On 20 February the European Parliament’s ECON Committee voted on the 909 amendments proposed by Members of the Parliament (MEPs) to the European Commission "Payments Package", composed by the revised Payment Services Directive (PSD2) and by the Regulation on Interchange Fees (IFR), writes Monica Monico
As far as "limited networks" are concerned, it shall be noted that their definition (in the PSD2) and the limited network exemption (in the IFR) have been reduced, as the "limited range of goods and services" which could be acquired via these products, is replaced in the text adopted by the ECON Committee by a "very narrow range of goods and services".
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This change in the wording appears very relevant, despite appearing minimal at first sight, as it determines whether a network is or is not subject to regulation. The "narrower" the definition of a limited network is, the higher the number of regulated "not narrow enough to be limited" networks.
More concretely, Recital 12 of the PSD2 explains that feedback from the market shows that the payment activities covered by the limited network exception often comprise massive payment volumes and values and offer to consumers hundreds or thousands of different products and services, which does not fit the purpose of the limited network exemption as provided for in PSD1.
According to the Commission, a payment instrument should be considered to be used within such a limited network if it can be used only either for the purchase of goods and services in a specific store or chain of stores, or for a very narrow range of goods or services, regardless of the geographical location of the point of sale. Such instruments could include, according to the Recital, store cards, petrol cards, membership cards, public transport cards, meal vouchers or vouchers for specific services.
However, where such a specific-purpose instrument develops into a general purpose instrument, the exemption from the scope of this Directive should no longer apply.
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As far as the IFR implementation periods are concerned, the timings proposed by the European Commission were two months for cross border interchange fees, and 24 months for national interchange fees. The ECON vote results indicate that the transitional period is now equal to one year for both the cross border and the national interchange fees.
In terms of application of interchange caps, the European Commission text was proposing 0,2% per transaction for debit cards and 0,3% per transaction for credit cards. The ECON vote results confirm the cap for credit card interchange at 0.3 percent of the transaction value, while the proposed cap on debit transactions is amended to 0.2% per transaction with a 7 cents maximum above 35 euros.
In relation to the scope of caps, the European Commission proposal included Consumer cards and excluded transactions with Commercial cards as well as transactions with cards issued by three party payment cards schemes. As a result of the vote, both Consumer cards and Commercial cards are included in the scope as are three party payment cards, unless "their volume does not exceed a threshold set by the European Commission" in which case they are still excluded from the scope.
For cross border acquiring, the possibility for a merchant to use the services of an acquirer in another member State is confirmed by the ECON vote. A new provision added by the MEPs says that the interchange fee of the country of the acquirer shall apply to cross-border transactions.
The very controversial European Commission proposal for a separation between the card scheme and the processing in terms of organisational and legal separation, is approved by the ECON Committee vote and any territorial discrimination in processing rules prohibited. Furthermore, the Parliament adds to the text a possible derogation for newly established card based payment schemes and for domestic debit card schemes operating below the caps.
The ECON Committee motion for a resolution will be put to vote most likely at the last Plenary session before the European elections, which will take place in the third week of April. The fact that this time all the MEPs will need to vote on the proposal and not only the MEPs in the ECON Committee, raises questions as to whether the proposal can or cannot federate the votes of the more than 700 MEPs and as to the quantity of oral amendments which could be presented in an attempt to modify the proposal at the last minute. To be continued…
Monica Monaco is the Founder and Managing Director of TrustEUAffairs. She focuses on payment systems and new payments means, including mobile and contactless payments. She can be contacted at the following address: monacom@trusteuaffairs.com
