Global Payments Newsletter, June 2020

Key developments of interest over the last month include:

  • Brazil: The Central Bank of Brazil has confirmed that open banking regulations will begin to be implemented from November 2020. The implementation will consist of four phases, to end in October 2021.
  • Europe: The EBA has published an opinion under Article 32(3) of the RTS on SCA and CSC (SCA RTS) on obstacles to the provision of payment initiation and account information services in the context of dedicated interfaces. The EBA issued this opinion to ensure that the SCA RTS (mandated under PSD2) are implemented consistently.
  • United Kingdom: The FCA has published draft additional temporary guidance to strengthen payment firms' prudential risk management and client money safeguarding arrangements in light of COVID-19.

In this Newsletter:

For previous editions of the Global Payments Newsletter, please visit our Financial Services practice page.

Regulatory Developments

Brazil: Implementation of open banking rules to begin in November 2020

On 8 May 2020 Banco Central do Brasil (BCB) announced that it would begin to implement open banking regulation in November 2020. This will allow financial institutions, payment institutions and other companies to securely share data as long as they are licensed by the BCB.

It is hoped that open banking will spur competition in Brazil by reducing the inequality of information between market players. Open banking is also expected to increase customer satisfaction and convenience.

Open banking will be implemented through a phased process, where gradually more types of information may be shared after each phase. Implementation is expected to finish by October 2021.

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Europe: EBA opinion on obstacles to providing account information services (AIS) and payment initiation services (PIS) under SCA RTS

On 4 June 2020 the EBA published an opinion under Article 32(3) of the RTS on SCA and CSC (SCA RTS) on obstacles to the provision of PIS and AIS in the context of dedicated interfaces. The EBA issued this opinion to ensure that the SCA RTS (mandated under PSD2) are implemented consistently.

To provide some context, account providers (ASPSPs) that offer access via a dedicated interface must ensure that the interface doesn't create obstacles to the provision of AIS and PIS by third-party providers (TPPs). However, although the SCA RTS provided some examples of potential obstacles, there was still a grey area over what would be considered "obstacles".

Some key points from the opinion are:

  • One measure of whether an interface imposes an obstacle is whether "the authentication procedure with the ASPSP is more cumbersome compared to the equivalent experience [users] have when directly accessing" their accounts.
  • Redirection is not an obstacle in itself. If redirection allows the TPP to rely on all the authentication methods offered by the ASPSP (for the equivalent direct journey), then it is unlikely to add additional obstacles.
  • On redirection at point-of-sale, where an ASPSP offers payment service users the possibility to perform instant payments at the point of sale directly, the ASPSP should allow TPPs to do the same using PISP services.
  • Re-authenticating every 90 days isn't an obstacle: the requirement to apply secure customer authentication applies to each access, including access via an AIS provider, subject only to the limited exemption under Article 10 of the SCA RTS.
  • ASPSPs checking a TPP's consent is an obstacle.

The EBA expects national competent authorities (NCAs) to act as necessary to ensure compliance of the interfaces offered by ASPSPs with PSD2 and the SCA RTS. Where obstacles are identified, NCAs should ensure that ASPSPs remove them as quickly as possible. The EBA will monitor the way in which the clarifications provided in the opinion are taken into account, and will take remedial action where it identifies inconsistencies.

See further information here.

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United Kingdom: FCA guidance consultation for payment firms in light of COVID-19

On 22 May 2020 the FCA published draft additional temporary guidance to strengthen payment firms' (including payment institutions (PIs) and e-money institutions (EMIs)) prudential risk management and client money safeguarding arrangements in light of COVID-19. The guidance is part of a broader programme of work the FCA was planning to consult on later in the year. This has now been brought forward due to pressures COVID-19 is placing on firms' finances.

The FCA notes that guidance for firms on safeguarding and managing prudential risk is already available in its Payment Services Approach Document (Approach Document). However, it has evidence that some firms have not implemented the Electronic Money Regulations 2011 or Payment Services Regulations 2017 as expected. Therefore, this temporary guidance aims to provide additional clarity to help strengthen firms' prudential risk management and their arrangements for safeguarding customers' funds, as well as outline how firms can put in place more robust plans for winding down.

