of competitors –> first movers • It is common sense and good practice to observe and learn from the regulatory practices in other countries • Yet, this may also result in a desire to be the first to market with new legislation (NYC Bitlicense) to beat other legislators • Drivers may originate from the supervisory bodies or Ministries within governments
  • 22. The power of a threat …. • Legislator writes an analysis of developments and desired outcome of the market • Threatens the market/industry with regulation but allows timeframe for self regulation • Frightened and divided industry will work on self regulation • Reuglators then use (and possibly tighten) the self regulation into a formal legal framework that could otherwise hardly have been developed
  • 23. The power of institutional memories / deals • Contraints for design of payment cheques in the Netherlands in the 1960s were based on central bank experiences in 1923 • In 1980 the central bank expressed desire to get its own payments regulation law.. It struck a deal with the ministry of finance…. And had to wait until 2014 for the deal to be effected (despite the fact that in the mean time the payment services directive was effected)
  • 24. The power of persons • Sometimes an institutional change may be slowed down or move to fast forward due to deciding constellations of power or specific persons in charge • Dual payment circuits in NL could have merged already in 1968 but for strategic reasons one side chose not to do • Thus we embarked on a project from 1986-1998 to merge the technologies to the appropriate national scale
  • 25.
  • 26. Observations on EU legislation - 1 • Consumer protection rules (1987-2014) • Copying the US approach to cards (Reg E and reg Z) • Competition Cases and regulation (1988-2014) • Towards regulation of interchange fees… (as in other continents) • Anti-Money Laundering Rules (1991-2014) • Relevant topic but completely hijacked by the US after 9/11 • Settlement Finality Directive (1998/2009) • Mostly technical stability provision to support euro-zone payment infrastructure
  • 27. Observations on EU legislation - 2 • Electronic Money Directive (2001-2009) • Compromise between central banks (wanting bank rules for new innovative companies) and ministries of Economic Affairs (in favour of innovation) • Mobile operators find out they are captured by regulation and seek exemption • Having paid huge amounts of money for the licenses, they get their exemption • payment transactions executed by means of any telecommunication, digital or IT device, where the goods or services purchased are delivered to and are to be used through a telecommunication, digital or IT device, provided that the telecommunication, digital or IT operator does not act only as an intermediary between the payment service user and the supplier of the goods and services;
  • 28. Observations on EU legislation - 3 • Electronic Money Directive (2001-2009) • Evaluation of directive:… the market has not taken off…. • So until today …pre paid mobile phone money works as electronic money but is out of the woods of regulation…. • Very interesting case of regulatory capture where the regulator allows itself to be captured not by the incumbent industry but by a non- regulated industry that uses its channels via Ministries of Transport and Communications. • The debate continues on during the PSD2-talks and review of EMD2
  • 29. Observations on EU legislation – 4 • Regulation (EC) No 2560/2001 of the European Parliament and of the Council of 19 December 2001 on cross-border payments in euro • Overstepping the formal legal reach, but supported by political momentum the EC stepts into price regulation for banking transfers • Underlying thought is to force banks into more efficient and proper conduct in the payments market • Bigger banks see opportunity to outsmart smaller local retail banks with their panEU processing centres and align with EU Commission to develop EU standards • Complex game of bigger/smaller banks slowly moving forward towards technical harmonisation • Request of banks to make harmonised legal framework is joyfully honoured by European Commission - leads to the PSD
  • 30. Observations on EU legislation – 5 • Payment Accounts Directive (2014) • Classic example of power of the civil servants at Commission • Set up joint group of experts – promise an impact assessment • Skip impact assessment and throw longstanding desire for panEuropean switching into policy plans for EU market • Wait and slowly move the process forward, duck the impact assessment issues • Time a draft legislation one year before EP dissolves and hope that they wish to get political momentum/impact with it • Directive 2014/92/EU on the comparability of fees related to payment accounts, payment account switching and access to payment accounts with basic features • Goal achieved: in the SEPA-harmonized area where one bank account is enough there is now also the opportunity to open bank accounts in each member state
