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Regulatory Developments: Payments
United Kingdom: PSR publishes interim report on market review into scheme and processing fees
On 21 May 2024, the Payment Systems Regulator (PSR) published its interim report for its market review into scheme and processing fees.
According to its related press release, the PSR has found that Mastercard and Visa do not face effective competition when dealing with merchants and acquirers:
- in respect of core scheme and processing services, where there is currently no effective competition to Mastercard and Visa;
- in some optional services, where competition and choice is limited and alternative providers, when present, cannot match the schemes’ one-stop shop solution for core and optional services.
The PSR has also found evidence that:
- Mastercard and Visa provide complicated and unclear pricing statements to card acquirers;
- Acquirers cannot access information about fees in an easy way and there were frequent delays and insufficient notice periods from Mastercard and Visa to implement fee changes;
- there was very little ability for acquirers to negotiate any fees.
The interim report includes potential remedies for the PSR’s findings, including:
- improved transparency so that businesses and acquirers can make informed decisions and are more able to switch to alternative suppliers of optional services;
- obligations on Mastercard and Visa to explain, consult on and/or document the reasons for price changes and the pricing of new services; and
- greater reporting of financial information to the PSR on an on-going basis to improve scrutiny of Mastercard and Visa’s UK operations going forward.
The consultation on the interim report closes on 30 July 2024. The PSR intends to publish its final report on scheme and processing fees in Q4 2024 but will confirm these timeframes in due course. If the final report upholds the provisional finding that the market is not working well, the PSR will consult on the implementation of any remedies.
See our previous Engage article for the background to the market review.
Ireland: Government publishes consultation summary on National Payments Strategy
On 23 April 2024, the Irish government published its summary of submissions received in response to its public consultation on the National Payments Strategy (NPS).
The public consultation closed on 14 February 2024. It had asked stakeholders to provide answers in relation to the following sections:
- Timeline and principles
- Instant payments
- Payment fraud
- Open banking
- Digital euro
- Cryptoassets
- Data collection and sharing
- Access to cash
- Acceptance of cash
For more on the consultation, take a look at our Engage article.
The submissions raised the need for holistic treatment of specific subject areas. For example, promotion of instant payments should consider the corresponding impact on payment fraud. The need for collaboration was a leading theme across the submissions. Many of the areas within the scope of the strategy are cross-sectoral and a horizontal response is needed.
Key points include that responding firms and industry bodies were almost in complete agreement on the need for an instant payments, or account to account, forum.
In addition, a number of respondents suggested that the Central Bank should collect and publish data on open banking usage to progress compliance with legislative obligations.
The NPS team will host a stakeholder workshop in May 2024 and continue to engage with stakeholders. The government aims to publish the finalised NPS in H2 2024.
Ireland: Central bank seeks power to close failing PIs and EMIs
On 22 April 2024, it was reported (subscription required) that the Central Bank of Ireland (CBI) has written to the Department of Finance asking for permission to petition the courts to wind-up failing payment and electronic money institutions (PIs/EMIs).
The CBI said that its inability to petition courts for the winding up of failing PIs or EMIs is a “key gap in the legislative framework”.
Ireland: Central Bank issues guidance on authorisation of PIs and EMIs and registration of AISPs
On 9 April 2024, the Central Bank of Ireland (CBI) issued guidance on the authorisation of payment institutions (PIs) and electronic money institutions (EMIs) and the registration of account information service providers (AISPs) (the Guidance).
In anticipation of further innovation in banking and financial services, the Guidance clarifies expectations and standards for PIs and EMIs seeking authorisation from the CBI.
The CBI reiterated the importance of clarity, transparency and predictability for applicant firms looking to be authorised. The Guidance refers to the 2022 IMF Report which identified the PI and EMI sector as one of the largest sub-sectors within the Irish fintech industry.
The Guidance sets out the following three stages of the authorisation process:
- Exploratory Stage
- Assessment Stage
- Authorisation/Registration Decision Stage
See our Engage article on the Guidance here.