The guidance includes the following:

  • Reconciliation of client funds should be carried out daily and clearly documented.
  • The FCA should be notified in writing if firms can't comply with safeguarding requirements in a material respect.
  • Firms should receive the appropriate acknowledgement from safeguarding institutions that these safeguarding institutions have no interest in or right over the client funds being safeguarded.
  • Unallocated funds are not "relevant funds" for the purposes of safeguarding requirements, but should be protected in accordance with Principle 10, i.e. they should be segregated and held in a separate account from other funds.
  • Firms are reminded to have robust governance arrangements and internal control mechanisms.

The FCA also published a proposed acknowledgement letter for safeguarding banks and custodians alongside the draft guidance.

The consultation closed on 12 June 2020 with the aim of the final guidance, if confirmed, being published at the end of June 2020 along with a "Dear CEO" letter to payment service providers. A full consultation on changes to the Approach Document, which is likely to include a proposal to incorporate this temporary guidance in the Approach Document, will be conducted later in 2020. The FCA proposes that the temporary guidance will remain in place until the Approach Document is updated following the full consultation.

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France: Banque de France and Société Générale test central bank digital currency (CBDC)

On 14 May 2020 Société Générale reported on a successful experiment with CBDC. This experiment involved the issuance of bonds in return for digital euros issued by the Banque de France through a blockchain platform (see the related French press release from the Banque de France).

The success of this experiment shows that CBDC can be used to improve the efficiency of interbank settlements. This may translate into quicker payment processes in the future.

The partnership with Société Générale follows the Banque de France's call for applications on 27 March 2020 for companies to participate in the testing of a digital euro. The Banque de France will continue to experiment with CBDC with other companies over the coming weeks. The results of these experiments will help inform the EU's examination of the feasibility of CBDC.

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Europe: European Commission launches consultation on Digital Services Act

On 2 June 2020 the European Commission launched a public consultation to help it to formulate its proposals for a future Digital Services Act. The consultation is high-level and invites views and evidence from a variety of stakeholders on consumer safety, freedom of expression, fairness and competition in the digital economy.

The European Commission states that the Digital Services Act will:

  • Establish clearer and more modern rules concerning the obligations of online intermediaries, including non-EU companies operating in the EU.
  • Implement a more effective governance and enforcement system.
  • Ensure a level playing field in the digital markets, noting that a lot of the market power currently remains in the hands of a few online platforms. This could include rules on self-preferencing and/or regulatory obligations for powerful platforms.
    The consultation closes on 8 September 2020. The European Commission expects to publish its proposals for the Act at the end of 2020.

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Poland: Mastercard and Visa increase contactless payment limits to PLN 100

On 25 March 2020 Mastercard followed Visa to announce an increase in contactless payment limits from PLN 50 (around EUR 11.30) to PLN 100 (around EUR 22.60). The Polish public authorities (including the National Bank of Poland, the Polish Financial Supervision Authority and the Ministry of Finance) urged these card schemes to increase these limits so that consumers could avoid using cash during the COVID-19 pandemic. Mastercard and Visa had already received general permission to increase contactless payment limits by the President of the National Bank of Poland back in 2018 and 2019 respectively.

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United Kingdom: FCA confirms continued availability of support for innovative firms

On 13 May 2020 the FCA updated its dedicated Innovation Hub support webpage to clarify that, despite the challenges presented by the COVID-19 pandemic, support is still available for innovative firms through its Innovation Hub.

Via the Innovation Hub, the FCA supports firms, on request, who want to apply for authorisation. For example, a dedicated case officer can help with applications by explaining the regulatory regime and providing informal guidance on how firms can address any issues arising from their product, service or business model.

The FCA is particularly interested in firms aiming to help people and the financial systems they rely on to deal with the effects of the COVID-19 outbreak. For example, it is keen to hear from firms that are developing businesses, products or services that:

  • improve access to credit for consumers or SMEs;
  • improve access to cash, charitable donations and/or government aid;
  • help distribute funds; and
  • assist the identification of scams, e.g. phishing and push payment fraud.

