In this Newsletter:
For previous editions of the Global Payments Newsletter, please visit our Financial Services practice page.
Regulatory Developments
United Kingdom: HM Treasury consultation on new special administration regime for payment institutions and electronic money institutions
On 3 December 2020 HM Treasury (HMT) issued a consultation on proposed insolvency changes for payment institutions (PIs) and electronic money institutions (EMIs), including a bespoke special administration regime (SAR). HMT notes the shortcomings of the current insolvency regime and is making these proposals ahead of the conclusion of the Payments Landscape Review to protect consumers in the event of the insolvency of PIs and EMIs.
The proposed SAR is intended to have the following key features:
- An explicit objective on the special administrator to return customer funds as soon as reasonably practicable.
- A bar date for client claims to be submitted to speed up the distribution process.
- A mechanism to facilitate the transfer of customer funds to a solvent institution.
- A post-administration reconciliation to top-up or drawdown funds to or from the safeguarding process.
- Provisions for continuity of supply to minimise disruption.
- Rules for treatment of shortfalls in the institutions' safeguarding accounts.
- Rules for allocation of costs.
- An explicit objective on the special administrator for timely engagement with payment systems and authorities.
HMT explains that Part 24 of the Financial Services and Markets Act 2000 (FSMA) provides the FCA with specific powers to protect consumers in an insolvency process of an FCA authorised firm. While the Payment Services Regulations 2017 (PSRs) and Electronic Money Regulations 2011 (EMRs) incorporate some FSMA insolvency provisions, it also proposes extending the full suite of provisions to PIs and EMIs so that the FCA has the same rights to participate and protect consumers in an insolvency process for PIs and EMIs, as it does for other FCA supervised firms.
Two annexes to the consultation paper provide details of the draft regulations for the proposed SAR. The regulations will create the new regime. On 17 December 2020, the government will publish a further annex with details regarding rules for the proposed SAR. The rules will be closely related to the investment bank SAR rules with minor modifications.
Responses to this consultation (and its two annexes) are requested by midnight on 14 January 2021. Responses specifically on proposals for the rules to be published on 17 December 2020 are requested by midnight on 28 January 2021.
Publication of the consultation was preceded by publication of the Payment Services and Electronic Money (Amendment) Regulations 2020 (SI 2020/1275) and an explanatory memorandum on 16 November 2020. The Regulations amend the EMRs and the PSRs to apply sections 93(4) and 233 to 236 of the Banking Act 2009, with modifications, to authorised electronic money institutions, small electronic money institutions, authorised payment institutions and small payment institutions. This enables HMT to create the new insolvency regulations and rules for the payments and e-money sector. The Regulations were made on 12 November 2020 and came into force on 8 December 2020. There was no open consultation on the Regulations, but HMT did informally consult some affected parties including the FCA, the Insolvency Service and a number of insolvency practitioners and trade associations.
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France: ACPR’s position on the application of PSD2 to telephone operators
On 4 December 2020 the French banking regulator (Autorité de Contrôle Prudentiel et de Résolution (ACPR)) published a document on the ways in which telephone operators should comply with payment services regulatory requirements (ACPR Document).
The ACPR Document addresses circumstances in which telephone operators are involved in payment transactions initiated by customers purchasing services, such as mobile app and related services, from a content editor (e.g. the price of the app or related services being invoiced by the telephone operator on the telephone bill). The ACPR Document focuses on the scope of payment services and related obligations (e.g. delays in execution, transparency requirements and safeguarding obligations).
The ACPR Document is based on investigations conducted by the ACPR throughout 2020 in relation to telephone operators. The aim of those investigations was to assess operators’ level of compliance with PSD2 principles as well as licensing requirements. The ACPR Document also stated that additional investigations will be initiated by the end of the year. Telephone operators will have one month from receipt of a formal request from the ACPR to address its queries.
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Singapore: Non-bank financial institutions to gain access to FAST and PayNow
On 30 November 2020 the Monetary Authority of Singapore (MAS) announced that eligible non-bank financial institutions (NFIs) that are licensed as major payment institutions under the Payment Services Act will be allowed to connect directly to Fast and Secure Transfers (FAST) and the PayNow overlay central addressing service which runs on top of the FAST payment system.
The shift to direct access will enable users of NFI e-wallets to make real-time funds transfers between bank accounts and e-wallets as well as across different e-wallets. At the moment most e-wallets require the use of debit or credit cards to top-up funds, and funds transfers between e-wallets are not possible.
