Opportunity 3 – Operating Payment Systems
Article 18 of the PSD2 (old article 16 PSD) provides what other services besides payment services payment institutions may undertake, such as the operation of a payment system (without prejudice to article 35). But what is a payment system? It is a “funds transfer system with formal/ standardized arrangements & common rules for processing/clearing/settling payment transactions”. Then which systems would fall under this definition? To me that would be SEPA, Visa, Mastercard etc. Whereas 49 of the Directive states “Those payment systems typically include the four-party card schemes as well as major systems processing credit transfers and direct debits.” This conforms to the examples given.
It is interesting to note that this clause already existed under PSD1, but it never got the proper attention and impact review it needed. The very first draft of PSD1 stated that PSPs would be allowed to “access and operate payment systems for the purposes of transferring, clearing and settling funds, including any instruments and procedures relating to the systems. In later draft versions, the word ‘access’ was removed. Could the word ‘operation’ mean that a PSP may establish a payment system competing with the existing systems? I would argue so, in particular because it even used to include the word ‘access’ to and therefore a clear distinction was made between accessing and operating. Operating means performing, conducting, carrying on. Interesting to see how it seems like the carefully considered word has not created any discussions so far during the drafting phase and PSD1 on what it effectively means. PSPs are able to compete directly with the payment schemes? Let’s see if this is picked up by any market players under PSD2.
Opportunity 4 – Access to Payment Systems
Article 18 also refers to article 35 PSD2 (article 18 PSD1) which stipulate that payment systems may not discriminate between authorized and registered PSPs. Whereas 49: “It is essential for any payment service provider to be able to access the services of technical infrastructures of payment systems. In order to ensure equality of treatment throughout the Union as between the different categories of authorised payment service providers, according to the terms of their licence, it is necessary to clarify the rules concerning access to payment systems”
Whereas 50 continues: “Provision should be made for the non-discriminatory treatment of authorised payment institutions and credit institutions so that any payment service provider competing in the internal market is able to use the services of the technical infrastructures of those payment systems under the same conditions.” To give non-banking parties the same access as banks. But what could this article further mean? In the whereas of PSD2 there is explicit reference to 4 party schemes as payment system. In four party schemes there are differences between authorized PSPs (being the acquirers) and registered PSPs (the PSPs registering as MSP of PF for instance). So would that mean that the difference between acquirers and payment processors is blurring? No more certifications or licenses to become authorized member or participant? In the market, you see acquirers already moving into the PSP work space and combining the two roles. Could however PSD2 mean that payment processors have direct access to the card schemes, a right that should not be limited by different conditions and where discriminatory treatment is prohibited from a regulatory perspective?
It seems like the distinct walls of carefully selected and distinct roles by (card) schemes could potentially crumble, but the actual impact and effects of this article in PSD2 is still to be seen. The legislator feels the same. Article 108 of PSD2 states that the Commission shall, by 13 January 2021, submit a report on the application and impact of this Directive, and in particular on access to payment systems. The legislator too believes that first some years must pass after PSD2 implementation before a full impact assessment can be made. I am curious to see how Visa and MasterCard would respond to any PSP knocking at their door to get equal membership rights as acquirers. Or will PSPs be hesitant to challenge the status quo?
Conclusion
There is still a great amount of concern about the details of PSD2 and how the new world post-PSD2 would look like. Nobody seems to know. It seems like even the legislator does not fully understand the impact of PSD2. As I have shown, certain PSD2 articles can be interpreted in different ways from different perspectives and the full impact is still unknown. The interpretations might be a bit bold and would be true game changers. Let’s see if this is picked up by the industry. However, payment processors should not just treat PSD2 as a compliance project and just sit back and wait. It is worthwhile to assess new possibilities to protect the client base and market position by extension of services and reach.
Want to discuss further? Contact me at nadja@pytchventures.com.
Published on July 6, 2016 by Nadja van der Veer, payment lawyer.