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United Kingdom: Corporate Insolvency and Governance Bill introduced in Parliament

On 20 May 2020 the Corporate Insolvency and Governance Bill was introduced in Parliament. The Bill introduces both permanent measures, to be included in the Insolvency Act 1986 and the Companies Act 2006, and temporary measures intended to help companies who may be suffering from temporary difficulties due to the COVID-19 pandemic.

The measures include the following:

1.  Permanent measures:

(a)  A new standalone moratorium (lasting at least 20 business days) which gives companies breathing space from creditor action whilst trying to rescue the company as a going concern. 

(b) Restrictions on termination clauses which provide that termination clauses in contracts for the supply of goods or services triggered by the insolvency of the counterparty will cease to have effect.  Provisions in such contracts allowing the taking of any other action which are triggered by the insolvency of the counterparty will also cease to have effect.  Pre-existing rights of termination are suspended.

(c)  A new restructuring plan procedure, similar to a scheme of arrangement, which can bind both secured and unsecured creditors.  Unlike a scheme of arrangement the court can impose the plan on dissenting classes of creditors (the cross-class cram down).

2.  Temporary measures:

(a)  A prohibition on presenting a winding up petition based on a statutory demand issued between 1 March and 30 June 2020; a prohibition on presenting a winding up petition after 27 April 2020 where the creditor cannot demonstrate that the non-payment is unrelated to difficulties encountered by the company due to the COVID-19 pandemic; provisions allowing the court to reverse any petition presented or order made between 27 April and the date the Bill comes into force that wouldn't have been made had the legislation been in force.

(b)  A temporary suspension from 1 March to 30 June 2020 of the financial consequences for wrongful trading.  The court must assume during that period that nothing done by the director has contributed to the worsening of the company's financial position.

Some measures, including measures 1(a) and (b) and 2(b), exclude financial services firms including banks, electronic money institutions and payment institutions. This means that they can't benefit from these proposals. Equally, their services as a supplier won't be affected by measure 1(b).  

The Bill had all three readings in the House of Commons on 3 June 2020, its second reading in the House of Lords on 9 June and the committee stage on 16 June.  The third reading in the Lords is expected to take place on 23 June.  The Bill is expected to receive Royal Assent at the end of June or early July 2020.

See further information here.

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United Kingdom: FCA survey on firms' financial resilience

On 3 June 2020 the FCA announced that it would be conducting a short survey of around 13,000 firms relating to their financial resilience in light of COVID-19. The survey was due to be sent to firms between 4 and 8 June 2020.

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Italy: Changes to legislation implementing the revised Payment Services Directive (PSD2) and the Interchange Fee Regulation (IFR)

On 10 June 2020 Legislative Decree No. 36 of 8 April 2020 came into force. The key payments-related provisions of the Decree include:

  • An amendment to the Italian Consolidated Banking Act so that account information service providers no longer need to join the Bank of Italy's out-of-court dispute resolution system.
  • Amendments to Legislative Decree No. 11 of 27 January 2010, which implemented PSD2 and IFR in Italy, to:
    1. extend the applicability of the right of recourse, in line with Article 92 of PSD2, to include non-execution and defective or late execution of payment transactions initiated through a payment initiation service provider;
    2. clarify the requirement for payment card schemes to send the Bank of Italy a report on compliance with interchange fees rules; and
    3. review the sanctions regime for failing to comply with the IFR.

See further information here.

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United Kingdom: UK Finance publishes one year update on the authorised push payment (APP) code

On 28 May 2020 UK Finance published an update on the APP Contingent Reimbursement Model Voluntary Code (the Code) to mark one year since the Code was launched.

The Code was a result of collaboration between payment service providers (PSPs) and consumer groups.  Since its launch, nine PSPs have signed up, representing over 90% of the payment market in terms of volume. These PSPS have therefore committed to reimbursing victims as long as they meet the Code's standards. The number of reimbursements for victims has doubled as a result.

The Lending Standards Board will review the Code later this year, and is working with UK Finance to increase the number of signatory PSPs in the meantime.

UK Finance also calls on the government, regulators and other sectors to help fight APP fraud, including those who indirectly facilitate APP fraud, e.g. companies who have suffered data breaches.

