Payments

Single Euro Payments Area Regulation

Regulation (EU) No 260/2012 — technical and business requirements for credit transfers and direct debits in euro

It sets out the rules and technical requirements for credit transfers and direct debit transactions in euro within the single euro payments area (SEPA).

KEY POINTS

National accounts used for credit transfers and direct debits within each country should also be accessible EU-wide. This is known as ‘reachability’.
The same rules apply to both national and cross-border operations.
Payment systems should be interoperable with each other.

Credit transfers and direct debit transactions must meet certain conditions, including:
the use of international bank account numbers, bank identifier codes and a financial messaging standard for all payments in euro;
the right of payers to issue specific instructions, such as the amount and frequency of a direct debit.

The legislation set the following entry dates:
from 1 February 2014 (later postponed to August 2014), all credit transfers and direct debits in euro to be made under the same format in EU countries with the euro as national currency;
from 31 October 2016, all credit transfers and direct debits in euro to be made under the same format also in non-euro EU countries;
from 1 February 2017, abolition of multilateral interchange fees* for direct debits;
from 1 February 2016, an end to compulsory use of the business identifier code (BIC).

EU countries had to:
appoint a national authority with the necessary powers to ensure the legislation is fully implemented;
lay down, by 1 February 2013, rules on penalties for any violations of the legislation;
establish adequate and effective out-of-court complaint and redress procedures.

The European Commission:
was given the five-year renewable power from 31 March 2012 to adopt delegated acts;
had to present a report by 1 February 2017 on implementation of the legislation.
Regulation (EU) No 248/2014 amended Regulation (EU) No 260/2012, introducing certain transitional arrangements. These ended on 1 February 2016.

BACKGROUND

The single euro payments area harmonises the way cashless euro payments are made across the EU. It makes them as easy as national payments.
SEPA covers payments in euro in the EU and Iceland, Norway, Switzerland, Liechtenstein, Andorra, Monaco, San Marino and the Vatican City.
For more information, see:
Single euro payments area (SEPA) (European Commission).
Multilateral interchange fees: fees which the sellers of goods and services pay for the cross-border payments they receive by consumer debit and credit cards.

DOCUMENTS

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 and amending Regulation (EC) No 924/2009 (OJ L 94, 30.3.2012, pp. 22-37)It has applied since 31 March 2012.

Successive amendments to Regulation (EU) No 260/2012 have been incorporated into the original text. This consolidated version is of documentary value only.

Regulation (EC) No 924/2009 of the European Parliament and of the Council of 16 September 2009 on cross-border payments in the Community and repealing Regulation (EC) No 2560/2001 (OJ L 266, 9.10.2009, pp. 11-18)

SEPA

The aim of the single euro payments area (SEPA) is to ensure that making electronic payments throughout the entire euro area is as easy as making cash payments and that there are no extra charges when making an electronic payment in euros in another European (EU) country.

Regulation (EC) No 924/2009 of the European Parliament and of the Council of 16 September 2009 on cross-border payments in the Community and repealing Regulation (EC) No 2560/2001.

The rules require banks to levy the same charges for electronic payment transactions in euros conducted cross-border, between two European countries, and for corresponding electronic payment transactions* in euros conducted nationally, within the same European country.

KEY POINTS

Electronic payment transactions include credit transfers, direct debits, withdrawals from automatic teller machines, payments by debit and credit cards, as well as cash transfers.

The payments concerned are to be made in euros or in the national currency of EU countries wishing to apply the regulation. Thus, following a request from Sweden, the principle of equality of charges also applies to payments made in Swedish kronor.

In practical terms, banks have to provide their clients with an international bank account number (IBAN) to be used when making cross-border electronic payment transactions. Banks also have to give them a bank identifier code (BIC). These transfers therefore cost no more than transfers made within the same country.

Compliance with obligations

If a bank does not comply with the charging rules, its customers or any interested party may submit a complaint to the national authority.

To guarantee that disputes arising between banks and customers are settled, EU countries must establish effective out-of-court complaint and redress procedures. Penalties can be handed out in case of infringements.

From 1 November 2009.

Corresponding payments: payments with similar characteristics, such as same amount, payment channel – e.g. by ATM (automated teller machine), online, etc. – or payment instrument used – cards, cheques, direct debits or credit transfers.