NFIs will have this direct access to the banking system’s retail payments infrastructure from February 2021.
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Europe: ECB consultation on revisions to oversight requirements for systemically important payment systems
On 27 November 2020 the European Central Bank (ECB) published a consultation on amendments to the Regulation on oversight requirements for systemically important payment systems ((EU) 765/2014) (the SIPS Regulation).
The ECB has published draft versions of the following legal acts together with a press release:
The ECB proposes three amendments to the SIPS Regulation:
- Setting out criteria for determining which of the Eurosystem central banks should be designated as the competent authority for conducting the oversight of a SIPS. In exceptional circumstances, where a pan-European payment system has been overseen by a national central bank for five years or more before becoming a SIPS, it would also be possible to designate two competent authorities, requiring further technical amendments to two implementing decisions.
- Ensuring all relevant factors can be taken into account when assessing the systemic importance of a payment system. One such factor is the nature and importance of the payment system’s participants, so it is proposed that, alongside the existing criteria for the classification of a payment system as a SIPS, an additional, flexible and forward-looking methodology for the identification of a payment system as a SIPS should also be put in place.
- Introduction of a phasing-out period before reclassifying a SIPS as a non-SIPS.
The consultation closes on 8 January 2021, after which the final versions of the revised legal acts will be published together with a summary of the consultation feedback (including individual responses where agreed by the respondent).
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United Kingdom: House of Commons Treasury Committee call for evidence on further inquiry into future of UK's financial services post-Brexit
On 20 November 2020 a House of Commons Treasury Committee press release announced the launch of a new inquiry into the future of financial services in the UK after the end of the Brexit transition period. The Committee has also published an accompanying call for evidence and a related webpage.
Among other things, the Committee will examine how financial services regulations should be set and scrutinised by Parliament and it will also assess the government's financial services priorities when negotiating trade agreements with third countries, as well as considering the extent to which financial services regulation should be consumer-focussed.
The deadline for the call for evidence is 8 January 2021.
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United Kingdom: FCA consultation on changes to policy on raising regulated fees and levies from 2021/22
On 19 November 2020 the FCA published a consultation paper on proposed policy changes to the way it will raise regulated fees and levies rates for 2021/22.
The FCA proposals include:
- Revalorising and simplifying all FCA authorisation application fees and introducing some new transaction fees (Chapter 1).
- Outlining the structure of periodic fees for cryptoasset businesses (Chapter 2).
The consultation closes on 22 January 2021. The FCA aims to publish its response and the final fee rates and levy rules in its Handbook Notice in March 2021.
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South Africa: Financial regulators confirm discontinuation of paper cheques from 31 December 2020
On 18 November 2020 the South African Reserve Bank (SARB), Financial Sector Conduct Authority (FSCA), Payments Association of South Africa (PASA) and the Banking Association South Africa (BASA) began communicating to the public that the issuing and acceptance/collection of cheques will end with effect from 31 December 2020.
The central bank noted that the decision to end the use of cheques was based on several reasons, including that the issuance of cheques could lead to fraud and that cheque payments involve a lengthy processing period.
Banks are expected to communicate extensively with their clients leading up to and beyond the discontinuation of cheques, and to educate them on alternative electronic payment methods. Affected stakeholders are asked not to write/draw or accept cheques after 31 December 2020.
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United Kingdom: Financial Services and Economic and Monetary Policy (Consequential Amendments) (EU Exit) Regulations 2020 made
On 18 November 2020 the Financial Services and Economic and Monetary Policy (Consequential Amendments) (EU Exit) Regulations 2020 (SI 2020/1301) were published together with an explanatory memorandum.
The Regulations amend references to "exit day" in the substantive provisions of 48 financial services-related statutory instruments made under the European Union (Withdrawal) Act 2018 (Brexit SIs) so that they instead refer to "IP completion day". They also make an equivalent amendment to the European Union Budget, and Economic and Monetary Policy (EU Exit) Regulations 2019 (SI 2019/484). Other characteristics of the Brexit SIs remain unchanged.
The Regulations were made on 17 November 2020 and will enter into force on 30 December 2020.
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Italy: Changes to the Italian law on development of fintech initiatives and the establishment of an Italian Fintech Sandbox
On 3 December 2020 the Italian Parliament published Law No. 159/2020 introducing a number of amendments to the Growth Decree concerning the development of fintech initiatives and the establishment of an Italian Fintech Sandbox.
