IBA CONFERENCE 2007 SINGAPORE Dr. Jürgen Brandstätter Alternative methods of payment

IBA CONFERENCE 2007

SINGAPORE

Dr. Jürgen Brandstätter

www.bma-law.com

Alternative methods of payment

• Cash payments

• Payments by cheque

• Payments by transfer

• Payments by credit card with signature

Traditional methods of payment

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• Introduction of Euro – Eurozone

• Privatisation of Telecom-Sector

• Quantum jump in technology – Digitalization

• Regulatory initiatives – Single European Payment Area (SEPA)

Creating the environment for the new


• Debit Cards

• Credit Cards with chip technology

• Electronic purses

• Prepaid cards

• Paying via online banking

• Internet payment systems

• Mobile payment systems

Alternative (New) methods of payment


• Proposal COM(2005)0603 of 1 December 2005 for a Directive on payment services in the internal market (PSD)

Relevant Legal Sources


• initiative of the European banking industry to make all electronic payments across the Euro area as easy as domestic payments

• aim is to allow easy, fast and secure transfers between bank accounts anywhere in the Euro area

• banks to offer first SEPA products starting 1 January 2008

• PSD will provide necessary legal framework for SEPA but its scope extends beyond

Single Euro Payments Area (SEPA)


Payment Services Directive (1)


Dates

• proposal presented on 1 December 2005

• passed by European Parliament on 24 April 2007

• to be published in the Official Journal of the European Union in October or November 2007

• transposition by Member States until 1 November 2009



Aims

• legal framework for SEPA

• legal framework for development of financial services and infrastructures in the EU

• faster handling of payments

• strengthening of competition

• consumer protection



Scope (1)• payment services in Euro or the currency of a

Member State within the EU, if payer’s and payee’s payment service providers (PSP) are located in the EU (Art. 2)

• payment services are (Annex)– services to enable cash to be placed on or withdrawn

from a payment account– operating a payment account– execution of payment transactions– execution of transactions by means of IT devices if the

payment is made to the operator who acts as an intermediary between the user and the supplier (“m-payment”)

– issuing/acquiring of payment instruments– money remittance



Scope (2)

• exempted payment services (Art. 3)– money exchange

– professional transport of banknotes and cash

– payment transactions• exclusively in cash

• through a commercial agent for goods or services

• based on cheques, vouchers etc.

• carried out within a payment or securities settlement system between participants of the system and PSPs



Scope (3)• related to asset servicing

• between PSPs, their agents or branches for their own account

• executed by means of any IT device, where the goods or services purchased are delivered to and are to be used through an IT device (ringtones etc.), provided that the operator does not act only as an intermediary between the user and the supplier

• between a parent undertaking and its subsidiary or between subsidiaries of the same parent undertaking, without any intervention by a PSP not belonging to the group



Scope (4)– services

• by technical service providers, which support the provision of payment services, without them entering at any time into possession of the funds to be transferred

• based on instruments that can be used to acquire goods or services only in the premises used by the issuer or under a commercial agreement with the issuer either within a limited network of service providers or for a limited range of goods or services (“limited network”)

• by providers to withdraw cash by means of automated teller machines acting on behalf of one or more card issuers, which are not a party to the framework contract with the customer withdrawing money from a payment account



Main changes• introduction of “payment institutions”• single authorisation for the whole EU (“EU

passport”)• possibility to treat micro-enterprises (see

Recommendation 2003/361/EC) as consumers

• Member States need to prohibit other persons from providing payment services (Art. 29)

• but: Member States are left with a number of options to chose from

Banks according to the BWG


• limited to certain legal forms• required licensing by the supervising FMA

(Austrian Financial Market Authority,)• certain organisational requirements• initial capital

– € 5 million for any banking business– € 1 million for issuing of e-money– none for money remittance and exchange

• substantial own funds (calculated per case)

Payment institutions (1)


• any legal or (if Member State permits) natural person allowed

• certain structural requirements• initial capital (Art. 6)

– € 20.000 for money remittance– € 50.000 for m-payment– € 125.000 for everything else

