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Rules governing online payments by electronic transfer need an EU-wide update to improve security, reduce processing fees and widen consumer choice, said Economic and Monetary Affairs Committee MEPs endorsing draft legislation to this end on Thursday. The new rules would also encourage competition to provide payment services and innovative payment methods.
Today’s rules would have to be modernised to keep pace with technical progress, market developments and the constantly growing number of payments executed online. The new ones would give online payment service users a uniform set of rights, of which they would have to be informed.
Safer payments
Under the new rules, payment service users would have to be told what information, such as a unique identifier, must be provided in order to execute the payment. All charges, execution times, contact information and where applicable exchange rates, would have to be clearly stated.
Unauthorised payments would have to be refunded within a maximum within 24 hours of their being noticed. Clients could be obliged to bear the losses resulting from the use of a lost or stolen payment card or device up to a maximum of €50.
Institutions providing payment services would have to be authorised by a Member State, after meeting the security requirements laid down in the legislation and would have to be insured. Member states would have to establish a public register of such institutions.
Cost control
Payment service providers would be required to disclose the actual cost of processing payments on request, decided MEPs. Payers and payees would be required to pay the charges levied by their respective service providers.
Member States would have to ensure that the charges imposed on the payee do not exceed the service charges, to be laid down in forthcoming EU rules, for using a specific payment device or means of execution (see below on card fees).
Widening consumer choice
A payer using an online account would have the right to use payment software or devices provided by an authorised third party and have his payments executed on his behalf by this provider.
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The fees that banks charge retailers for processing shoppers’ payments should be capped, Economic and Monetary Affairs Committee MEPs decided in a vote on Thursday. The cap would apply to both cross-border and domestic payments. Banks’ card payment fees cost EU retailers over €10 billion each year, according to the European Commission figures. These fees are not transparent and they differ between EU Member States, where they are subject not to legislation but to decisions by national competition authorities. These service or "interchange" fees are charged by banks belonging to card schemes such as Visa and MasterCard, which together control the lion’s share of the market. Retailers are charged for every card transaction and add the costs to the prices of goods or services they offer.
Fees: capped and transparent
For credit card transactions, MEPs backed the European Commission's proposal to cap the bank’s fee at 0.3 per cent of the transaction value. For debit card transactions, the committee amended the proposed cap to 7 euro cents, or 0.2 per cent of the transaction value, whichever is the lower.
These caps would apply to both cross-border and domestic transactions in the EU and would take effect one year after the rules enter into force. Under the new rules, retailers would be free to choose which cards to accept, unless they are subject to the same interchange fee which, moreover, must comply with the cap set by these rules. Whilst this would restrict the shopper’s freedom to choose which payment card to use, lower fees should translate into in lower prices.
EBF
EBF considers that the far-reaching consequences of the Interchange Fees Regulation on cardholders and on the usage of cards, as approved by the ECON Committee, have not been duly weighed.
“A drastic reduction of the fee paid by merchants for the benefits they derive from being paid by card is a threat to innovation and security in card transactions. This will not benefit consumers as the costs of issuing cards may not be covered. Consumers, instead of merchants, will end up paying the bill”, explained Guido Ravoet, EBF Chief Executive.
Furthermore, the EBF considers it unrealistic to impose that the very substantial changes to numerous long-standing rules governing the cards market have to be implemented within one year. “It took 10 years to introduce an integrated market for credit transfers and direct debits (SEPA) – it is therefore hardly understandable to do the same with cards in a single year”, added Ravoet.
Regarding the Payment Services Directive, the EBF understands the eagerness of ECON to open the market to third-party payment providers (TPPs), but considers that it has failed to recognise fully one fundamental drawback. Allowing consumers to hand over their personal confidential credentials to some TPPs to make a payment on their behalf will indeed put the security of payments and data protection at risk.
As a consequence, the very open approach taken by ECON does not address the additional risks (e.g. ID-theft, fraud, illicit transactions) posed by the use of third-party payment providers to the detriment of consumers.
EPP
"Since I started working on the Multilateral Interchange Fees Regulation, my aim has been to strengthen the Single Market by establishing a level playing field for card payments and for companies at European Level", underlined Spanish MEP Pablo Zalba Bigedain.
Portuguese MEP Diogo Feio added: "Today, we have approved a text with a significant majority that will increase consumer protection and bring more safety and more transparency to the market of online payments".
"I believe that through the Payment Package we will ensure greater transparency in the payments market, ensuring that both retailers and consumers know how much they are paying when they acquire a product with a debit or credit card", said Zalba Bigedain.
Greens/EFA
The European Commission has presented a proposal for the regulation of fees on card payments. Sven Giegold, economic and financial policy spokesman of the Greens in the European Parliament, commented on the proposal: "The ECON Committee of the European Parliament has today strengthened trade and consumer and significantly limited the rip-off with credit and bank cards. Consumers and retailers can breathe more easily now. Each year, about €6 billion has ended up in the pockets of the credit card providers.
"The proposed direct price caps are a legitimate means to break the anti-competitive oligopoly of card providers such as Visa and MasterCard. Where the competition is not working and has been abused, the state must intervene. The new rules will come into force in Europe one year after their adoption. A large majority of the ECON Committee has supported this position. Equally pleasing is the fact that retailers remain able to reject payment cards that charge very high fees."
AmChamEU
The American Chamber of Commerce to the EU considers the growing use of electronic payments a substantial benefits for consumers, retailers, society and the broader economy. Regulation of payments must therefore carefully balance the interests of all parties, while allowing for continued innovation and new technologies. AmCham EU believes that, given the vastly different levels of penetration of electronic payments across the EU, the cards industry should be allowed to determine the appropriate rate of interchange fees based on negotiations with retail and costs, among other factors. In addition, implementing the Honour will provide certainty for consumers, ease transactions for tourists and reduce the need for retailers to train staff to examine each type of card. Finally, it is to be the review of the Payment Services Directive addresses recent technological developments and inconsistent implementation in Member States, thereby fostering greater harmonisation and innovation in the European payments market.