The main changes to the Growth Decree are as follows:
- The Ministry of Economy and Finance (MEF) decree(s) setting out secondary measures is(are) to be adopted by 31 January 2021.
- Participation in the Sandbox is to be for a maximum duration of 18 months, but it may be extended for a further 12 months in specific cases to be established by the MEF decree mentioned above.
- The Bank of Italy, Consob and IVASS (the Supervisory Authorities) are expressly identified as the authorities in charge of adopting the necessary measures for admission to the Sandbox.
- Without prejudice to mandatory EU rules, participation in the Sandbox may involve a temporary waiver of supervisory guidelines and/or regulations issued by the Supervisory Authorities.
The deadline for the adoption of the final version of the secondary measures by MEF is 31 January 2021.
See further information here.
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United Kingdom: FCA reminds firms of client data responsibilities
On 18 November 2020 the FCA published a press release warning firms of the need to act responsibly when handling client data.
The FCA stresses that firms need to take extra care to ensure that they lawfully process and transfer client data if they leave the market or merge with another firm. Firms need to consider the Principles for Businesses, in particular Principles 3 (Management and control), 6 (Customers' interests) and 7 (Communications with clients).
Firms should also ensure that they comply with their obligations under data protection legislation (including the Data Protection Act 2018, the General Data Protection Regulation (EU) 2016/679) and the Privacy and Electronic Communications Regulations (SI 2003/2426)). There is a reminder that firms should comply with related guidance published by the Information Commissioner's Office (as linked to from the press release).
The FCA also expects firms that intend to transfer or receive personal client data to be able to demonstrate how they have considered the fair treatment of consumers and how they comply with data protection and privacy laws.
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United Kingdom: Sanctions (EU Exit) (Consequential Provisions) (Amendment) Regulations 2020 made
On 16 November 2020 the Sanctions (EU Exit) (Consequential Provisions) (Amendment) Regulations 2020 (SI 2020/1289) (the 2020 Regulations) were published. They were made on 12 November 2020.
The 2020 Regulations amend:
- The ISIL (Da'esh) and Al-Qaida (United Nations Sanctions) (EU Exit) Regulations 2019 (SI 2019/466) (regulation 2);
- The Counter-Terrorism (International Sanctions) (EU Exit) Regulations 2019 (SI 2019/573) (regulation 3); and
- The Counter-Terrorism (Sanctions) (EU Exit) Regulations 2019 (SI 2019/577) (regulation 4), (together, the 2019 Regulations).
Under the amendments, the 2019 Regulations will themselves make amendments to the Charities Act 2011, the Sanctions and Anti-Money Laundering Act 2018, and the following:
- The Electronic Money Regulations 2011 (SI 2011/99).
- The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (SI 2017/692).
- The Payment Services Regulations 2017 (SI 2017/752).
These amendments are consequential on the commencement at the end of the post-Brexit transition period of the counter-terrorism sanctions framework established by the 2019 Regulations. The framework is designed to replace the counter-terrorism sanctions regimes currently implemented through EU Council Decisions and Regulations (and associated UK legislation) and the Terrorist Asset-Freezing etc Act 2010.
The Regulations will come into force in accordance with regulations made by the Secretary of State under section 56 of the Sanctions and Anti-Money Laundering Act 2018.
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United Kingdom: Misappropriation (Sanctions) (EU Exit) Regulations 2020 made
On 7 December 2020 the Misappropriation (Sanctions) (EU Exit) Regulations 2020 (SI 2020/1468) (Regulations) were made. They were laid before Parliament on 9 December 2020 and will come into force in accordance with section 56 of the Sanctions and Anti-Money Laundering Act 2018 (SAMLA) on a day to be appointed by the relevant Minister.
The Regulations establish a sanctions regime to deter and provide accountability for the misappropriation of state funds from a country outside the UK. They are of extra-territorial reach, applying to any UK person irrespective of whether the relevant conduct takes place wholly or partly outside the UK.
The Regulations will revoke the following geographically specific EU regimes dealing with misappropriation of state assets:
- Council Regulation (EU) No 101/2011 of 4 February 2011 concerning Tunisia.
- Council Regulation (EU) No 270/2011 of 21 March 2011 concerning Egypt.
- Council Regulation (EU) No 208/2014 of 5 March 2014 concerning Ukraine.
The Regulations will also revoke the corresponding implementing UK regulations.