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Europe: European Payments Council (EPC) consults on draft rulebook for SEPA Request to Pay (SRTP) scheme

On 2 June 2020 the EPC published for public consultation the proposed rulebook for the SRTP scheme. The SRTP scheme is based on the Request to Pay (RTP) specifications document produced by the RTP Multi-Stakeholder Group. RTP is a framework which allows a creditor to securely request payments directly from a payer. The payer is given flexibility on how and how much to pay. The payer can also ask for more time to pay or engage in dialogue with the creditor if they decline to pay for any reason.

The proposed rulebook sets out the operating rules and technical elements that enable RTP, as well as the rights and obligations of participants.

The consultation will close on 30 August 2020.  

Related to this is Pay.UK's launch of the RTP Framework on 29 May 2020. This includes the message standards, rules and terms and conditions for developing RTP services. Pay.UK has already started to pilot RTP standards, with Visa helping to test over 100 use cases.

See Visa's press release here.

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Europe: European Cards Stakeholders Group (ECSG) consults on SEPA cards standardisation (SCS) volume

On 1 May 2020 the ECSG, the association overseeing cards standardisation in SEPA, launched a consultation on version 8.5 of Book 3 – Data Elements of the SCS volume. Book 3 was not consulted on earlier alongside version 9.0 of the volume because Book 3 contains an update to the Acquirer-to-Issuer Card Messages (ATICA) Standard.

The deadline for responses to this consultation is 30 June 2020.

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United Kingdom: Competition and Markets Authority (CMA) approves changes to Retail Banking Market Investigation Order 2017

On 15 May 2020 the CMA published a notice of approval of changes to the timetable and project plan set out in the Retail Banking Market Investigation Order 2017.

The changes were made to take account of the impact of COVID-19. For example:

  • The nine banks and building societies taking part in the Open Banking project (CMA9) are allowed to defer implementation to certain areas.
  • The CMA9 will be expected to continue to investigate how performance could be improved.
  • Participation in consultations may be deferred until enough resources become available.

In terms of changes beyond timing, the CMA states that there are areas that will need to be looked into further, including:

  • The data security risks posed by reverse payments.
  • Customer evaluation frameworks.
  • Root cause analysis on consent rates.

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United Kingdom: Actions against Mastercard and Visa transferred to the Competition Appeal Tribunal (CAT)

On 2 June 2020 the CAT published a High Court order transferring actions brought by Westover Group Limited against Mastercard and Visa to the CAT. Each action involves 58 claimants. This group of claimants is pursuing Visa and Mastercard for multilateral interchange fees (MIFs) which it had allegedly overpaid for the past six years.

These actions derive from a decision against Mastercard by the European Commission in 2007, which found that Mastercard had set MIFs in a way that breached EU competition law.

The course of these cases might change in the future, subject to the pending Supreme Court judgment on a similar action against Mastercard and Visa which has been brought by the UK's biggest retailers, such as Sainsbury's and Asda.

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United States: Financial Crimes Enforcement Network (FinCEN) speech on AML/CTF during COVID-19

On 13 May 2020 Kenneth Blanco, FinCEN's director, delivered a speech at the 2020 Consensus conference. He said that FinCEN, the US government agency overseeing AML, has seen cybercriminals using the COVID-19 pandemic to target weaknesses in networks, carry out scams involving virtual currencies and attack the onboarding processes of virtual currency institutions.

Blanco also emphasised the importance of the travel rule in the fight against money laundering via anonymised transactions. This rule requires financial institutions, including virtual asset service providers, to collect and send information regarding payers and counterparties in certain transactions.

Blanco also warned that foreign businesses who try to transact with US residents without complying with US legislation should be identified and reported.

The speech concluded with the encouragement of cooperation between cross-sector organisations and virtual currency institutions.

See further information here.

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Global: Bank for International Settlements (BIS) brief on AML and cyber resilience during COVID-19

On 14 May 2020 BIS's Financial Stability Institute published a brief on AML and cyber resilience measures in light of COVID-19. 

The brief notes that COVID-19 has increased the risk of cyber attacks, money laundering and terrorist financing as more people are using digital payments and remotely accessing networks; financial institutions conduct digital onboarding; and operational risks are increased.

The brief also reiterates the efforts of authorities worldwide to ensure that financial institutions are increasingly vigilant to these threats, especially with regard to:

  • IT networks.
  • Third-party risks.
  • Cyber security incident response plans.
  • Staff training.

