Sector Changes
Banks are normally associated with activities like executing payments and issuing payment cards, along with other payment services.
Although this remains true, these days even non-bank institutions are active in the payment services sector – both regulated (e.g., credit institutions and e-money institutions) and unregulated (e.g., payment initiation services providers or PISPs, and account information services providers or AISPs). In the last decade the world of payment services has been radically changed by modern technologies – not only electronic wallets but also cloud computing and cognitive computing. More recently still, discussion has started about how distributed ledger technology or even quantum computing can be used for payment services.
Legal Changes
Into this environment comes the new Payment Contact Act (the “Act”). The Act is based on Payment Services Directive 2 (PSD2). This directive sets out the basic legal framework for payment services regulation in the European Union and explicitly declares its ambition to promote technological innovation and boost competition in payment services while at the same time assuring safe and secure services for consumers. The proposed Act – already published by Czech Ministry of Finance and available online – points to a precise and “technical” transposition of this EU instrument into Czech law.
The basic impacts of the up-coming legislative changes can be divided into three groups. First, it will cover hitherto unregulated activities, such as those of PISPs and AISPs. Second, it will reduce transaction costs and introduce stricter rules on transferring costs to consumers. Third, and perhaps most significantly, it will, when certain (particularly technical) conditions are met, provide both banking and non-banking payment service providers with the right to access the payment infrastructure of European banks and other third party payment providers and to request certain information about customers.
Broader Regulation
All entities now operating in the field of e-commerce, m-commerce, telecommunications, and information technology whose activities somehow involve payment transactions and/or other payment services must consider whether they will fall within the ambit of Act. The new regulatory system could affect institutions which issue payment instruments used only to acquire a very limited range of goods or services, or those which provide mobile services enabling a network subscriber to pay for goods or services using a mobile phone. It will certainly cover PISPs and AISPs. If these institutions are not banks, they will only be allowed to pursue their current activities if they obtain authorization to operate as a payment institution or e-money institution.
Pressure on Costs
The Act will also limit charges for payment transactions provided within the European Union (if both the payer’s and the recipient’s payment service providers are located there, or if the sole payment service provider in the payment transaction is). In those circumstances the recipient can only be required to pay charges levied by his/her payment service provider, and the payer can only be charged by his/her payment service provider. Moreover, any charges applied by the payment service provider must not exceed the direct costs borne by the recipient for using the specific payment instrument. In any case, the recipient cannot be asked to pay charges for using payment instruments for which interchange fees are regulated under the EU regulations on interchange fees for card-based payment transactions or on credit transfers and direct debits in euros.
Greater Access to Customer Information
For PISPs, AIPSs, and other providers of payment services – if they are authorized to provide services under the new system – the Act opens up space to obtain payment account information. Each provider will be entitled to request that a bank or person that manages a payment account provide access to relevant information pertaining to the account and related transactions. Such access to information about the account will always be subject to the user’s – the account holder’s – prior consent and to the existence of a sound IT security system capable of interacting with the IT system of the provider through an appropriate application programming interface (API).
Considering the Opportunities
Although it is hard fully to anticipate the real impact of the Act on the payment services market, it is clear that, considering both technological innovation and the legal framework in which a right to access information is embedded, both banking and non-banking entities will benefit from numerous business opportunities that will be opened up by this new piece of legislation.