European Union: European Parliament adopts amended PSD3 and PSR texts and EBA publishes Opinion on new types of payment fraud and possible mitigants
On 23 April 2024, the European Parliament announced its adoption at first reading of amended texts of the European Commission’s June 2023 legislative proposals for a Directive on payment services and electronic money services (PSD3 – amended text) and a Regulation on payment services in the EU (PSR – amended text).
This was followed on 29 April by the European Banking Authority’s (EBA) publication of an Opinion on new types of payment fraud, setting out additional measures for consideration by the EU co-legislators and the Commission in the negotiation of the PSD3/PSR proposals.
The Council of the EU has not yet published its proposals on the Commission’s draft legislation, although we are expecting to have a general approach before the end of the Belgian Presidency on 30 June 2024. After that - and once the new Parliament is in place following the European elections on 6-9 June 2024 - trilogues (inter-institutional negotiations) will begin.
For more on this development, take a look at our Engage article.
European Union: ECB opinion on proposed PSD3 and PSR
On 7 May 2024, the Council of the EU published a note attaching an opinion (dated 30 April 2024) of the European Central Bank (ECB) on the proposed Directive on payment services and electronic money services (PSD3) and the proposed Regulation on payment services in the EU (PSR). The note also includes a separate technical working document setting out the ECB's proposed drafting amendments to the legislative proposals, with accompanying explanatory text.
United Kingdom: Bank of England speech on payments innovation signals more regulatory and infrastructure changes ahead
On 15 April 2024, the Bank of England Deputy Governor of Financial Stability, Sarah Breeden, delivered a speech on ‘Modernising the trains and rails of UK payments’.
The speech considered the implications of new technologies for digital money, retail payments, and wholesale settlement and payments, and the Bank of England’s regulatory and infrastructure work in these areas. There was also a call to urgent action for banks, with payments innovation described as both a first-tier opportunity (in terms of enhanced payments functionality) and a first-tier threat (of disintermediation by new entrants).
The Bank of England will publish a discussion paper on innovation in wholesale payments and the importance of payments innovation by banks in summer 2024.
For more on the speech, see our Engage article here.
United Kingdom: PSR consults on compliance and monitoring requirements for APP fraud mandatory reimbursement
On 17 April 2024, the Payment Systems Regulator (PSR) published a consultation on the data and information that payment service providers (PSPs) will be required to provide to Pay.UK to enable it to monitor effectively compliance with the new Faster Payments Scheme (FPS) reimbursement rules for authorised push payment (APP) fraud. The proposals include a requirement on PSPs to use Pay.UK’s reimbursement claim management system to manage data.
The proposed requirements will also enable the PSR to monitor compliance with its directions and requirements in relation to the new regime.
The consultation is open until 5pm on 28 May 2024. The reimbursement requirement will come into force on 7 October 2024.
Take a look at our Engage article for more on this development.
United Kingdom: PSR consults on CHAPS mandatory reimbursement requirement for APP fraud victims
On 8 May 2024, the Payment Systems Regulator (PSR) published a consultation on a proposal to direct banks and other payment firms participating directly or indirectly in CHAPS (the UK’s high-value payment system) to reimburse their customers who have been victims of authorised push payment (APP) scams.
The proposed direction will require payment service providers (PSPs) to comply with the Bank of England’s (BoE) new CHAPS reimbursement rules (which have also been published in draft for comments directly to the BoE).
The draft CHAPS Compliance Data Reporting Standard (CCDRS) - specifying the data and information that all PSPs will be required to collate and retain for the BoE to effectively monitor compliance – has been published with the other consultation documents.
The proposed APP fraud reimbursement rules and requirements for CHAPS are very similar to the equivalent rules the PSR has previously consulted on for the Faster Payments Scheme (FPS) and will have the same go-live date – 7 October 2024. The aim is to provide a consistent outcome for victims of APP scams across CHAPS and FPS, as well as consistent processes for firms participating in CHAPS and FPS and consistent incentives on PSPs to prevent fraud.