It should also be noted that machine learning may be less equipped to deal with money laundering risks arising from COVID-19, especially if they are trained on historic data.

Information should also be shared between the public and private sectors and among jurisdictions, and the flexibility offered by the recommended risk-based approach to AML/CTF risks should be used.

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Sweden: Launch of the Swedish Anti-Money Laundering initiative

On 27 May 2020 Danske Bank announced that it has joined four of Sweden's largest banks (Handelsbanken, Nordea, SEB and Swedbank) to launch the Swedish Anti-Money Laundering initiative. Through this initiative, the banks and Swedish police authorities will share information on methods, suspicious transaction patterns and new types of crime which they have identified.

The project will enter a pilot phase and is expected to launch fully next year. It is expected that more banks will join the scheme in due course.

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United Kingdom: Joint Money Laundering Steering Group (JMLSG) revises AML/CTF guidance  

On 1 June 2020 the JMLSG announced the publication of its finalised AML/CTF guidance to reflect the amendments made by the Money Laundering and Terrorist Financing (Amendment) Regulations 2019 to the Money Laundering Regulations 2017 in light of MLD5.

These amendments were made following the JMLSG's consultation in February 2020, but the JMLSG doesn't explain what responses they received and how its guidance has changed to take these into account.

The amended versions of the JMLSG's guidance have been submitted to HM Treasury for approval. The anticipated new chapter on cryptoasset exchanges and custodian wallet providers has not yet been finalised.

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Poland: PFSA publishes sample AML/CTF questionnaire for banks to use for payment institutions

On 2 June 2020 the Polish Financial Supervision Authority (Komisja Nadzoru Finansowego) (PFSA) published a Communication and a sample questionnaire covering the scope of information banks should obtain from payment institution customers for the purpose of AML/CTF checks. According to the Communication, this questionnaire will help harmonise banks' approaches towards the payment services industry and increase compliance with the Polish AML Act.

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Europe: European Financial and Economic Crime Centre (EFECC) launches

On 5 June 2020 Europol launched its EFECC to help EU member states fight against financial and economic crime and conduct financial investigations systematically. It will serve as a "platform and toolbox" for investigators across Europe and increase cooperation between member states. The EFECC will also be staffed with 65 international experts and analysts.

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Europe: European Parliament's Economic and Monetary Affairs Committee (ECON) publishes draft recommendations on digital finance

On 4 June 2020 ECON published a draft report containing its recommendations to the European Commission for its digital finance strategy. The report targets the areas which ECON believes need EU-wide legislation to address fragmentation. For example, the report recommends:

  • A cryptoassets framework, starting from a common definition of what a "cryptoasset" is. The framework should balance innovation against regulatory control appropriately and be able to cover future cryptoasset activities.
  • Legislative changes to ICT and cybersecurity requirements for the financial sector so that incidents are reported, operational resilience is tested, and third-party providers are supervised.
  • A framework for digital onboarding and digital identities.
  • Greater oversight on how big data is used.

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Austria: Raiffeisen Bank International testing national digital currency with Billon

On 18 May 2020 British-Polish fintech Billon announced the success of a proof of concept with Austrian Raiffeisen Bank International (RBI). The proof of concept is the tokenisation of a national digital currency through a RBI platform using Billon's blockchain technology. With blockchain technology, the platform aims to speed up processes, provide more certainty as to the status of payments and reduce errors.

The platform will be tested with selected corporate and institutional clients of RBI for particular use cases, e.g. real-time money transfers or improving cut-off times for custody matters.

The pilot is expected to take place by the end of 2020. This project is an example of the global trend towards developing a central digital currency.  

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Lithuania: Bank of Lithuania issues guidelines on opening accounts for electronic money institutions (EMIs) and payment institutions (PIs)

On 28 May 2020 the Bank of Lithuania published a Position on credit institutions opening accounts for EMIs and PIs. It covers the following:

  • There are three types of bank account which can be opened for EMIs and PIs:
    1. Current accounts to handle an institution's own funds.
    2. Accounts for the safeguarding of an institution's client funds.
    3. Accounts for the execution of payments by an institution's clients.
  • The principles of objectivity, non-discrimination and proportionality should be adhered to by credit institutions when dealing with EMIs and PIs.
  • Decisions to implement extreme measures based on AML/CTF, e.g. closing an account, should be impartial and made only after risk management and mitigations measures are applied.