There are certain exceptions to the sanctions regime under the Regulations, for example to permit interest to be credited to frozen accounts and also exempt acts done for the purposes of national security or to prevent serious crime.
Under the Regulations, it is a criminal offence to contravene or circumvent any of the prohibitions.
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Russia: Prime Minister promises to “civilise” crypto markets
On 26 November 2020, during a governmental session, Mikhail Mishustin, the Russian Prime Minister, raised the subject of cryptocurrencies and the need to protect users.
Mishustin said that the government plans to lead the cryptocurrency market’s development in a “civilised direction” so that users are better able to protect their “rights and interests”. Its aim will be to prevent the operation of fraudulent “shadow schemes” currently functioning in the crypto market.
The Prime Minister also stated that Russia’s tax code will be amended in order to designate crypto assets as property. This will enable owners to seek relief in court if they become victim to any illegal activity.
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United Kingdom: House of Commons EU Scrutiny Committee report looks at EU financial services reform agenda
On 25 November 2020 the House of Commons European Scrutiny Committee published its 29th report of the 2019-21 session.
Among other things, section 4 of the report considers the EU's reform agenda as set out in the European Commission's second Capital Markets Union (CMU) Action Plan (COM(2020) 590) and its Communication on a Digital Finance Strategy (COM(2020) 591 final). Both documents were published in September 2020.
The Committee’s conclusions include:
- The EU's legislative efforts to revise its financial services rulebook could still have UK regulatory, economic and fiscal implications.
- The fact that the Commission's papers do not refer directly to impacts on non-EU countries' markets should not be taken as a reason to presume that no impacts will occur.
- Parliament will need to be selective in prioritising which of the EU proposals to focus on, in light of the scope of the EU's financial services work programme and the uncertainties around how it may affect the UK. EU proposals with the greatest continued relevance to the UK should take priority in terms of scrutiny efforts. There is specific reference in the report to the Commission's proposed Regulation on markets in cryptoassets (MiCA) and the future "Open Finance" legislative framework.
- The Committee will continue to monitor EU legislative developments and continue to report them to the House where sufficiently significant, in particular in the context of the government's own review of UK financial services regulation.
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United Kingdom: Supreme Court dismisses Mastercard appeal on legal requirements for granting collective proceedings order in collective competition damages claim
On 11 December 2020 the Supreme Court handed down its judgment in Mastercard Incorporated and others v Walter Hugh Merricks CBE [2020] UKSC 51. This was an appeal by Mastercard to challenge a Court of Appeal judgment that had held that the Competition Appeal Tribunal (CAT) had erred in refusing an application for a collective proceedings order (CPO) by Mr Walter Merricks in relation to a potential collective claim for damages from Mastercard.
By a majority decision, the Supreme Court dismissed Mastercard's appeal and sent Mr Merricks’ application for a CPO back to the CAT.
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United Kingdom: FCA press release on benefits of RegData and initial enhancements it has made
On 24 November 2020 the FCA published a press release setting out the benefits of RegData, its new data collection platform.
The FCA explains it has made initial enhancements in RegData to reflect the feedback of firms and other users in response to an exercise carried out in 2019 relating to their experience of Gabriel.
In order to minimise the impact, the FCA is moving firms and their individual users to RegData in groups, the first firms having moved from Gabriel to RegData over the weekend of 17 and 18 October 2020.
There is also updated registration process information on the FCA’s RegData webpage. All users must register for RegData before their move by logging into Gabriel and completing the one-time registration when prompted. Until their move, firms should continue reporting through Gabriel using their existing Gabriel login details.
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United Kingdom: FCA updated digital sandbox pilot webpage
On 23 November 2020 the FCA updated its webpage on its digital sandbox pilot which aims to support innovative firms trying to overcome challenges caused by the COVID-19 pandemic. The pilot, which is being run in collaboration with the City of London Corporation, is focusing on three priority areas, namely fraud and scams, vulnerability and SME lending.
The FCA states that 30 organisations will take part in the pilot. It received 94 applications across the three use cases, which were assessed against four primary criteria of genuine innovation, scope, need for a digital sandbox and testing.
The pilot will be assessed against five success criteria of innovation, speed, collaboration, pilot features and sustainable future, as explained further on the webpage. It will run until 5 February 2021, and an independent evaluation process will be carried out by Grant Thornton.
Firms or individuals with no proposition to test in the digital sandbox but who want to observe or be involved with a team can register an account on the pilot website.