• own funds (Art. 7)– Member States may chose from 3 calculation

methods or empower the competent authority (in Austria the FMA) to chose instead

– competent authority may raise or lower the calculated own funds by 20% per case



• authorisation for legal persons only (Art. 10)– may engage in additional activities (Art. 16)

• provision of operational services• operation of payment systems• business activities other than the provision of

payment services• grant of credit

– ancillary and in connection with the execution of a transaction

– repaid within maximum 12 months– not granted from funds received from or for transfer– own funds are at all times and to the satisfaction of the

supervisory authorities appropriate in view of the overall amount of credit granted



• Member States may additionally allow registration (Art. 26)

– for natural and legal persons with head office or residence in the Member State in which business is carried out

– maximum monthly transactions of € 3 million– managers not convicted of financial crimes– no “EU passport”– may be restricted to certain activities

• supervision by FMA but majority of provisions of BWG (accounting etc) do not apply

Low value payment instruments and electronic money


• limited to– individual transactions up to € 30 or– € 150 spending limit or– instruments which can store maximum of € 150

• for national transactions Member States may reduce or double these amounts

• for prepaid payment instruments Member States may increase them up to € 500

• simplified information requirements• do not need to (Art. 53)

– allow blocking of payment instrument– prove authorization of transaction– notify of non-execution– allow revocation of transaction

Access to payment systems (Art. 28)


• objective, non-discriminatory and proportionate

• only for access by legal persons

• does not apply to payment systems– designated under Directive 98/26/EC

– belonging to a corporate group

– operated by a single PSP

Information requirements


• applies to consumers; Member States may chose to treat micro-enterprises as consumers

• replaces Directive 2002/65/EC where applicable (Art. 31)

• information has to be provided prior to con- clusion of contract on a durable medium and free of charge

• for single payment additional information after receipt of order and after execution

• changes in framework contracts to be announced 2 months prior to application

• Member States may require monthly provision of information on paper free of charge

Rights and obligations (1)


• applies to consumers, Member States may chose to treat micro-enterprises as consumers

• Member States must assure effective out-of-court complaint and redress (Art. 83)

• revocation of payment order– generally: until reception by PSP or authorization– direct debit or specific day: until end of business

day preceding the day of debit or agreed on• refusal of payment order

– notification to user at earliest opportunity– not possible if conditions set out in framework

contract are met


• unauthorized or incorrectly executed payment– notification of PSP without undue delay but not

later than 13 months after debit date– PSP to prove authorization and correct execution– use of payment instrument “in itself” not sufficient to

prove authorization, fraud or gross negligence• refund for transaction initiated by payee

– notification within 8 weeks after debit of funds• if authorization did not specify exact amount and• if transferred amount not reasonably expected

– may be waived in framework contract when authorization is given directly to PSP



• liability– PSP to refund transferred amount and, where

applicable, restore payment account to state in which it would have been without transaction

– PSP not liable if payer supplies wrong “unique identifier”

– payer’s PSP is liable unless he proves that payee’s PSP has received the transaction

– until notification of PSP, payer bears losses up to € 150 in case of loss, theft or misappropriation

– payer bears all losses for fraud, intent and gross negligence

– Member States may reduce payer’s liability for gross negligence to € 150

– if PSP does not provide means for notification at all times, payer is only liable for fraud


• execution time and value date– calculated from day of receipt of payment order (D)– D+3 for electronic payments until 01/01/2012– D+1 from 01/01/2012 onwards– additional day for paper-initiated transactions– D+4 for transactions not in Euro or the currency of

a Member State– for national transactions Member States may

provide for shorter execution times– value date equals date of crediting of transaction to

the account of the payee's PSP



• many options for transposition:– possible amendment of the BWG– amendment or abrogation of the

Überweisungsgesetz– possible amendment of the Austrian Civil Code– definitely creation of the Zahlungsdienstegesetz

(Austrian Payment Services Act)• due to options granted to the Member States,

strong lobbying is expected• already licensed money remitters will probably

opt to change status to payment institutions

Perspective for Austria


Thank you for your attention!

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IBA CONFERENCE 2007 SINGAPORE Dr. Jürgen Brandstätter Alternative methods of payment