  • 31. Rationality and irrationality • The institutional process is rational in the sense that there is a institutional power rationale and dynamics at work that has similar characteristics time and over again • The outcome is irrational in the sense that the proclaimed considerations / intentions do not always match with the end result in terms of legislation
  • 33. Settlement Finality Directive(s) - 1 Which rules? • Directive 98/26/EC of 19 May 1998 on settlement finality in payment and securities settlement systems and Transfers (Settlement Finality Directive) • Directive 2009/44/EC of the European Parliament and of the Council of 6 May 2009 amending Directive 98/26/EC on settlement finality in payment and securities settlement systems and Directive 2002/47/EC on financial collateral arrangements as regards linked systems and credit claims
  • 34. Settlement Finality Directive(s) - 2 Main reason: Elimination of the zero-hour rule that should apply when certain payments are revoked/reversed given that a company or person is declared insolvent A technicality, but an important one…. Trigger: Ensuring financial stability (mostly domestic focus)
  • 35. Bank Users Central bank Settlement Transport and clearing of, Payment instructions Users Market for payment services and products Users Bank Payment products Payment products, clearing and settlement Users Payment products Clearing house Market for clearing and settlement
  • 36. DNB bank A bank Bretail payments Customers l netting BuBa ECB retail payments bank C bank D netting International setup Domestic
  • 37. Settling payments individually (gross) bank A bank C bank B bank D 40 2060 30 7090 10 80 50 Number of settlement payments: 9 Totale value of payments: 450
  • 38. bank A bank C bank B bank D 40 40 30 20 70 50 Number of payments to settle : 6 Total value of payments : 250 Settling payments via netting
  • 39. bank A bank C bank B bank D Number of payments to make: 3 Totale value of (split) payment : 130 Clearing house 130 30 100 Settling payments via multilateral netting
  • 40. Settlement Finality Directive - 3 • What does it do? • Designate specific large value systems and retail payment netting and settlement systems and institutions that participate, • Payments that are done via these designated systems are final and cannot be unwound due to insolvency proceedings
  • 41. Settlement Finality Directive - 4 • Renewal – update via Directive 2009/44/EC • Motivation: • Account for interoperable – interconnected systems (security settlement) • Ensure usage of credit claims as collateral • Remarks ? • No upcoming changes planned, but might be relevant for payment institutions and electronic money institutions
  • 42. Agenda • 1800-1930: • Settlement Finality Directive (1998/2009) • Electronic Money Directive (2001-2009) • Consumer protection rules (1987-2014) • SEPA and the Payment Services Directive (2009-2014) • Anti-Money Laundering Rules (2005-2014) • Competition Cases and regulation (1988-2014) • 2000-2100: • Industry dynamics in payments • Case: regulating bitcoin in Europe?
  • 43. Electronic Money Directive - 1 Which rules? • DIRECTIVE 2000/46/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 18 September2000 on the taking up, pursuit of and prudential supervision of the business of electronic money institutions (First EMD) • DIRECTIVE 2009/110/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 16 September 2009 on the taking up, pursuit and prudential supervision of the business of electronic money institutions amending Directives 2005/60/EC and 2006/48/EC and repealing Directive 2000/46/EC (Second EMD)
  • 44. Electronic Money Directive - 1 • Main reason • Allow niche-businesses to operate e-money products under a specialised credit-institution regime • Triggers • Development of chipcard-money, Internetbased e-money
  • 45. Emergence of digital or e-money (1990s) - 1 • Initial regulatory response: • Protecting the (value of) fiat currency • Buying pre-paid value is the equivalent of taking deposits
  • 46. Emergence of e-money (1990s) - 2 • International coordination: • Reports on security /impact of electronic money (1996) • Local regulatory differences: • US: Money transmitter based frameworks vs national legislation • EU: discussion on restriction to banks or opening up the market • Electronic Money Directive: specialised credit-institution
  • 47. Emergence of e-money (2001) - 3 • Early topics: • Pegging the value to fiat currency (1:1 conversion) • Is electronic money ‘in the cloud’ also e-money or should it reside on a chip ? • Do pre-paid funds from mobile operators constitute e- money, yes or no?