REFERENCES

Regulation (EC) No 924/2009

Regulation (EU) No 260/2012

Regulation (EU) No 248/2014

21.3.2014

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Revised rules for payment services in the EU

Directive (EU) 2015/2366 on EU-wide payment services

Directive (EU) 2015/2366 (Payment Service Directive 2 — PSD 2) provides the legal foundation for the further development of a better integrated internal market for electronic payments within the EU.
It puts in place comprehensive rules for payment services*, with the goal of making international payments (within the EU) as easy, efficient and secure as payments within a single country.
It seeks to open up payment markets to new entrants leading to more competition, greater choice and better prices for consumers.
It also provides the necessary legal platform for the Single Euro Payments Area (SEPA).
It repealed Directive 2007/64/EC (PSD) from 13 January 2018.

KEY POINTS

The directive seeks to improve the existing EU rules for electronic payments. It takes into account emerging and innovative payment services, such as internet and mobile payments.

The directive sets out rules concerning:
strict security requirements for electronic payments and the protection of consumers’ financial data, guaranteeing safe authentication and reducing the risk of fraud;
the transparency of conditions and information requirements for payment services;
the rights and obligations of users and providers of payment services.

The directive is complemented by Regulation (EU) 2015/751 which puts a cap on interchange fees charged between banks for card-based transactions. This is expected to drive down the costs for merchants in accepting consumer debit and credit cards.
Towards a better integrated EU payments market

The directive establishes a clear and comprehensive set of rules that will apply to existing and new providers of innovative payment services. These rules seek to ensure that these players can compete on equal terms, leading to greater efficiency, choice and transparency of payment services, while strengthening consumers’ trust in a harmonised payments market.

Opening up the EU market to new services and providers

The directive also aims to open up the EU payment market to companies offering consumer- or business-oriented payment services based on access to information about the payment account, particularly:

account information services which allow a payment service user to have an overview of their financial situation at any time, allowing users to better manage their personal finances;
payment initiation services which are services to initiate an order at the request of the payment service user with respect to a payment account held at another payment service provider.

Consumer rights

Consumer rights are enhanced, including:
reduced liability for non-authorised payments from €150 to €50;
unconditional refund right for direct debits in euro for a period of 8 weeks;
removal of surcharges for the use of a consumer credit or debit card.

The European Commission was to produce a ‘user-friendly’ electronic leaflet by early 2018 listing consumers’ rights under the directive and related EU law.
Authorisation of payment institutions

The directive does not substantially change the conditions for granting authorisation as payment institutions, although payment institutions offering payment initiation services or account information services will be required to have professional indemnity insurance as a condition of authorisation or respectively registration. The directive also contains rules on the supervision of authorised payment institutions, as well as measures in case of non-compliance.

Role of European Banking Authority (EBA)

The role of the EBA is strengthened to:

develop a publicly accessible central register of authorised payment institutions, which shall be kept up to date by the national authorities;
assist in resolving disputes between national authorities;
develop regulatory technical standards on strong customer authentication and secure communication channels with which all payment service providers must comply;
develop regulatory technical standards for cooperation and information exchange between supervisory authorities.

The Commission has adopted the following implementing and delegated acts:

Regulation (EU) 2017/2055 on regulatory technical standards for the cooperation and exchange of information between competent authorities relating to the exercise of the right of establishment and the freedom to provide services of payment institutions;
Regulation (EU) 2018/389 on regulatory technical standards for strong customer authentication and common and secure open standards of communication;
Regulation (EU) 2019/410 laying down implementing technical standards with regard to the details and structure of the information to be notified, in the field of payment services, by competent authorities to the EBA;
Regulation (EU) 2019/411 on regulatory technical standards setting technical requirements on development, operation and maintenance of the electronic central register within the field of payment services and on access to the information contained therein.

DOCUMENTS

Directive (EU) 2015/2366 of the European Parliament and of the Council of 25 November 2015 on payment services in the internal market, amending Directives 2002/65/EC, 2009/110/EC and 2013/36/EU and Regulation (EU) No 1093/2010, and repealing Directive 2007/64/EC (OJ L 337, 23.12.2015, pp. 35-127)

It has applied since 12 January 2016. EU countries had to incorporate it into national law by 13 January 2018.

Successive amendments to Directive (EU) 2015/2366 have been incorporated into the original document. This consolidated version is of documentary value only.

