Before the end of 2017, EU countries must include in their national legislations the new payment directive PSD2 2.0 (second edition of the Payment Services Directive) on the development of alternative nonbanking payments. It is early days yet to speak about the decline of era of payment cards and even Internet banking, but this European directive will lead to a rapid growth and competition of payment service providers.
It is urgent enough for Latvia: the number of transactions only within the first two quarters of 2015 was 174.1 million units at annual growth of 5.9%. The total amount of cash flow, including the bank credits, exceeds EUR 177 billion. There is something to fight for.
Meanwhile, the European Commission and the European Central Bank create an integrated market of payment services where differences will be extinguished between the transborder and national payments within the Euro area. Europe demands to remove all technical, legal and commercial barriers between the effective national payment markets. And the banks already expected it: in 2007, PSD European directive in its first edition has legalized the first that time alternatives of electronic payment, as a result of which, for example, the mobile operators and retailers have obtained a possibility to carry out certain bank functions.
Three points are becoming of a key importance at present:
a) new payment service providers are created;
b) they are integrating into EU bank infrastructure, their restrictions are prohibited and punishable;
c) starting with January 2018, it will be possible to transfer payments via payment services throughout the Euro area with the use of bank services in accordance with unified rules.
There also exists the Merchant Interchange Fees Regulation (MIFR). This European regulation established the upper limit of interbank commission fee up to 0.2–0.3% for the cardholders.
Here the essence is in the following: from each transaction, the retailer shall pay to its bank an amount consisting mainly of payment for the transaction, use of the payment card and margin for services of the acquiring bank. The bank shall pay to the merchant the selling price deducted the abovementioned amount. And now, the bank margin is legislatively cut back to the historical minimum.
It all induces the development of alternative payment services created on the base of banks.
It is clear that the banks are not happy with this Brussels’initiative depriving them if not of the monopoly but certainly of their dominating position on the market of money transfers. The more so as European banks already have incurred EUR 6 billion as a result of innovations within the framework of PSD implementation in 2007.
Second edition PSD2 approved by the European Parliament on 05 May 2015 brings not less serious changes for the banks. According to poll byFinextra, only 14% of European banks accepted this idea positively: thus EU-28 banks undertake to open their APIs (Application Programming Interface) in order to rise the competition in financial sector, particularly in the field of mobile and online payments via open access to the industry of nonbanking companies, and banking ones also – it is worth expecting that a part of local banks are working in this direction.
Another aspect: requirements will be tightened to the identification in banks. According to yet another European directive, starting with 2017 the payment service providers will be obliged to adopt the new regulations, including the implementation of a two-factor identification and a guarantee for security of channels via which the user personal data is transmitted.