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United Kingdom: PSR notice of intention to operate confidentiality ring to allow disclosure of material underlying merchant survey commissioned under market review into supply of card-acquiring services
On 27 November 2020 the Payment Systems Regulator (PSR) published a Notice of intention to operate a confidentiality ring following publication of the interim report on its market review into the supply of card-acquiring services. See the September 2020 edition of our Global Payments Newsletter for more on the PSR’s interim report.
As a result of a request by a party, the PSR has decided to disclose material underlying the merchant survey that was commissioned as part of the market review from IFF Research to certain interested parties through a confidentiality ring to help parties respond to its consultation on the interim report.
Access to the confidentiality ring will be granted to a limited number of approved external economic and legal advisers of certain parties with an interest in the consultation. They will be required to sign individual and firm-level undertakings (the text of which is set out in the Notice of intention) before being granted access to the confidentiality ring.
Interested parties had to send an expression of interest in obtaining access to the merchant survey disclosure by 5pm on 4 December 2020.
The PSR intends to extend the consultation period for the interim report, which was due to close on 8 December 2020, to allow for the confidentiality ring. It plans to make a further announcement to confirm the duration of the confidentiality ring and the end of the extended consultation period.
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Europe: EPC 2021 SEPA scheme rulebooks and guidelines
On 26 November 2020 the European Payments Council (EPC) published version 1.0 of its 2021 Single European Payments Area (SEPA) credit transfer (SCT), instant credit transfer (SCT Inst), direct debit (SDD) and business-to-business (SDD B2B) rulebooks. An EPC press release sets out the changes made as compared to the current version 1.2 of the 2019 rulebooks.
The updated and enhanced rulebooks will come into effect on 21 November 2021, and will replace version 1.2 of the 2019 rulebooks, which were published in March 2020 and are in force until 21 November 2021.
The EPC has also published:
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South Africa: Crypto assets to be considered financial products under draft regulatory proposal
On 20 November 2020 the South African Financial Sector Conduct Authority (FSCA) announced the publication of a draft declaration under which crypto assets would become a financial product regulated by South Africa’s Financial Advisory and Intermediary Services (FAIS) Act.
The declaration would have the effect that any person providing advice or intermediary services in relation to crypto assets would have to be authorised under the FAIS Act as a financial services provider, and would have to comply with the requirements of the FAIS Act. This includes crypto asset exchanges and platforms, as well as brokers and advisors.
The FSCA is inviting comments on the draft declaration by 28 January 2021.
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United Kingdom: Government blog post on actions for firms to take in preparation for end of post-Brexit transition period
On 1 December 2020 a blog post on key actions for firms to prepare for the end of the post-Brexit transition period, which was written by the government, was published by UK Finance.
In the blog post, points highlighted by the government include the need for firms to make sure that their business is prepared on data protection and data transfers. The government directs firms to its webpages on recognition of qualifications, using personal data and work permits and visas for more information, and recommends that firms use its transition checker tool for a tailored summary of actions they need to take.
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China: Speech by Chairman of the China Banking Regulatory Commission suggests more fintech regulation on the horizon
On 8 December 2020 Guo Shuqing, Chairman of the China Banking and Insurance Regulatory Commission (CBIRC), delivered a speech during the Singapore Fintech Festival in which he warned that "timely and targeted measures" may be needed to prevent "new systemic risks" in relation to fintech.
In addition, Mr Shuqing mentioned big tech firms, saying that he will watch over "too big to fail" cases in the sector. Mr Shuqing also mentioned a number of areas of interest to the CBIRC including data ownership, cybersecurity, micro-lending and anti-competitive behaviour.
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United Kingdom: FCA publishes press release and FAQs in preparation for end of post-Brexit transition period
On 1 December 2020 the FCA published a press release reminding firms to be ready for the end of the post-Brexit transition period, and in particular the end of passporting and the new UK “financial services landscape”.
The FCA will continue to provide regular updates on its dedicated Brexit webpages. Firms can also call the FCA Brexit information line (0800 048 4255) if they have any other questions.
On 9 December 2020 the FCA also published a new webpage containing FAQs on key questions about Brexit and the temporary permissions regime (TPR) to help firms in preparing for the end of the post-Brexit transition period.
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Europe: Supervisory co-operation on banks’ operational resilience – PRA and ECB statements
On 3 December 2020 the PRA published a statement on supervisory co-operation in relation to operational resilience. The ECB published a virtually identical statement.
