On 8 December 2015 the European Banking Authority launched a consultation on its draft technical standards on the separation of payment card schemes and processing entities under Article 7(6) of the Interchange Fees Regulation.
The Interchange Fees Regulation: independence and separation
The Interchange Fees for Card-Based Payment Transactions Regulation (EU) 2015/751 (“IFR”) entered into force in the European Union on 8 June 2015 and, while the fee caps are already applicable, the majority of business rules will come into effect on 9 June 2016.
The objective of the IFR is to facilitate the creation of a single market for card payments across the European Union, by ensuring a level playing field that will facilitate greater competition. Recital 33 of the IFR states that card schemes and processing entities should be independent and should:
“not discriminate, for instance by providing each other with preferential treatment or privileged information which is not available to their competitors on their respective market segment, imposing excessive information requirements on their competitor in their respective market segment, cross-subsidising their respective activities or having shared governance arrangements.”
Article 7 sets out the rules intended to ensure such independence and separation, providing that payment card schemes and processing entities shall:
- be independent in terms of accounting, organisation and decision-making processes;
- not present prices for payment card scheme and processing activities in a bundled manner and shall not cross subsidise such activities; and
- not discriminate in any way between their subsidiaries or shareholders on the one hand, and users of payment card schemes and other contractual partners on the other hand, and shall not make the provision of any service they offer conditional in any way on the acceptance by their contractual partner of any other service they offer.
And further that:
- competent authorities may require payment card schemes to provide an independent report confirming compliance with such rules;
- payment card schemes shall allow for the possibility that authorisation and clearing messages of single card-based payment transactions be separated and processed by different processing entities;
- territorial discrimination in processing rules operated by payment card schemes are prohibited;
- processing entities within the EU shall ensure system interoperability with other systems of processing entities; and
- payment card schemes shall not adopt or apply business rules that restrict interoperability among processing entities within the Union.
In order to contribute to these aims and ensure compliance, the IFR confers on the EBA a mandate to develop regulatory technical standards (“RTS”) to separate payment card schemes and processing entities in terms of accounting, organisation and decision making process. The consultation paper includes the draft RTS at section 4, supplemented where necessary by examples, the rationale behind a provision, and sets out specific questions for the consultation.
Broadly, the consultation asks respondents to confirm whether they agree with the RTS as currently drafted. Responses to this consultation can be sent to the EBA until 8 March 2016. The EBA will then assess the responses received and use them as input for the development of the final draft RTS, which it will publish in Q2 of 2016.