Practice to be followed when a credit institution closes an EMI or a PI's account.

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Europe: European Parliament study on consumer protection in digital services and AI

On 2 June 2020 the European Parliament published a study on the new aspects of consumer protection in the context of digital services and AI.  

The study notes that the data of online consumers needs to be protected from online service providers such as search engines, online payment providers and content sharers. There are particular concerns in situations where such services are provided for free and rely on the ability to provide targeted advertising instead. AI is used to operate targeted advertising and to spot patterns between consumer data and their responses to advertisements. Eventually, targeted advertising may be able to influence purchasing behaviour as more data is collected.

The study also sets out policy recommendations, such as:

  • Consumers should be able to opt-out of being tracked.
  • There should be guidance as to what algorithms may constitute aggressive advertising.
  • There should be mitigation measures and redress mechanisms to protect consumer privacy.
  • Consumer-friendly AI should be encouraged.
  • Limitations on the secondary liability of online service providers such as search engines and social media networks should not apply when providers have failed to adopt reasonable precautionary measures that could have prevented users' unlawful behaviour or mitigated its effects. This failure may also depend on not having adopted the most effective AI technologies.

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Global: New York and French regulators sign memorandum of understanding on fintech cooperation

On 3 June 2020 the New York State Department of Financial Services (DFS) announced that it had signed a memorandum of understanding with the French regulator, Autorité de Contrôle Prudentiel et de Résolution (ACPR), to boost fintech innovation.  

Through this agreement, the DFS and the ACPR will:

  • Refer fintech companies to each other to ease access to each other's financial services markets.
  • Exchange information about regulatory and policy thinking.
  • Support each other's fintech innovators.
  • Share regulatory and supervisory expertise.

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United States: Faster Payments Council publishes white paper on interoperability

On 4 June 2020 the US Faster Payments Council (FPC) published a white paper on interoperability to help different payment solutions work together smoothly. The purpose of the white paper is to provide a foundation for approaches to interoperability.

The paper does this by covering the following areas:

  • The different models that can achieve payments interoperability between systems, e.g. point of origination, network to network or through an intermediary.
  • The various forms of settlement which centre around timing and netting:
    • Deferred gross settlement.
    • Deferred bilateral net settlement.
    • Deferred multilateral net settlement.
    • Real-time gross settlement.

The FPC hopes that this paper will contribute to the ongoing dialogue within the industry.

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Payment Market Developments

Ghana: National QR code payment solution launched

On 14 May 2020 global payment solution provider, HPS, announced the launch of the Universal QR Code platform with the Bank of Ghana. This platform enables customers to make payments instantly for goods and services regardless of payment method.

Ghana is the first country in Africa to launch a QR code payment system at a national level. This solution will also help people avoid using cash during the COVID-19 pandemic.

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Poland: Mastercard becomes a shareholder of the Polish Payment Standard (Polski Standard Płatności) (PPS)

On 15 April 2020 PPS, the operator of BLIK, announced that Mastercard has become one of its shareholders after being entered into the National Court Register. This was the final stage to implementing the strategic partnership between the two companies, which was initiated with a letter of intent in December 2018. BLIK is a mobile payment system available to most Polish banks, and aims to leverage Mastercard's global network so that its users can make transactions around the world. BLIK and Mastercard are also working together to develop contactless payments for BLIK users.

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China: WeChat launches personal credit rating for users

On 12 May 2020 it was reported that WeChat Pay, China's leading digital payment system, will now give its users a credit rating called "payment points". This rating is said to represent a user's "credibility" as it is based on their personal and credit records and other factors. This figure is calculated using AI technology. WeChat hopes that this credit rating will be used by credit institutions.

There are concerns, however, regarding user privacy and the consequences that will follow if WeChat suffers a data breach.

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Israel: Mastercard opens lab to advance fintech and cybersecurity

On 13 May 2020 Enel X, a technology company focused on the energy sector, announced that it is launching a lab in Israel with Mastercard. The aim of the lab is to develop innovative solutions in relation to fintech and cybersecurity for the payments and energy markets. The lab will work with start-ups to help develop and test such solutions.