The consultation closes at 5pm on 31 May 2024. The PSR expects to finalise and publish the specific direction in September 2024. Any comments on the draft CHAPS reimbursement rules should be sent directly to the BoE at the following email address by 5pm on 31 May 2024: chapsappfraud@bankofengland.co.uk.
For more on this development, take a look at our Engage article.
United Kingdom: PSR consultation on APP scams data publication guidance for the second cycle
On 7 May 2024, the Payment Systems Regulator (PSR) published a consultation on its APP scams data cycle 2 publication guidance. For more information, see the section entitled ‘In other payments news’ in this Engage article.
The consultation closes at 5pm on 30 May 2024. The PSR expects to issue the final publication guidance for cycle 2 by the end of June 2024. It will consult on the more substantive issues raised during its cycle 1 consumer testing in Autumn 2024 and will look to address these in cycle 3.
United Kingdom: PSR mid-point review of five-year strategy
On 7 May 2024, the Payment Systems Regulator (PSR) announced a mid-point review of its five-year strategy (launched in January 2022) to ensure it is responsive to new developments in the payments landscape such as the increasing use of AI and the expansion of big tech firms into payments.
In addition to discussing the review in roundtables and as part of its ongoing stakeholder engagement, the PSR is launching an online stakeholder survey, which is open until 4 June 2024.
India: National Payments Corporation of India to delay caps on UPI payments market share
On 9 May 2024, it was reported that the National Payments Corporation of India (NPCI) will delay caps on market share for the country’s Unified Payment Interface (UPI) instant digital payments service again.
The UPI was launched in 2016 but companies were prohibited from charging for the service with the aim of promoting online transactions and reducing cash use.
In 2020, NPCI had announced a 30% cap on market share of any company processing payments via the UPI. The deadline was later extended to the end of 2024 and is expected to be extended by another two years.
Global: BIS publishes report on service level agreements for cross-border payment arrangements
On 29 April 2024, the Committee on Payments and Market Infrastructures of the Bank for International Settlements (BIS) published a report on service level agreements for cross-border payment arrangements.
The report contains high level recommendations, key features and guiding questions to inform parties. Payment service providers, correspondent banks, and payment system operators are encouraged to consider the recommendations when establishing new agreements or reviewing existing ones.
United Kingdom: Open Banking: JROC publishes proposals for design of future entity
On 19 April 2024, the Joint Regulatory Oversight Committee (JROC) (co-chaired by the FCA and the Payment Systems Regulator (PSR)) published its proposals for the design of the future entity for UK Open Banking (OB) that will replace Open Banking Ltd (OBL) as well as for the establishment of an interim entity (Interim Entity).
The proposals follow consultation with industry through the Future Entity Working Group, which presented its findings to the JROC in December 2023 (see our previous Engage article).
The funding for the 5 JROC non-CMA Order workstreams being progressed by OBL has, to date, been provided on a voluntary basis by the CMA9. However, as these workstreams are for the benefit of the entire ecosystem, not just the CMA9, the JROC considers that a clearer separation of the Order and non-Order activities is now necessary.
Until the long-term regulatory framework is in place and transition to the Future Entity is complete (currently planned to take place within the next two years), the JROC is recommending that an Interim Entity is established as a separate legal entity with the purpose of undertaking the JROC non-Order workstreams (which include promoting additional services and encouraging innovative use cases, using non-sweeping variable recurring payments (VRP) as a pilot). This will be a key step to the establishment of, and transition to, the Future Entity. Funding will be voluntary and from firms within the OB ecosystem identified as either having the largest number of customer accounts with consents to use OB, the largest number of API calls, or increasing their use of OB services at an increasing rate to fund the JROC non-Order workstreams.
The FCA, the PSR and other JROC members will work closely to ensure regulatory oversight of all aspects of OB is well-coordinated under the long-term regulatory framework. The government’s intention, as set out in the 2023 Autumn Statement, is to legislate to support the long-term regulatory framework for OB, including through new powers in the Data Protection and Digital Information Bill. There is also mention of potential expansion to Open Finance, and OB payments.
