De Nederlandsche Bank
European legislation & Payment Systems
Statistics
Ayse Zoodsma-Sungur
4th Macedonian Financial Sector
Conference on Payments and
Securities settlement Systems
Ohrid
21 June 2011
De Nederlandsche Bank
Eurosysteem
Agenda







Background to the PSD
Types of PSP’s
Scope of the PSD
Application Process
PSD Conduct of Business Rules
Crediting and Value Dating
E-Money Directive
De Nederlandsche Bank
Eurosysteem
Background to the
Payment Services Directive (PSD)

Legislative proposal for PSD adopted on 1
December 2005 with political agreement
reached in April 2007. The PSD was finally
adopted on 13 November 2007.

In NL PSD is implemented into national law
by 1 November 2009 and in most countries
De Nederlandsche Bank
Eurosysteem
Background to the
Payment Services Directive (PSD)
2
In the Payment Services Directive stated intent:

remove legal barriers to creation of SEPA;

SEPA will remove differences between
domestic and cross-border payments.
De Nederlandsche Bank
Eurosysteem
Background to the
Payment Services Directive (PSD)
3
PSD has three main objectives:
enhance
competition;
increase market transparency; and
standardise rights and obligations of
providers and users
De Nederlandsche Bank
Eurosysteem
Types of Payment Service Providers
Directive set out different types of payment
service provider:

credit institutions, e-money institutions,
payment institutions, the ECB and other
central banks, government departments and
local authorities

Impact of the PSD will vary depending on
the type of payment service provider
De Nederlandsche Bank
Eurosysteem
Types of Payment Service Providers
2

Prohibition on the provision of payment
services by persons other than payment
service providers
De Nederlandsche Bank
Eurosysteem
Scope of the PSD

Territorial Limits – Conduct of business rules
(i.e. information requirements and provider
and user rights and obligations only apply
where both the payer provider and payee
provider are located in the EEA.

Currency Limits – Conduct of business rules
only apply where the payment services are
carried out either in Euro or in the currency of
an EEA State that has not adopted the Euro
De Nederlandsche Bank
Eurosysteem
Scope of the PSD
2
The Regulations only apply to the payment
services listed below 5 main categories:

Services enabling cash deposits and
withdrawals from a payment account;

Execution of payment transactions;

Issuing and acquiring of payment instruments;
De Nederlandsche Bank
Eurosysteem
Scope of the PSD
3

Money remittance services;

Execution of payment transactions where
consent to execute a payment transaction is
given by means of an IT device and payment
is made to the operator acting only as an
intermediary between the user and supplier of
the goods and services.
De Nederlandsche Bank
Eurosysteem
Activities that are not in the Scope of the
PSD
4
Certain activities do not constitute payment services,
these in summary include:



cash transactions without an intermediary or payment
transactions through a commercial agent
money exchange business consisting of cash to cash
operations where funds not held on a payment
account
payment transactions based on paper based
cheques, vouchers; traveller's cheques etc.
De Nederlandsche Bank
Eurosysteem
Activities that not in the scope of the PSD
5

services provided by technical service
providers, which support the provision of
payment services, without them entering into
possession of the funds

services based on instruments that can be
used to acquire goods or services only in the
issuers premises or through a limited network
of providers or for a limited range of goods or
services
De Nederlandsche Bank
Eurosysteem
Activities which do not constitute Payment
Services
3

payment transactions carried out between
payment service providers, or their agents or
branches for their own account

execution of payment transactions executed
by means of an IT device where goods or
services are delivered to and used through an
IT device provided the operator does not only
act as an intermediary between the user and
supplier of the goods and services
De Nederlandsche Bank
Eurosysteem
Activities that are not in the scope of the
PSD
5
payment transactions within a payment or
securities settlement system or relating to
securities, including dividends, income or
other distributions
 payment transactions between group
companies
 services by providers to withdraw cash by
means of an ATM acting on behalf of a card
issuer

De Nederlandsche Bank
Eurosysteem
Scope of the PSD Business Activity
Restrictions
The Regulations specify the business activities
that payment institutions may be involved in.
They may also provide operational and related
ancillary services such as:
ensuring
payment transaction execution;
foreign exchange services;
storage of data; and
De Nederlandsche Bank
Eurosysteem
Scope of the PSD Business Activity
Restrictions
2

May undertake non-payment service activities
but cannot issue e-money or accept deposits.

