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Following Tuesday's instalment, VIXIO rounds up the remaining clarifications made by the European Banking Authority (EBA) in its latest set of Q&As on the revised Payment Services Directive (PSD2).
The EBA has offered further insight into the payments and banking world with its latest set of PSD2 clarifications.
The banking watchdog has now responded to 226 of the 255 overall questions regarding the directive. There are also 16 currently under review and 13 that have been rejected.
Although these answers will provide welcome insights for some payment service providers (PSPs), insiders have previously told VIXIO that clarity from the Q&As is not always a good thing for firms. Sometimes, it can mean having to stop what they are doing.
Strong customer authentication (SCA)
One of the biggest issues regarding PSD2 has always been SCA, considering the change that it meant throughout the ecosystem, especially for EU consumers used to very little friction in their online shopping experience.
A question submitted to the EBA in 2021 by an unnamed competent authority asked whether transactions initiated via email should be subject to SCA requirements.
“In the banking sector, it is common to sign an email clause granting the possibility to initiate transactions by email. Therefore, the payer often [sic] initiates a transaction by sending an email (including the amount, recipient and purpose of the payment) to the payment service provider. The payment is then processed by an employee of the payment service provider.”
The competent authority currently considers transactions initiated by email to be excluded from PSD2 and the EBA’s SCA regulatory technical standards, but would like confirmation.
Here, the EBA agreed, pointing out that when a payer tasks its PSP with executing a payment transaction via email, this action is similar to a mail-order payment. “The payment initiation itself is not performed by the payer.”
“In this particular example, the payer only orders its payment [sic] service provider to initiate and process the payment, providing instructions including the required transaction information,” the EBA clarifies.
A Swedish resident, Sebastian Nielsen, asked the EBA whether bill payments via postal service fall into the definition of Article 97, which sets out the rules for SCA.
The EBA replied that it does not. “A payment transaction initiated through the described postal service is not initiated and executed electronically and thus can be considered as outside the scope of the SCA requirement.”
Passporting
A question submitted by the French Autorité de contrôle prudentiel et de résolution (ACPR) in February 2021 raised the issue of triangular passporting.
This takes place when a PSP licensed in Country A has recourse to an intermediary (possibly a branch, or a PSP agent) located in Country B in order to provide payment services in Country C via the intermediary.
According to the regulator, PSD2 “keeps silent” on the matter.
Here, the EBA said that triangular passporting is allowed because if you are authorised in one EU country, you are authorised in all of them.
“The payment institution can therefore provide payment services in the host Member State C without having a physical presence in that member state, through an agent or a branch located in a Member State B,” the EBA said, pointing out that this is in accordance with the procedure in Article 28 of PSD2.
In such cases, the passport notification should be sent by the competent authority of the home member state to the competent authority of the host member state.
Meanwhile, the services provided in host Member State C will be provided under the sole responsibility of the payment institution, and the EBA stated that it is also important that the payment service users in Member State C are properly informed that the agent is providing services on behalf of the payment institution.
More safeguarding funds
A consultancy firm asked the EBA in September 2020 for a clarification of the meanings “transferring of funds” and “another payment service provider” in the context of Article 10, which again looks at safeguarding requirements.
These requirements apply, according to the EBA, when the funds received by the payment institution have not been “delivered to the payee or transferred to another payment service provider by the end of the business day following the day when the funds have been received”.
The payment service user's transfer of funds to a payment account held in the name of the payment institution with another payment services provider would not be considered as “transferred” in the meaning of Article 10.
Therefore, it would not discharge the payment institution from the safeguarding requirements, the EBA summarised.
A question submitted in October 2021 by someone anonymous seeks clarification on the definition of “previous year” with regard to Method B, which is one of the methods of calculating funds.
In PSD2, Article 9 dictates that payments institutions are required “to hold, at all times, own funds calculated” in accordance with one of three options.
Method A relies on the company's overheads; Method B on its payment volume; while Method C focuses on a relevant indicator, comprising the sum of interest income, interest expenses, commissions and fees received, and other operating income.
Here, the question asks whether it should be the previous 12 months from the date of calculation, therefore a rolling calculation, or whether it refers to the previous accounting year.
“We believe that the calculation should be based on the previous accounting year, [sic] however, our local regulator has suddenly changed this and interpreted it to be 'the previous 12 months',” the party asking states.
Here, the EBA sided with the national competent authority, clarifying that “at the moment where the own funds are calculated, usually on a month-end basis, the 'preceding year' referred to in Article 9 is the full 12 month-period prior to the moment of calculation”.
Method B is likely to be a pertinent part of the upcoming PSD2 review, with the EBA having recommended to the European Commission over last summer that it should be the default option for payments institutions.
This may mean some institutions will need to change their calculation of funds method to comply with new rules.
Mastercard
Mastercard’s Denmark subsidiary also had a question answered, which queried the ability of a creditor to change a mandate.
The question, which was submitted in September 2020, asks whether a mandate change is possible by observing the procedure informing a debtor that the collection of the amount due, as agreed in the mandate, will continue unless the debtor indicates to the contrary.
The EBA responded that pursuant to Article 64 of PSD2, the procedure for giving consent must be agreed between the payer and the relevant payment services provider. “There are no formal requirements in the PSD2 governing the payer’s consent to a direct debit mandate including the modification of the mandate,” the EBA pointed out.
The procedure for the modification of an agreed direct debit mandate can, therefore, be agreed by the payee and the payer, the Paris-based regulator suggested, adding that any subsequent transaction based on a mandate changed following that procedure would be considered lawfully authorised.