In the statement, the PRA makes the point that the ability of a bank to recover from an operational disruption (e.g. a cybersecurity incident) has become even more important with the growing trend towards technology-led business transformation. The PRA also refers to the progress made by banks in enhancing their operational resilience in recent years, including through their response to the COVID-19 pandemic.
Recognising the global and interconnected nature of banks and the importance of supervisory coordination, the PRA states its commitment to working closely with the ECB and the Federal Reserve to make sure that supervisory approaches on operational resilience are properly co-ordinated.
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United Kingdom: Production and distribution of cash - House of Commons Public Accounts Committee publishes report
On 4 December 2020 the House of Commons Public Accounts Committee (PAC) published a report on the production and distribution of cash.
HM Treasury (HMT), the Bank of England (BoE), the FCA and the Payment Systems Regulator (PSR) all have responsibility for aspects of the cash system, so oversight is fragmented. The PAC is concerned that division of responsibilities between these bodies is currently blurred and that they are unclear on what they are trying to deliver for consumers and businesses.
Some of the recommendations set out in the report include:
- HMT needs to give overall responsibility for the cash system to a single body, with the other bodies having clearly defined support roles.
- By January 2021, HMT and the PSR should provide the PAC with a detailed assessment of the prevalence across the UK of cash only being available via paid for cash machines or Post Office counter withdrawals.
- By the end of March 2021 at the latest, HMT should publish a plan of action, including draft legislation, for securing access to cash across the UK which should include a clear statement of what the regulators are expected to achieve in terms of cash access for communities and vulnerable groups.
In October 2020 the government published a call for evidence on access to cash. See the October 2020 edition of our Global Payments Newsletter for more information.
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United Kingdom: Pay.UK publishes recommendations for adopting ISO 20022 for UK payment systems
On 30 November 2020 Pay.UK published a report containing conclusions and recommendations relating to adopting the common global messaging standard for UK payments, ISO 20022, together with other key standards for the clearing and settlement capability that will be enabled by the New Payments Architecture (NPA).
The report, which is relevant to developers of ISO 20022 messages, service and solution providers, and end users (businesses, charities, and individuals), provides a statement of Pay.UK's intentions regarding the implementation of the UK retail standard and its plan for the next 18 months, focusing on:
- The recommended direction for implementing ISO 20022 to enable the NPA’s core clearing and settlement capability.
- Foundational technical details for the ISO 20022 message standard, which include Pay.UK's technical design and ISO 20022 readiness approach.
- Future direction on concepts requiring a degree of standardisation across the payments ecosystem.
In a related press release, Pay.UK states its intention to publish a series of updates in 2021 to show the progress made against the report’s conclusions.
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Europe: EPC publishes first SEPA request-to-pay (SRTP) scheme rulebook
On 30 November 2020 the European Payments Council (EPC) published the first version of the Single European Payments Area (SEPA) Request-To-Pay (RTP) scheme rulebook, covering the operating rules and technical elements that allow a payee to request the initiation of a payment from a payer in a range of physical or online use cases. The EPC also published a related webpage.
The effective date of this first release of the rulebook is 15 June 2021.
In addition, in a press release the EPC sets out a number of future key dates as follows:
- Implementation guidelines relating to the rulebook are due in January 2021.
- Change requests relating to the rulebook should be submitted to the EPC by 26 February 2021.
- The EPC is expected to launch a request for proposal relating to the certification of applicants to the SRTP scheme in February 2021.
- The scheme adherence process is due to open in May 2021.
- A second version of the rulebook, which will support more functionality, is due in November 2021.
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Europe: Interchange Fee Regulation – speech by Executive Vice President and Competition Commissioner Margrethe Vestager
On 7 December 2020 the Executive Vice President and Competition Commissioner, Margrethe Vestager, gave a speech entitled "The Interchange Fee Regulation in a rapidly evolving payment landscape: Impact and way forward".
Among other things, Ms Vestager commented on the European Commission's competition enforcement action leading up to adoption of the Interchange Fee Regulation and on the impact that the Regulation has had on the card payments market. She also spoke of the new challenges arising in the market and the Commission's plans for further action.
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United Kingdom: Review of implementation of effective warnings provision of CRM code for APP scams – LSB report
On 10 December 2020 the Lending Standards Board (LSB) published a summary report of the findings from a review of how firms have implemented the effective warnings provision of the contingent reimbursement model code (CRM code) for authorised push payment (APP) scams.
