Legal and Regulatory Framework for Electronic Money ...€¦ · Legal and Regulatory Framework for...

1

Legal and Regulatory Framework for Electronic Money Instruments

EU Payment services directive and e-money directive

as a tentative benchmark

Prof. M.C. Malaguti PSDG Legal Expert

2

Overview of the PSD

•  It establishes who may provide payment services

•  It imposes transparency requirements in the provision of the service

•  It sets out the relative rights and obligations of service provider and service user

3

Who can provide the service?

Credit institutions Whose business is

to receive repayable funds from the public,

whether in the form of deposits

or in other forms such as the continuing issue of bonds

E-money institutions Receipt of funds from the public in exchange for

electronic money. Store-value

(credit balance). Redeemability not an issue

Payment institutions Forbidden from taking deposits

or other repayable funds; customers funds

can be taken until end of day

following reception; credit granted under limited

conditions

Yet, no need for a payment account: money remittance

SOME HYPOTHESIS

4

Bank

customers

MNO A

B

C C account

B account

Bank

customers MNO

A

B

C

Customers Funds stored

Bank

customers

MNO A

B

C C account

Pooling account

M-banking with agents

Bank

customers

MNO A

B

C C account

Pooling account

merchant

BACK TO THE PSD

9

10

Authorization regime

Supervisory regime

Safeguarding measures for users

Granting fair access of PI to payment

systems

pricing

Applicable conditions

Rules for unauthorized payment

transactions

Rules on irrevocability

Rules on refunds

Rules on execution time

Rules on defective execution

Pillar I

Authorization and supervision regime for

PI

Pillar II

Transparency requirements applicable to all PSPs

Pillar III

Rights and obligations of PSU and PSPs in a payment transaction

Protection of users Competitive EU market

Slide from Ceu Pereira

11

Regulatory choices:

Pillar I

Authorization and supervision regime for

PI

Authorization regime

Supervisory regime

Safeguarding measures for users

Granting fair access of PI to payment

systems

Qualitative/quantitative

More/less burdensome

Higher/lower barriers to entry

Scope of authorized activities

Maximum/minimum harmonization

Degree of interference with some payment systems’ rules

Slide from Ceu Pereira

12

Regulatory choices:

Pillar II

Transparency

Charges

Other contractual terms

Value dates

Derogations for new payment methods

More/less information

free of charge or not

Make available/provide

Support: paper or other?

No hidden tariffs

Maximum/minimum harmonization

Which derogations can be justified

Slide from Ceu Pereira

13

Regulatory choices:

Pillar III

Rights and obligations of the parties

unauthorized payment transactions

irrevocability

refunds

execution time

defective or non execution

Derogations for new payment methods

Degree of sharing of cost between users/PSPs

Level of service

More / less users' protection

Which derogations can be justified

Slide from Ceu Pereira

14

Agents and Outsourcing of operational functions

•  Outsourcing operational functions may not be undertaken in such a way to impair materially the quality of the internal control and monitoring capacities of relevant authorities

•  Relationship and obligations of the PI shall not be altered

SOME QUICK CONCLUSIONS

15

Legal and regulatory approaches for an

innovative retail payment space

16

Functional approach

•  Risk-based approach •  Outsourcing •  Agents networks

17

Structure of the market

•  Access to clearing and settlement •  Interoperability •  Foreclosure of the market

18

Protection of users

•  Transparency •  Security of communication network •  Protection of funds of customers

19