This lab is the result of a tender launched by the Israel Innovation Authority. The Israeli government will therefore assist with the lab's establishment. For example, it will grant a licence for three years and provide around $3.7 million of public funding.

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United Kingdom: Co-operative Bank implements Confirmation of Payee solution

On 19 May 2020 Exela Technologies announced that its partnership with the Co-operative Bank has been extended to implement Exela's Confirmation of Payee platform. Although the Co-operative Bank has not been mandated by the Payment Systems Regulator to implement Confirmation of Payee, they have recognised the importance of this additional layer of security for customers.

Exela's platform already processes millions of verification requests a day for other banks. The Confirmation of Payee solution will help reduce the amount of fraud and customer errors.

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Global: PayPal launches QR code payments in 28 countries

On 19 May 2020 PayPal announced that it has implemented QR code functionality in 28 countries, including the UK. This means that customers using the PayPal app can make in-store payments touch-free. The new function was developed with social distancing requirements in mind and the resulting demand for digital payments.

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United Kingdom: Successful proof of concept relating to payments via video

On 29 May 2020 UK-based fintech, Gala Technology, announced that they have successfully carried out a proof of concept on the processing of secure payments via video conferencing technology.

Due to social distancing measures, video conferencing service providers such as Zoom, Microsoft Teams and Webex have increased in popularity. Gala Technology aims to allow businesses to accept secure payments via video conference which comply with the Payment Card Industry Data Security Standard. This will be done by using Gala Technology's SOTpay technology, which is its existing "Cardholder Not Present" payment solution.

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Japan: JCB to research the possibility of a blockchain-based payment system

On 1 June 2020 Japanese card company, JCB, announced a partnership with a technology accelerator, TECHFUND Inc. The aim of the partnership is to research the development of a blockchain-based payment system.

The partnership will leverage TECHFUND's blockchain technology, such as security token offerings. It appears that the research will also involve testing with JCB's merchant and customer network in the future.

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United Kingdom: Rapyd launches all-in-one payment solution in the UK

On 2 June 2020 global fintech company, Rapyd, announced the launch of its all-in-one payment solution in the UK. This allows both local and foreign businesses to offer payment methods local to the user, including cash, mobile wallets and cards, through a single API.

Rapyd's payments network supports more than 900 payment methods in over 100 countries, and its all-in-one solution combines these methods into a single connection. This not only provides convenience for consumers, but also makes payments seamless for companies.

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Sweden: P27 Nordic Payments starts to lay down payment rails

On 3 June 2020 the SEB Group announced that P27 Nordic Payments has started to lay down payment rails in preparation for implementing a harmonised payments platform for the Nordic countries.

P27 Nordic Payments is an initiative involving six banks in total, including the SEB Group, which aims to enable multi-currency real-time payments across Sweden, Denmark and Finland. With this harmonisation, account-to-account payments will be made possible, regardless of who the payee banks with.

These countries have set up committees that will coordinate the banks' migration to the future payments infrastructure, including the ISO 20022 standard. This standard is used for SEPA payments, but the Scandinavian countries have yet to use this infrastructure.

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Saudi Arabia: MoneyGram to provide remittance services in Saudi Arabia

On 4 June 2020 MoneyGram announced its partnership with the world's largest Islamic bank, Al Rajhi Bank, to provide remittance services in Saudi Arabia. The partnership will include both digital and offline requests for money transfers.

As Saudi Arabia reportedly has over 11 million immigrants, this partnership is a strategic investment for MoneyGram. It is one of a series of partnerships that MoneyGram has entered into in other countries such as India and the Philippines.

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Italy: UniCredit uses open banking

On 4 June 2020 Italian bank UniCredit announced the launch of an account aggregating feature. This enables customers to view all their current accounts, including those held with other banks, online or through UniCredit's mobile app. This is made possible through open banking.

The service is currently available in Italy. It will then be rolled out in Germany and Austria by October 2020, followed by the other Group PSD2 countries.

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Switzerland: Central open banking platform launched

On 19 May 2020 Swiss Stock Exchange operator, SIX, announced the launch of the b.Link platform. This central platform provides standardised APIs to allow financial institutions and third-party providers to share customer data, subject to customer consent, and initiate payment requests.