In the review, which took place between August and November 2020, the LSB’s findings included that the nine signatory firms had approached the implementation of effective warnings as a key tool in efforts to prevent APP scams from taking place. Most firms were in the process of reviewing the warnings in place and many had change programmes in progress with the aim of making improvements to the design and impact of warnings. All firms have also improved the level of customer education information provided.
As well as some key areas for industry-wide improvement, the review also identified some CRM code breaches so the LSB will work with the relevant firms to ensure that the breaches are resolved as a priority.
Individual reports have been issued to the firms and the LSB will monitor progress in embedding its recommendations. It plans to carry out a follow-up review in 2021.
The LSB’s findings from this review will feed into its wider CRM code review, the results of which will be published in the new year.
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United Kingdom: UK Finance announces further extension to interim funding arrangement under CRM code for APP scams
On 9 December 2020 UK Finance published a press release announcing that the interim funding arrangement to compensate victims of authorised push payment (APP) scams under the contingent reimbursement model code (CRM code) for APP scams in a “no blame” scenario (i.e. where the customer, sending and recipient banks have met the standards expected of them under the CRM code) is being extended to 30 June 2021. It had been due to end on 31 December 2020.
The interim funding is being provided by seven payment service providers to make sure that customer reimbursement takes place while regulators and the government work on a long-term, sustainable funding arrangement. The extension is intended to provide further time for legislation to be agreed and implemented, placing the voluntary CRM code on a statutory footing.
Payment Market Developments
United Kingdom: World’s first “fintel” mobile network launches in the UK
On 5 November 2020 To The Moon, a future-focused mobile network, launched its new innovative mobile fintech service in the UK. The new service introduces a first ever fusion of flexible tariffs and built-in crypto wallet which will enable customers to manage their funds and mobile needs within one app.
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United States: i2c and Purewrist partner to offer wearable solutions for contactless payments
On 11 November 2020 i2c, a leading provider of digital payment and open banking technology, announced its partnership with Purewrist, a fintech company specialising in end-to-end contactless payment solutions and wearables. Under the partnership, i2c’s configurable platform will be used for transaction processing of contactless payments made with the Purewrist GO wearable at NFC contactless readers.
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Denmark: Danske Bank launches expense management tool
On 19 November 2020 Danske Bank announced its collaboration with fintech Zenegy in order to launch a new service that will automate the processing of payments made with corporate cards. The payment processing service will be introduced in Denmark before it is offered in other Nordic region countries.
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United States: NFL partners with Visa to make this season’s Super Bowl cashless
On 19 November 2020 the National Football League (NFL) finalised plans with payment technology partner Visa to make the 2021 Super Bowl completely cashless by offering a fully digital payment acceptance for fans, in a bid to mitigate the health risks posed by COVID-19.
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Finland: OP Financial Group to carry out pilot of biometric payment cards
On 23 November 2020 Finland's largest financial services group, OP Financial, announced that it is going to pilot the use of biometric fingerprint cards with local supplier TietoEvry. OP wants to address increased customer demand for safer, easier and more hygienic payment methods at stores.
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United Kingdom: NatWest trials Open Banking app for house sharers
On 24 November 2020 NatWest announced that it is piloting a new app for renters to share bills with flatmates and help boost their credit scores. The Housemate app is due for a wider roll out in 2021.
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Belgium: PagoFX launches international money transfer app in Belgium
On 26 November 2020 PagoFX, the international money transfer app from Santander, launched in Belgium, marking its first expansion since launching in the UK in April. Billed as a direct rival to fintech unicorn TransferWise, PagoFX allows users with a debit card issued by any bank or financial institution to send money abroad using their smartphone.
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India: Razorpay issues corporate credit cards for SMEs
On 26 November 2020 Razorpay, an Indian fintech, and Visa announced the launch of RazorpayX Corporate Cards. The bank-issued cards have features aimed specifically at helping start-ups and SMEs in the current difficult economic environment.
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Global: Facebook-backed Libra Association changes its name to Diem
On 1 December 2020 the Facebook-backed cryptocurrency Libra was rebranded as “Diem” in a renewed effort to gain regulatory approval by stressing the project’s independence. Diem, which means “day” in Latin, now aims to initially launch a single dollar-backed digital coin.