The consultation closed on 20 May 2024. The JROC will publish a summary of the feedback, together with its response, in due course.
Note also that on 22 April 2024, UK Finance published a report on commercial VRPs model clauses. The JROC has a working group focussing on VRPs, which published a blueprint for rolling out non-sweeping VRPs in December 2023, at the same time as the PSR published a consultation on expanding VRPs (see this Engage article). The report indicates that work undertaken to develop contractual clauses could feed into the development of the VRP framework.
United Kingdom: Bank of England publishes final Codes of Practice on wholesale cash distribution
Following a consultation by the Bank of England (BoE) in November 2023 (see our Engage article here), the three final Codes of Practice (CoPs) for wholesale cash distribution (WCD) market oversight were published on 24 April 2024 along with a consultation response.
This follows on from provisions in the Financial Services and Markets Act 2023 (FSMA 2023) which introduce a new Part 5A of the Banking Act 2009 giving the BoE powers to oversee the wholesale cash industry with a view to ensuring the long-term sustainability of the UK’s cash infrastructure. The CoPs and Guidance will come into effect for any firms recognised by HM Treasury (HMT) as having ‘market significance’ under wholesale cash oversight orders provided for in the new regime (see further our previous Engage article on the November 2023 consultation, linked above).
The BoE has also published a final WCD data catalogue (setting out how information required by the BoE under the CoPs should be submitted) and Guidance to accompany the CoPs. This non-statutory Guidance aims to provide a non-exhaustive statement of steps that a recognised firm may take to comply with the CoPs.
In its consultation response, the BoE confirmed that it will review its approach to the regime regularly and publish a further consultation on any substantive changes to the CoPs if required.
See this Engage article for more on this development.
United Kingdom: PSR publishes call for views on approach to supervision
On 24 April 2024, the Payment Systems Regulator (PSR) published a call for views on its proposed approach to supervision. The PSR's primary regulatory focus will be on its regulatory relationship with payment systems operators (PSOs) such as Pay.UK, Visa and Mastercard. However, if necessary this may widen over time to include other types of firms. The call for views closes on 7 June 2024.
United Kingdom: Bank of England publishes policy statement and consultation on enhanced data requirements: ISO 20022 migration
On 12 April 2024, the Bank of England (BoE) published a policy statement and consultation on mandating ISO 20022 enhanced data in CHAPS and updated its webpage on the RTGS renewal programme. The consultation closes on 28 June 2024.
Regulatory Developments: Digital Assets
United States: Senators introduce Payment Stablecoin Bill
On 17 April 2024, a bipartisan Payment Stablecoin Bill (the ‘Stablecoin Bill’) was introduced to the U.S. Senate with the aim of progressing a regulatory framework for payment stablecoins.
According to a press release, the Stablecoin Bill seeks to preserve the current dual banking system and give federal and state agencies a role in enforcement. It aims to protect consumers by requiring one-to-one reserves, prohibiting algorithmic stablecoins and requiring compliance with anti-money laundering and sanctions rules.
United States: House of Representatives vote on SEC policy on crypto custody
On 8 May 2024, the House of Representatives voted to overturn a Securities and Exchange Commission (SEC) accounting policy relating to digital assets and cryptocurrency.
The SEC policy required banks to put digital assets held in custody on their balance sheet, which was criticised as not aligning with the traditional practice of banks treating custody assets as off-balance sheet. Opponents argued that the policy would have the effect of pushing banks out of the digital assets market.
Global: BIS Innovation Summit 2024 key takeaways
The Bank for International Settlements (BIS) Innovation Summit 2024, held in Basel, Switzerland, over 6-8 May 2024, brought together central bankers, policymakers, senior executives from the financial and technology industries, and academics from around the world to discuss the accelerated pace at which technological innovation (e.g. tokenisation, artificial intelligence) is progressing, the opportunities and risks to the financial sector, and a vision of a future financial system based on “unified ledgers” and the “Finternet”.
Take a look at our Engage article on the key takeaways from the Summit.