  • 48. Further development of e-money • Licenses for companies such as Paypal, Google, • Strong concentration of e- money industry in the UK • Stepwise development of pre- paid market and regulation
  • 49. Electronic Money Directive - 2 • What does it do (in 2000) ? • Create specific supervisory regime for companies that issue electronic money (minimum harmonisation) • Competent board of directors, integrity of systems, lower own funds (€ 1 million ) requirement, security measures etc. • Requires redemption and ensures 1:1 conversion • Waiver regime for smaller companies and limited networks • Restricts business to e-money only
  • 50. Electronic Money Directive - 3 • What’s remarkable - Evaluations / Assessments of the first EMD? • Little uptake in the market …. • Paypal started and …. mobile operators were excluded • Scope confusion for mobile phone money (hybrid issuers) was a problem • Exemption phrasing in later times: • monetary value used to make payment transactions executed by any telecommunication, digital or IT device where the goods or services are delivered to and used through such a device, but only where the operator of the device does not only act as an intermediary between the user and the supplier.
  • 51. Electronic Money Directive - 4 • What changed in the Second E-money Directive?: Revised definition and exemption; mobile money is out EMI no longer credit-institution, but separate institution Lower own funds (€ 350.000) Prohibition on paying interest No issuing via agents Other business activities allowed (including provision of credit) Full harmonisation
  • 52. Electronic Money Directive – 5 • What’s up next? • Evaluation of 2nd EMD to determine a.o.: • Economic effects • Scope effect of limited network rules and waivers • Use of agents • Cooperation between supervisors
  • 53. Agenda • 1800-1930: • Settlement Finality Directive (1998/2009) • Electronic Money Directive (2001-2009) • Consumer protection rules (1987-2014) • SEPA and the Payment Services Directive (2009-2014) • Anti-Money Laundering Rules (2005-2014) • Competition Cases and regulation (1988-2014) • 2000-2100: • Industry dynamics in payments • Case: regulating bitcoin in Europe?
  • 54. Consumer protection rules - 1 • Which rules? • Europe could play an Ace: Communication: COM(86) 754 final BrusseLs, 12 January 1987 • Commission Recommendation 87/598/EEC of 8 December 1987 concerning a European code of conduct relating to electronic payments • Commission Recommendation of 17 November 1988 concerning payment systems, and in particular the relationship between cardholder and card issuer • Commission Recommendation 97/489/EC of 30 July 1997 concerning transactions by electronic payment instruments and in particular the relationship between issuer and holder
  • 55. Consumer protection rules - 2 • Which rules - …. ? • Directive 97/5/ec of the European Parliament and of the Council of 27 January 1997 on cross-border credit transfers • Regulation (EC) No 2560/2001 of the European Parliament and of the Council of 19 December 2001 on cross-border payments in euro • SEPA regulations and the Payment Services Directive (next block) • Directive 2002/65/EC of the European Parliament and of the Council of 23 September 2002 concerning the distance marketing of consumer financial services
  • 56. Consumer protection rules - 3 • Main reasons for the rules are: • Ensuring legal framework for electronic funds transfers (1988) • Increased dissatisfaction with banks cross-border processing/cost • Eliminating cold calling and unsolicited provision of financial services
  • 57. Consumer protection - 4 • Triggers • Introduction of the euro • Continued irritation over banks behaviour and cost level Milestone regulation: 2560/2001 • Prescribing fee levels for banks (identical for domestic and cross-border payments) • Had a major impact and became the stepping stone / stick to push banks towards the creation of a Single Euro Payments Area
  • 58. Consumer protection rules - • Which changes are now in the making … almost finalised ? • Forthcoming Payments Account Directive (2014): Directive of the European Parliament and of the Council on the comparability of fees related to payment accounts, payment account switching and access to payment accounts with basic features (COM(2013)0266 Means: Obliges use of harmonized terminology, fee information document, fee statement Obliges payment service providers to facilitate switching, even cross-border Allows consumers the right to open bank account in each member state
  • 59. Consumer protection - 5 • What’s remarkable ? • Creating SEPA (one bank account makes EU reachable) vs allowing customers to open a bank account in each country • So-called need for Directive on bank accounts and actual leeway for Member States in implementation • Scope of Bank Account Directive – to Payment Account Directive and halfway back • Not using revision of the PSD to change consumer protection and disclosure rules
  • 60. Agenda • 1800-1930: • Settlement Finality Directive (1998/2009) • Electronic Money Directive (2001-2009) • Consumer protection rules (1987-2014) • SEPA and the Payment Services Directive (2009-2014) • Anti-Money Laundering Rules (2005-2014) • Competition Cases and regulation (1988-2014) • 2000-2100: • Industry dynamics in payments • Case: regulating bitcoin in Europe?
