Welcome to the latest edition of Osborne Clarke's Payments Law Update. In this edition we take a look at some key industry developments in the last quarter.
If you would like to discuss any of the topics covered in this Update, please contact one of the experts listed below.
A managed rollout for SCA in the cards sector
UK Finance has been working extensively with the cards industry and the retail sector to understand operational readiness for the introduction of SCA in September 2019. As a result, it has approached the FCA for agreement to a managed rollout of SCA for card transactions in an e-commerce context, effectively deferring, subject to conditions, mandatory SCA by 18 months to 14 March 2021.
Due to the cross-border nature of payments, it believes a pan-European approach should be taken, and has provided its Shared Industry Roadmap to Operational Readiness with the European Commission and other national associations in Europe for consideration.
Osborne Clarke has been supporting this significant activity by UK Finance and in this article, we share some insights from this work.
PayPal / iZettle | A paradigm shift in UK merger control?
On 11 June 2019, the CMA announced that it had unconditionally cleared PayPal's acquisition of iZettle, the innovative Swedish FinTech company that offers mobile point-of-sale services, following an in-depth six month Phase II investigation. This clearance decision is to be welcomed, as concerns had been growing about the tightening of regulatory scrutiny on deals in the FinTech sector.
The clearance decision showcases the CMA's more forensic approach to assessing the impact of a merger in a dynamic market.
The decision has been seen as an important indicator of the CMA's current approach to mergers in the digital sector.
The impact of CBPR2 on the payment industry | The equality of charges principle
On 19 March 2019, the European Parliament and Council adopted Regulation 2019/518 amending Regulation 924/2009 as regards certain charges on cross-border payments in the Union and currency conversion charges. Regulation 2019/518 came into force on 18 April 2019 but its provisions will progressively become applicable between 15 December 2019 and 19 April 2021.
This Regulation introduces two amendments: (i) the extension of the equality of charges principle in non-euro Member States; and (ii) new rules on the transparency of charges regarding currency conversions for payments.
This Regulation will a have an important impact on the industry, by limiting revenues of payment service providers and forcing them to implement significant changes in their processes and IT systems.
In this article, we focus on the changes to the equality of charges rule.
PSR to require the roll-out of Confirmation of Payee scheme
On 9 May 2019, the Payment Systems Regulator published a consultation on giving a specific direction for the implementation of Confirmation of Payee. CoP is a name-checking service that has been identified by the PSR and the payments industry as an important tool to help prevent Authorised Push Payment scams and accidentally mis-directed payments.
CoP is an industry-agreed way of ensuring that names of payment recipients are checked before payments are sent, meaning corrections can be made before the payment is made.
In phase one of the roll-out, six major banking groups will need to ensure that they are capable of receiving and responding to CoP requests by 1 December 2019 and sending CoP requests by 31 March 2020.
EBA tightens outsourcing regime for wider range of firms under new guidelines
With the release of the EBA’s updated outsourcing guidelines for financial institutions on 26 February 2019, a single regime encompassing both outsourcing and cloud outsourcing has been introduced. This regime is one that is far more expansive, detailed and prescriptive for financial institutions caught within its remit. Now, investment firms and payment and e-money institutions will also have to ensure they are compliant with the heightened requirements.
Service providers providing outsourced services will also need to understand this framework as it may impact their contractual negotiations and their service management. For some firms operating in the Fintech space this will mean a significant compliance burden lies ahead.