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France: Icare Technologies unveils its new contactless payments ring
On 3 December 2020 a French start-up Icare Technologies, working in collaboration with Philippe Starck, launched a new “Aeklys” ring device linked to an e-money wallet which allows users to initiate contactless payment transactions, as well as enabling other related services such as storing of public transport tickets.
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Brazil: Central Bank of Brazil launches its instant payments system
On 16 November 2020 the Central Bank of Brazil, Banco Central do Brasil (BCB), launched its instant payments platform Pix.
The BCB states that the new platform aims to foster competition in a highly concentrated financial system and to boost financial inclusion. According to the BCB, 71 million registrations have been opened for the service, by 30 million individuals and 1.9 million businesses.
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Surveys and Reports
Global: COVID-19: FSB report on financial stability impact and policy responses
On 17 November 2020 the Financial Stability Board (FSB) published a report on the financial stability impact of the COVID-19 pandemic and policy responses to it.
The report sets out an update on financial stability developments and risks relating to COVID-19, as well as considering the international policy responses to the pandemic and the effectiveness of those policies.
The FSB also sets out its proposed way forward to address challenges relating to the pandemic:
- Promoting resilience of the global financial system. The FSB will continue to evaluate information on financial stability risks from COVID-19 and on jurisdictions’ policy responses to challenges associated with debt overhang. It will also coordinate the international regulatory response to strengthen the resilience of non-bank financial intermediation.
- Promoting effective policy responses to COVID-19. The FSB will continue to facilitate sharing of information on jurisdictions' policy responses and on their use of tools to design, calibrate and assess policies, to monitor the use of flexibility within standards and the consistency of policy responses with international standards. It also intends to discuss factors that jurisdictions are considering to prepare for an orderly unwinding of support measures, once appropriate, with the aim of avoiding any unintended effects across sectors and jurisdictions.
The FSB will provide a further update to the G20 by April 2021 on the COVID-19 responses of member authorities and standard-setting bodies.
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United Kingdom: UK Finance report on ethical principles for advanced analytics and AI in financial services
On 2 December 2020 UK Finance published a report co-authored by KPMG on ethical principles for advanced analytics and artificial intelligence (AI) in financial services.
The report states that there is a growing awareness that AI not only offers the potential for great benefits to society, but also poses risks that need to be carefully managed and considered. The financial services industry is moving to become a leader in data and AI ethics, and the report's authors note they are seeing firms engaging in nuanced debate of the merits of products in governance forums, as well as formulating new controls and investing in ethical training for their workforce.
The report sets out five ethical principles that financial services firms can apply when developing offerings which rely on advanced analytics and AI (AAAI):
- Principle 1: explainability and transparency.
- Principle 2: integrity of AAAI.
- Principle 3: fairness and alignment to human rights.
- Principle 4: contestability and human empowerment.
- Principle 5: responsibility and accountability.
The principles are not rules, but they are intended to serve as a valuable resource to firms as a point of reference for developing or enhancing their own internal principles and governance. They are designed to be sufficiently flexible to be adapted, as appropriate, to the diverse use cases to which AAAI can be applied, using a proportionate and risk-based approach.
The principles were drafted and refined with input from a working group of experts from among UK Finance’s members from a range of different business types, to ensure a focus on the key considerations for financial services institutions.
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Europe: EPC payment threats and fraud trends report 2020
On 7 December 2020 the European Payments Council (EPC) published its 2020 report on payment threats and fraud trends.
The report provides an overview of the current most important threats in the payments landscape, such as social engineering and phishing, malware, advanced persistent threats (APTs), distributed denial of service, botnets and monetisation channels.
For each identified threat, the EPC provides a descriptive definition together with an analysis of the impact and context. Annex I to the report contains an overview matrix listing the threats and the main suggested controls and mitigation measures.
Some of the main conclusions in the report concerning payment threats and payment fraud include the following:
- Social engineering attacks and phishing attempts are still increasing and more frequently leading to authorised push payment fraud.
- Malware remains a major threat and requires new mitigating measures.
- APTs must be considered as a potential high risk, not only for payment infrastructures, but also for all network related payment ecosystems. Some of the measures to tackle APTs are security defence, advanced security data analytics, and early detection technology.
The EPC has established the Payment Scheme Fraud Prevention Working Group, which is focusing on operational payment fraud prevention by facilitating Single Euro Payments Area (SEPA) payment scheme fraud data collection and analysis, information sharing and prevention measures.
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Authored by Virginia Montgomery and Julie Patient