  • 61. SEPA and the Payments Services Directive - 1 • Which rules? • Regulation (EC) No 2560/2001 of the European Parliament and of the Council of 19 December 2001 on cross-border payments in euro • Directive 2007/64/EC of the European Parliament and of the Council of 13 November 2007 on payment services in the internal market (full harmonization) • Regulation (EC) No 924/2009 of the European Parliament and of the Council of 16 September 2009 on cross-border payments in the Community • Regulation (EU) No 260/2012 of the European Parliament and of the Council of 14 March 2012 establishing technical and business requirements for credit transfers and direct debits in euro • 2013/0449(COD) - 09/01/2014 Legislative proposal to amend final deadline with 6 months
  • 62. SEPA and the Payments Services Directive - 2 • Main reasons: • Unified Europe requires further standardisation / harmonisation of legal rules; incorporation of previous conduct rules in Directive, • A separate supervisory regime required for payment institutions (like e- money institutions, but only for transferring money), • Desire to cut down processing times for payments (T+3 / T+1) • Direct debit needed to be included in EU cost-equality rules • IBAN had to be positioned as a central processing standard • Agreement on interchange for direct debit (rejects) • Need for a SEPA-deadline (which can’t be agreed privately)
  • 63. SEPA and the Payments Services Directive - 3 • Triggers: • Fear for further intervention by regulators lead to bank initiative to create panEuropean payment mechanism • Large banks saw opportunity to drive out smaller banks and standardise back-end processing – European Payment Council • Commission saw opportunity to further harmonise/standardise and get leverage for Payment Services Directive • European Central Bank used the dynamics to gain as much territory as possible during the process • A complex waltz/tango between: • Large international banks – European Commission – European Central bank – Domestically oriented banks – Bank associations – Consumer representatives
  • 64. SEPA – Payment Services Directive - 4 • What do the rules do? • PSD harmonized: • Conduct / contract rules towards customers • Creation of separate supervisory regime for payment institutions • Execution requirements with respect to processing • Regulations established: • Equal fee level for all payment products • Technical standards and leeway for interchange fee direct debit • Deadline – and extension with 6 months of SEPA-deadline
  • 65. SEPA – Payment Services Directive - 5 • Which changes underway? • Revision PSD seeks to: • include third party payment processors as a separate licensed entity • further detail security requirements • expand scope geographically (to one leg trx) • redefine scope of exemptions (agents/limited networks) • ensure access to bank accounts for payment institutions and e-money institutions
  • 66. SEPA – Payment Services Directive - 6 • What’s remarkable? • Level of detail with respect to security definition (copy-paste ECB) • No contract required for third party payment processor that acccesses bank account of customer via its own technology • Considerable role for European Banking Authority to further specificy security requirements
  • 67. Agenda • 1800-1930: • Settlement Finality Directive (1998/2009) • Electronic Money Directive (2001-2009) • Consumer protection rules (1987-2014) • SEPA and the Payment Services Directive (2009-2014) • Anti-Money Laundering Rules (1991-2014) • Competition Cases and regulation (1988-2014) • 2000-2100: • Industry dynamics in payments • Case: regulating bitcoin in Europe?