To connect to b.Link, participants have to be approved by SIX and show that they can securely handle sensitive financial data.

Certain banks have already joined b.Link such as Credit Suisse and UBS. SIX will now focus on increasing the number of participants.

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Surveys and Reports

Global: Number of open banking users will double by 2021 according to Juniper Research

On 19 May 2020 Juniper Research published its findings from a study into open banking. It predicts that the number of open banking users worldwide will double by 2021 to reach 40 million.

It also reports that the COVID-19 outbreak boosted the need for customers to aggregate their accounts and view their financial health holistically. This in turn has led to the increased popularity of open banking.

According to the Juniper Research findings, the growth in open banking is said to be led by Europe where the region's regulator-led approach has ensured a level playing field with low barriers to entry. In contrast, the lack of regulatory intervention in the US seems to have limited open banking's potential in that region.

Juniper Research encourages banks and card networks to embrace open banking as competitors come into the picture and payments evolve.

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Canada: Move towards digital payments because of COVID-19

On 22 May 2020 Canada's leading payment service provider, Interac, reported that its data shows Canada's move towards digital payments. Interac reports that from mid-March 2020, the number of first-time users of Interac's e-Transfer service, which allows online banking customers to transfer money electronically, increased by 43%. 61.3 million Interac e-Transfer transactions also took place in April 2020, which is a record number. Interac further recorded a double-digit growth in in-app and in-browser payments since mid-March 2020. 

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Global: Financial institutions show great interest in open banking

On 26 May 2020 Finastra published a report following its survey of over 750 financial institutions across the US, UK, Singapore, France, Germany, Hong Kong and the UAE.

According to the report, 86% of the banks surveyed are exploring how they can use open banking in the next 12 months, with 30% believing that open banking is already making an impact.

The survey also records that 48% of respondents believe that regulation is too strict and that there is not enough support for innovation from the government or industry. Notably, the respondents in the UK complained the least about the regulatory framework compared to the respondents based in other countries.

In terms of the way forward, 83% of the respondents believe that regulations should be harmonised between different countries. Continuing to collaborate with fintechs is also encouraged.

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Europe: 78% of transactions in Europe are contactless

On 28 May 2020 Mastercard published its findings from a study into transactions in Europe. Mastercard reports that 78% of all transactions in Europe are now contactless. Mobile contactless payments, rather than by debit or credit card, also doubled in Q1 2020 from 7% to 14%.

Mastercard indicates that the increase in contactless payments may reflect a permanent shift in behaviour that will continue even after the COVID-19 pandemic passes.

Mastercard also notes that some survey respondents still had concerns about fraud, so measures have been implemented, e.g. cumulative limits and increased fraud controls.

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Global: Plaid and 11:FS report on open finance

On 4 June 2020 11:FS published a report in collaboration with Plaid on the move from open banking to open finance.

The companies use their experience and their joint submission to the FCA's Call for Input on open finance to set out the successes and weaknesses of open banking. For example, they note the impact of the UK's Open Banking regulation and the EU's revised Payment Services Directive (PSD2) which have sped up account application processes and ID verification services.

However, they encourage increased access to data beyond payment accounts to assist with long term financial planning and to give lenders a holistic picture of a customer's finances, e.g. a customer's investments and insurance policies. This is known as open finance.

The report also makes some recommendations in respect of how policy-makers should approach open finance:

  • Customers should have a right to all their personal data to enable access.
  • Regulations should address areas such as access, liability and governance to increase certainty for customers.
  • The different sectors that may be involved in open finance should be evaluated to see where regulatory intervention is needed to allow access to customer data, e.g. the insurance and pension sectors.
  • There should be proportionate liability between those involved in open finance so that customers are protected.
  • Open finance infrastructure should be left to the market to build, instead of regulation trying to enforce a standard API.

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Authored by Virginia Montgomery and Julie Patient

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Beata Balas-Noszczyk
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James Black
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Jonathan Chertkow
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Gregory Lisa
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Victor de Vlaam
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Roger Tym
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Julie Patient
Counsel
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Pierre Reuter
Office Managing Partner
Luxembourg

 

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