Commission Implementing Regulation (EU) 2019/410 of 29 November 2018 laying down implementing technical standards with regard to the details and structure of the information to be notified, in the field of payment services, by competent authorities to the European Banking Authority pursuant to Directive (EU) 2015/2366 of the European Parliament and of the Council (OJ L 73, 15.3.2019, pp. 20-83)

Commission Delegated Regulation (EU) 2019/411 of 29 November 2018 supplementing Directive (EU) 2015/2366 of the European Parliament and of the Council with regard to regulatory technical standards setting technical requirements on development, operation and maintenance of the electronic central register within the field of payment services and on access to the information contained therein (OJ L 73, 15.3.2019, pp. 84-92)

Commission Delegated Regulation (EU) 2018/389 of 27 November 2017 supplementing Directive (EU) 2015/2366 of the European Parliament and of the Council with regard to regulatory technical standards for strong customer authentication and common and secure open standards of communication (OJ L 69, 13.3.2018, pp. 23-43)

Commission Delegated Regulation (EU) 2017/2055 of 23 June 2017 supplementing Directive (EU) 2015/2366 of the European Parliament and of the Council with regard to regulatory technical standards for the cooperation and exchange of information between competent authorities relating to the exercise of the right of establishment and the freedom to provide services of payment institutions (OJ L 294, 11.11.2017, pp. 1-25)

Regulation (EU) 2015/751 of the European Parliament and of the Council of 29 April 2015 on interchange fees for card-based payment transactions (OJ L 123, 19.5.2015, pp. 1-15)

Electronic money: business and prudential supervision

Directive 2009/110/EC — the business and supervision of electronic money

The electronic money directive (EMD) sets out the rules on the business and supervision of electronic money* (e-money) institutions in order to contribute to the emergence of a true single market for e-money services in the European Union (EU).
It also seeks to ensure consistency with the EU’s payment services directive (Directive 2007/64/EC, known as the PSD), thus contributing towards a single EU market for payments for the benefit of consumers, business and the wider EU economy.

KEY POINTS

In general, the EMD aims to:

facilitate the emergence of new, innovative and secure e-money services;
provide market access to new companies;
encourage effective competition between all market participants.

Specifically, it modernises EU rules on e-money, in particular bringing the prudential regime for e-money institutions* into line with the requirements for payment institutions in the PSD.

It introduces proportionate prudential requirements in order to ease market access for newcomers. This includes reducing the initial capital requirement to €350,000 and new rules on calculating own funds.

The institutions covered by the EMD include banks, e-money institutions, the European Central Bank and national central banks.

The activities which e-money institutions are permitted to carry out include providing payment services and granting credit related to these payments.

In October 2015, the EU adopted a new directive on payment services known as PSD2. It repeals Directive 2007/64/EC with effect from 13 January 2018. PSD2 aims to improve security, widen consumer choice and keep pace with innovation.

KEY TERMS

Electronic money is the digital alternative to cash, which enables users to store funds on a device (card or phone) or through the internet and to make payment transactions.

E-money institutions are organisations that have been authorised to issue electronic money.

ACTS

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 (OJ L 267, 10.10.2009, pp. 7–17)

Directive 2007/64/EC of the European Parliament and of the Council of 13 November 2007 on payment services in the internal market amending Directives 97/7/EC, 2002/65/EC, 2005/60/EC and 2006/48/EC and repealing Directive 97/5/EC (OJ L 319, 5.12.2007, pp. 1–36). Successive amendments to Directive 2007/64/EC have been incorporated in the original text. This consolidated version is of documentary value only.

Fees for card-based payments

Regulation (EU) 2015/751 on interchange fees for card-based payment transactions

This regulation caps interchange fees. It increases transparency on fees thus permitting retailers to know the level of fees paid when accepting cards. It enhances competition by providing consumers with more and better choices between different types of payment cards and service providers.

KEY POINTS

Specifically, the regulation:

caps interchange fees at 0.2% of the transaction value for consumer debit cards and at 0.3% for consumer credit cards;
as regards consumer credit cards, allows EU countries to define percentage caps lower than 0.3%;
as regards consumer debit card transactions, allows EU countries to impose a fee of no more than 5 eurocents per transaction interchange fee in combination with the 0.2% cap;
provides for a limited number of exemptions, such as business cards used only for business expenses being charged directly to the account of the company;
increases transparency on the level of fees paid by retailers, thus enabling them more easily to select which payment cards to accept.

The regulation is part of a package that includes also the revised Payment Services Directive (PSD2), on which political agreement was reached in May 2015. The package aims to promote the digital single market by making payments safer and cheaper and paves the way for innovative payment technologies.

It has applied since 8 June 2015.

DOCUMENTS

Regulation (EU) 2015/751 of the European Parliament and of the Council of 29 April 2015 on interchange fees for card-based payment transactions (OJ L 123, 19.5.2015, pp. 1-15)