Taiwan: Government proposes AML regulations on cryptocurrency firms
On 9 May 2024, it was reported that the Taiwanese Ministry of Justice has proposed amendments imposing harsher penalties on virtual asset service providers (VASPs) who breach anti-money laundering (AML) regulations.
The proposals would have the effect of imposing jail terms of up to two years for firms in breach, such as those who offer services without registration, as well as fines of up to $1.5 million.
The proposals establish a new legal category for money laundering offences linked to third-party payment accounts and virtual asset accounts.
Foreign cryptocurrency firms will be at risk of criminal penalties if they do not establish the required local firms and seek AML registration.
European Union: EBA publishes final reports containing three sets of final draft RTS and one set of final draft ITS under MiCA
On 7 May 2024, the EBA published a press release and final reports containing three sets of final draft regulatory technical standards (RTS) and one set of final draft implementing technical standards (ITS) under the Regulation on markets in cryptoassets ((EU) 2023/1114) (MiCA):
Final report on draft RTS on information for application for authorisation to offer to the public and to seek admission to trading of asset-referenced tokens and draft ITS on standard forms, templates and procedures for the information to be included in the application under Article 18(6) and (7) of MiCA;
Final report on draft RTS on the detailed content of information necessary to carry out the assessment of a proposed acquisition of qualifying holdings in issuers of asset-referenced tokens under Article 42(4) of MiCA; and
Final report on draft RTS on the approval process for white papers for asset-referenced tokens (ARTs) issued by credit institutions under Article 17(8) of MiCA.
The EBA will now submit the final draft RTS to the European Commission for endorsement, following which they will be subject to scrutiny by the European Parliament and the Council of the EU before being published in the Official Journal of the European Union. The EBA will also submit the final draft ITS to the Commission for endorsement and publication in the Official Journal.
United Kingdom: UKJT legal statement on digital assets and English insolvency law
On 17 April 2024, the UK Jurisdictional Taskforce (UKJT) published a ‘Legal Statement on Digital Assets and English Insolvency Law’ (requires registration). This follows a related consultation in October 2023. Among other things, the UKJT concludes that digital assets are property for the purposes of insolvency law, and that the courts can resolve many issues using existing legal principles.
Latvia: Government considers bill to designate Bank of Latvia as cryptoasset regulator
On 7 May 2024, it was reported that the Bank of Latvia will be designated as the supervisory authority for the issuance of cryptoasset operating permits under a draft Cryptoasset Services Law.
The draft Cryptoasset Services Law establishes a legal framework for the country’s cryptoassets market. It is broad in scope and governs individuals engaged in issuing, offering and trading cryptoassets, as well as those providing related services.
Relevant companies can continue to provide cryptoasset services without a permit until 30 June 2025, or until the Bank of Latvia reviews their application and makes a decision.
Market Developments
Iraq: National Bank of Iraq updates core banking platform
On 25 April 2024, it was reported that the National Bank of Iraq has moved its legacy systems onto a new banking platform. The core banking and payments services were migrated to a Temenos platform and the transition was completed in 12 months.
Belgium: Centre for Exchange and Clearing agrees to new verification of payee service provider
On 8 May 2024, it was reported that the Belgian Centre for Exchange and Clearing (CEC) has selected SurePay to provide confirmation of payee technology for banks within its scope.
The CEC oversees the channelling of retail payment transactions between banks in Belgium. The partnership with SurePay is part of the CEC’s compliance with the EU Instant Payments standards.
Australia: National Australia Bank progresses account-to-account payments solutions
On 8 May 2024, it was announced that National Australia Bank and Banked, a global payments network fintech, have partnered to accelerate the number of Australian merchants adopting and integrating account-to-account payments solutions.
The partnership seeks to build on the Australian Payments Plus PayTo service, which is a ‘Pay by Bank’ technology. This aims to give consumers more choice and control in payment methods by streamlining processes for merchants.