May grant credit subject to certain conditions.
 safe-keeping
activities.
De Nederlandsche Bank
Eurosysteem
Application Process –
How to obtain authorisation and
Registration
Payment service providers, who are neither
banks nor e-money issuers and not otherwise
excluded under the negative scope
provisions, must be either:
authorised
as a payment institution; or
registered as a small payment institution
subject to the qualification criteria
De Nederlandsche Bank
Eurosysteem
Application Process –
How to obtain authorisation and
Registration

2
Agents of authorised payment institutions and
small payment institutions in the country, and
agents of authorised payment institutions in
the EEA, must register with the NCB
De Nederlandsche Bank
Eurosysteem
Conduct of Business Rules –
Information Requirements
Part 5 of the Regulations sets out certain
information requirements that apply to all
payment service providers providing payment
services.

In applying the information requirements the
Regulations make a distinction between:
De Nederlandsche Bank
Eurosysteem
Conduct of Business Rules –
Information Requirements
2
–a
payment transaction which is part of a
series of successive payment transactions
which is to be covered by a payment service
agreement referred to as a "framework
contract"
–a
payment transaction which is a single
payment transaction
De Nederlandsche Bank
Eurosysteem
Conduct of Business Rules –
Information Requirements
2

In each case the Regulations set out
information to be provided before the contract
is entered into, at the time the payment order
is made and after execution of the transaction

Providers can agree a “corporate opt-out”
where the customer is not a consumer, a
micro enterprise, or a charity with an annual
income of less than £1 million
De Nederlandsche Bank
Eurosysteem
Framework Contracts – Prior Information

Before the contract is concluded (or
immediately after the execution of the
transaction if concluded at a distance where it
is not practicable to do so) the provider must
make available certain specified information
in Schedule 4 (Regulation 40)

Where the contract is also a regulated
agreement under the certain exemptions
apply to Regulation 40 (Regulation 34)
De Nederlandsche Bank
Eurosysteem
Framework Contracts – Prior Information
2

Any information provided or made available
under Part 5 must be provided or made
available in an easily accessible manner (e.g.
on paper, by e-mail or text) in English or
another agreed language and in a clear and
comprehensible form (Regulation 47(1))
De Nederlandsche Bank
Eurosysteem
Rights and obligations
Information requirements - single payment transactions
Information to the payer
prior
after receipt
Information needed
Execution time
Charges
Reference exchange
rate
Transaction Identifier, payee
Amount of the payment
Charges payable
exchange rate used
Date of receipt order
Information to the payee
Reference, payer
Amount
Charges
Exchange rate
Credit value date
De Nederlandsche Bank
Eurosysteem
Rights and obligations
Obligations for the user
 Act according to the contract
 Reasonable safety measures
 Direct notification of loss/theft
 And more..
De Nederlandsche Bank
Eurosysteem
Crediting and Value Dating

The payer’s provider must ensure that the
amount of the payment transaction is credited
to the payee’s provider’s account by the end
of the business day following the time of
receipt of the payment order (D+1)
(Regulation 70)

Until 1 January 2012 the payer and the
payer’s provider may agree a D+3 standard
De Nederlandsche Bank
Eurosysteem
Crediting and Value Dating

3
The credit value date for the payee’s payment
account must be no later than the business
day on which the amount of the payment
transaction is credited to the account of the
payee’s payment service provider (Regulation
73(1))
De Nederlandsche Bank
Eurosysteem
PSD summing up
PSD provides harmonisation of:
 Market access: besides credit institutions and
electronic money institutions also payment
institutions
 Rights and obligations
 Implementation in national legislation
De Nederlandsche Bank
Eurosysteem
Payment Trends in the EU
•
Number of transactions per type of payment instrument (billions)
20000
18000
16000
14000
debit and credit cards
12000
credit transfers
10000
direct debits
cheques
8000
E-money cards
6000
4000
2000
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
Source ECB
De Nederlandsche Bank
Eurosysteem
E-Money

Definition of E-money

Main Areas of E-money
Box 1, Box 2
De Nederlandsche Bank
Eurosysteem
Definition of E-money
E-money can be defined as any amount of
monetary value represented by a claim issued
on a
 prepaid basis, stored in an electronic medium
(for example, a card or computer) and
accepted

De Nederlandsche Bank
Eurosysteem
Definition of E-money
2

as a means of payment by undertakings other
than the issuer, predominantly for small-value

transactions (for example, the settlement of
modest transactions over the Internet and of
parking or telephone charges and payment
for public transport services)
De Nederlandsche Bank
Eurosysteem
Definition of E-money
2
Now a short definition of e-money:
Electronic money is monetary value as
represented by a claim on the issuer which is:
 Stored on an electronic device