  • 68. Anti-money laundering rules - 1 • Which rules? • Third AML Directive: 2005/60/EC of 26 October 2005 on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing (minimum harmonization) • Regulation No 1889/2005 of 26 October 2005 n controls of cash entering or leaving the Community • Regulation (EC) No 1781/2006 of 15 November 2006 on information on the payer accompanying transfers of funds (FATF-7)
  • 69. Anti-money laundering rules - 2 • Main reasons: • Complying with international agreements of the FATF • Prevent/detect terrorism / criminal behaviour • Relevant triggers: • Al-Qaida attacks on New York • Barriers to business for e-money providers
  • 70. Anti-money laundering rules - 3 • What do the rules do? • Cash-regulation: obligation to declare cash in transit > € 10.000 • FATF-7 regulation: add payer info to the funds transfer, verify payer identity and addresss omitted information problems • Third Directive: prohibition of money laundering/ terrorist financing; no anonymous accounts; customer due diligence obligation and simplified regime for low risk products ; casino rule; monitoring obligations ; FIU ; no disclosure; identify ultimate beneficial owner / politically exposed persons regime /
  • 71. Anti-money laundering rules - 4 • Change underway? • 4th AML Directive • Reduction of simplified due diligence regime • Alignment with latest FATF-insights (tax crimes are also crimes) • Find ultimate beneficial owner • Use risk based apporach – risk assessments at state level • Delegation of rule-making to: EBA, EIOPA and ESMA
  • 72. Anti-money laundering rules - 5 • What’s remarkable? • The obedience to more US centric FATF-interpretations perhaps…?
  • 73. Agenda • 1800-1930: • Settlement Finality Directive (1998/2009) • Electronic Money Directive (2001-2009) • Consumer protection rules (1987-2014) • SEPA and the Payment Services Directive (2009-2014) • Anti-Money Laundering Rules (2005-2014) • Competition Cases and regulation (1988-2014) • 2000-2100: • Industry dynamics in payments • Case: regulating bitcoin in Europe?
  • 74. Competition cases and issues - 1 • Which rules? • Case (Decision 2001/2002) on MIFs on cross-border transactions on Visa consumer credit and debit cards & on certain scheme rules • Study (2005) on financial services in the European Union in retail market products and payment cards and payment systems. • Case (Decision 2007) on MIFs on cross-border and certain domestic transactions on MasterCard consumer debit and credit cards • Case (Decision 2010) on MIFs on cross-border and certain domestic transactions on Visa consumer debit cards • And… ……
  • 75. Competition cases and issues - 1 • Main reasons for cases: • Behaviour that is a barrier to true competition • State support leading to unlevel playing field • Desire for lower fees or elimination of barriers by new entrants • Political desire to impose competition improving measures
  • 76. Competition cases and issues - 2 • Main triggers: • Complaints by market participants, consumer/merchant organisations • Desire to eliminate different treatment per country • Introduction and use of international schemes for the move to SEPA (leading to possibly higher fees for merchants) • Other regulatory bodies leading the way (Australia, US…) • EC-desire to regulate in EU-rule and consolidate case-law
  • 77. Competition cases and issues - 3 • Proposed MIF-regulation (2014) • Places cap on debit-card payments (including pre-paid cards) to become the lower of 7 eurocents or 0,2% of the payment transaction value; cap for credit-card payments is 0,3% of value • Increased interoperability and separation of schemes / processing is required, EBA gets a role for standards • Dual branding allowed
  • 78. Competition cases and issues - 4 • Remarkable? • The scientific community does not agree at all whether the concept of interchange fees works or doesn’t work; it’s a war of beliefs • Lots of technical discussions possible on level of fees vs alternatives, tourist test etc. • European Parliament forbids other ways to get revenue streams for services to merchants