Latin America: Chile, Peru and Colombia join alliance with fintech associations
On 3 May 2024, it was reported that nuam exchange, a collaboration between the Santiago, Lima and Colombia Stock Exchanges, has joined with the fintech associations of Chile, Colombia and Peru. The collaboration aims to foster growth and innovation in the financial ecosystem across the region.
United Kingdom: UK Banks support launch of SigningBanks.UK to improve inclusivity for deaf community
On 7 May 2024, it was reported that a group of over 20 businesses from the financial services sector, including Nationwide, Lloyds Banking Group, Barclays, Monzo, HSBC and Starling Bank, have supported the launch of SigningBanks.uk.
SigningBanks.uk provides resources for deaf people and financial services firms to help with accessibility to financial services.
Asia-Pacific: Fintech groups partner to promote growth
On 2 May 2024, it was reported that FinTech Australia and the Thai Fintech Association have signed a memorandum of understanding to promote the growth of the fintech sector between Australia and Thailand. The collaboration follows the Australian government’s ‘Southeast Asia Economic Strategy’ paper which set out the digital economy as a route to boost two-way trade and investment with Thailand.
Middle East: Fils partners with Arab Financial Services to promote sustainable growth in region
On 13 May 2024, it was announced that Fils and Arab Financial Services (AFS) have entered a partnership to promote sustainable practices through the use of fintech and digital payments technology. The partnership aims to integrate sustainability into business operations, customer journeys and payments.
The partnership will allow financial institutions and banks to track and mitigate their emissions.
Africa: PAPSS hosts first Bank CEO consultative forum
On 13 May 2024, the Pan-African Payment and Settlement System (PAPSS) organised the first consultative forum of CEOs of African banks. According to the press release, the event gathered executives of African commercial banks, bankers’ associations, payment switches, the association of African stock exchanges and other financial service providers.
The forum considered ways to optimise the PAPSS payment system and how to facilitate efficient cross-border payments. Participants also discussed ways to leverage PAPSS to increase the share of African currencies in intra-African trade and other cross-border payments.
Africa: Access Bank Group and Mastercard partner to expand cross-border payments
On 9 May 2024, it was announced that Access Bank Group and Mastercard have launched a unified cross-border money movement solution across African markets. The partnership will offer a platform for businesses and individuals to enter into more efficient international transactions.
Singapore: Blockchain company XREX Singapore receives major payment institution licence
On 13 May 2024, XREX Singapore, a blockchain-enabled financial institution, announced that it has obtained a Major Payment Institution Licence from the Monetary Authority of Singapore (MAS).
XREX’s Singapore licence will enable it to undertake services such as account issuance, cross-border money transfer and digital payment token provision.
United States: Cross-border funds transfer service launched for nonprofit organisations
On 2 May 2024, it was announced that Crowded, a digital banking platform targeted at nonprofits and membership organisations, has partnered with Checkout.com, Cross River Bank and Visa Direct. The partnership seeks to allow consumers to make payments abroad without establishing an international bank account and instead use Visa Direct to transfer funds to their home bank accounts.
China: Mastercard joint venture begins processing domestic payments in China
On 8 May 2024, it was announced that the Mastercard NetsUnion joint venture has begun to process payments made in China with Mastercard cards issued by Chinese banks. Mastercard cards can be used for domestic and international purchases.
Surveys and Reports
United States: Digital assets advisor pulse survey results published
On 13 May 2024, it was reported that the Digital Assets Council of Financial Professionals has released the results of its digital assets advisor pulse survey.
The survey, which was conducted in March, shows that 35% of advisors plan to recommend digital assets within the next six months. This represents a 70% increase from the result in the previous December survey. The report suggested that the increase may be due to the availability of spot bitcoin ETFs.
Argentina: Argentina revealed as most crypto-friendly country in new research
On 2 May 2024, it was reported that CryptoCasinos research has found Argentina to be the most ‘crypto-friendly’ country. A large percentage of the population holds crypto and the country offers some of the best conditions for miners and traders. One in ten of the country’s population holds cryptocurrency, which is more than three times the global average.
Authored by Grace Wyatt, Virginia Montgomery, and Ada Nourel.