The German Federal Cartel Office (FCO) recently concluded its investigation into the terms and conditions for online banking commonly used by German banks. The FCO found that restrictions on consumers from sharing their PIN or TAN (transaction authentication number) with third parties could impede the development of the alternative payment services market.
What’s behind the investigation?
The Deutsche Kreditwirtschaft is the joint committee operated by the central associations of the German banking industry and which sets recommended terms and conditions for online banking by its members.
The alternative payment services market for e-commerce is booming. Some of these services require the customer to provide their personalised security features, such as TAN and PIN. The alternative payment service provider requires this information in order to transfer it to the customer’s bank in encrypted form, so that the bank can execute the transfer. The banks believe that the security of online banking and the protection of their customers’ data could be jeopardised because revealing the “key to the client’s account” to third parties allows for unauthorised access and leads to serious risks of abuse.
For that reason, the member associations of the Deutsche Kreditwirtschaft prohibited the conveyance of online banking data to non-bank third parties in online payments through its recommended terms and conditions.
The FCO has now found these clauses to be incompatible with German competition law, as they are considered to “impede new and innovative services on the growing market for online payments“. Although the authority agreed with the banks that online banking security has to be ensured, it considers that the confidentially obligation is not an “indispensable part of a consistent security concept“.
What is the impact on alternative providers of online payment services?
The competition authority’s decision is just one step in a continuing debate between the Deutsche Kreditwirtschaft and alternative online payment services and the Deutsche Kreditwirtschaft has already filed an appeal to the competent Higher Regional Court of Düsseldorf.
The FCO seems alive to the implications of its decision and granted a suspension of the immediate enforceability of that decision. This means that the existing terms and conditions remain effective until the court confirms the FCO’s decision.
The current debate may become obsolete when the second Payment Services Directive (PSD2) is transposed into German law, which will open competition for payment services by non-banks. The transposition is due in the beginning of 2018.