Academic says EU payments regulation will dampen innovation

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This article is part of our special report Payments services directive II.

SPECIAL REPORT / An updated Payment Services Directive (PSD II) that aims to embrace new mobile payments methods could end up acting as a hindrance to entrepreneurs, a leading Spanish academic told EURACTIV.

The Commission is set to publish its update to the Payment Services Directive (PSD II) this month, with a separate regulation on multilateral interchange fees (MIFs) likely to be published simultaneously.

The new rules form part of the Commission’s broader aim to promote a single European Payments Area (SEPA) and will seek to create a more competitive payments card market.

MIFs are charges paid by a retailer's bank for processing a payment and aim at sharing transaction costs between the buyer and seller.

But Gustavo Matías Clavero, an economics professor at the Autonomous University of Madrid, doubts that the 28 EU states could successfully converge into one payments area.

“It is illusory to achieve it [SEPA] through many more regulations that only increase the complexity and furthermore – as in the case of MIFs – threaten to have an impact opposite to that which they were seeking,” Matías Clavero said in an interview.

Matías Clavero emphasised that his research into Spanish efforts to lower MIFs had demonstrated no consumer benefits. The issue is hotly contested between consumer groups.

>> Read: Consumer groups divided over benefits of lower payment-card fees

Matías Clavero said that when Interchange fees are forced down, "issuing and acquiring banks, damaged by lower revenues, defend their income [by] increasing other costs." Consumers or merchants will pay the price through cardholder fees, higher interest rates on credit and debit cards, or new ATM costs, he said.

He was also challenged the EU executive’s contention that there have been no negative impacts on consumers in France, where MIFs were also lowered.

“What the Commission says about France is very different from what the Fédération bancaire française and several French consumer organisations stated,” Matías Clavero said, adding: “The problem is that the European Commission just addresses the merchant’s opinion and forgets about all the other actors, and does not consider other costs and benefits of the means of payment that affect directly consumers and the economy as a whole.”

In general, Matías Clavero seemed pessimistic about the chances that PSDII would foster innovation.

He was unimpressed by proposals in the latest draft for a new SEPA governance system to be put in place, consisting of a new board with a wide range of stakeholders.

"All participation and transparency will always be welcomed, so long as it does not turn into the joke about the committee that invented the camel by designing a horse," he said.

The European Payments Council, which already exists as a stakeholder representative group to help establish SEPA, “has failed to remove the barriers and limitations which would enable the eurozone to standardise an area and break down the borders to electronic monetary transactions," he said.

Asked whether the new PSDII would be capable of keeping track with innovation in the sector, he suggested it was more likely to hinder it. “The problem is normally greater for innovators when new rules suppress the competitive environment which the regulators would like to believe they are improving.”

The Payment Services Directive (PSD) was adopted by the EU in 2007, but an explosion in e-commerce through the internet and the ownership and use of smartphones has taken place since then.

The European Commission, meanwhile, has conducted a series of antitrust investigations in the payment card market, targeting in particular multilateral interchange fees (MIFs).

A commitment by the Visa card company to cap its debit card MIFs at 0.20% was made legally-binding in December 2010. But proceedings relating to consumer credit MIFs continued until the company committed to cap its inter-bank credit charges at 0.3% of the value of the transaction in May 2013. Such a cap may thus become legally binding later this year.

The Commission has also been investigating MasterCard, and recently opened new proceedings investigating its inter-bank fees and cross-border acquiring.

>> Read our LinksDossier: Payment Services Directive: The new payments landscape


  • July 2013: European Commission expected to put forward legislative proposal for Payment Services Directive update (PSD II), accompanied by impact assessment report.

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