Issued on receipt of funds

Accepted as a means of payment by persons
other than the issuer
De Nederlandsche Bank
Eurosysteem
Box 1 - Main areas of e-money
E-money in a virtual environment
The most successful schemes still fall
essentially into the category of pre-funded,

personalised online payment schemes,
involving the transfer of funds stored in an
online account (excluding traditional bank
deposits). Accounts are typically accessible
via Internet browser,
De Nederlandsche Bank
Eurosysteem
Box 1 - Main areas of e-money
2
e-mail and/or, in some cases, via mobile phone
text messaging (SMS).
Examples pre-funded personalised online
payment schemes include

Paypal, Digicash and Moneybookers etc.
De Nederlandsche Bank
Eurosysteem
Box 1 Main areas of e-money
3
E-money in a standard retail environment
Two main categories exist according to the
storage device used:
 Card-based e-money (‘electronic purses’)
which relies on a device containing
 hardware-based security features (typically in
the form of a microprocessor chip embedded

De Nederlandsche Bank
Eurosysteem
Box 1 Main areas of E-money
4
in the plastic card). The card is used for
authentication rather than account
information.

Aside from conventional e-purses, smartcards
for public transport are the second most
widely used
De Nederlandsche Bank
Eurosysteem
Box 1 Main areas of e-money
5

Software-based e-money (sometimes referred
to as ‘digital cash’ or ‘network money’) which
employs specialised software on a personal
computer, typically allowing electronic value
to be transferred via telecommunication
networks and the Internet.

The value held by a customer is stored
centrally on a server under the control of the
issuer and customers access their purses
remotely.
De Nederlandsche Bank
Eurosysteem
Box 2. Categories of smartcards
Single-purpose card: usually in the form of a
magnetic stripe card to record the amount of
funds stored therein. It is designed to facilitate
only one type of transaction, for example,
telephone calls, public transportation, parking
facilities, etc.
A distinguishing feature is that the issuer and
the service provider are usually the same
entity.

De Nederlandsche Bank
Eurosysteem
Box 2. Categories of smartcards
3

Closed-system or limited-purpose card:
generally used at a small number of points of
sale within a well-identified location, such as a
university campus or a football stadium.

Multipurpose card: can perform a variety of
functions with several vendors.
De Nederlandsche Bank
Eurosysteem
Box 2. Categories of smartcards
4
According to the technology they incorporate

Contact card: a microprocessor chip is
embedded in the card and the card must be
inserted into a smartcard reader which
physically comes into contact with the chip’s
pad to transmit/receive data.

Contactless smartcard: the card must pass
close to a smartcard reader to register a
transaction so that the embedded antenna in
the card can communicate with a receiving
antenna in the reader.
De Nederlandsche Bank
Eurosysteem
Box 2. Categories of smartcards
5

Hybrid card: is one that has both contact and
contactless capabilities, often used for
transport applications.
The contact mode is used to load the card with value
and the contactless mode is used to reduce the value
as services are consumed.

Proximity card: communicates through an antenna
similar to contactless smartcards
except that it is a read-only device; no information
can be written in the chip’s memory.
De Nederlandsche Bank
Eurosysteem
E-money Regulatory Objectives

Market Confidence

Public Awareness

Consumer Protection

Reduction of Financial Crime

Facilitating innovation
De Nederlandsche Bank
Eurosysteem
The status of the new directive
It is maximum harmonising – not minimum
harmonising
 Applies many provisions of the Payment
Services Directive (PSD), mutatis mutandis
 ELMIs are now defined as financial
institutions

De Nederlandsche Bank
Eurosysteem
Authorisation and Registration
Authorisation of ELMIs and registration of
small issuers: 2EMD applies Article 5 of
PSD
 Optional exemptions from prudential rules
under consideration for small issuers
 Exemptions for limited scope schemes
 Passporting for ELMIs follows Art 25 PSD
 No passports for small issuers

De Nederlandsche Bank
Eurosysteem
Prudential Changes
• Initial Capital for ELMIs reduces from €1
million to €350,000
• Investment rules have been replaced by
safeguarding
• The new EMD safeguarding rules are subtly
different from those of PSD
• ELMIs can now carry out mixed business
De Nederlandsche Bank
Eurosysteem
Final Remark

Review of 2EMD is envisaged by
November 2012 in line with PSD review
De Nederlandsche Bank
Eurosysteem
Questions?
De Nederlandsche Bank
Eurosysteem