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Payment Matters: no. 6

    • Financial services - Payment services


    United Kingdom

    HM Treasury’s new proposals for cheque depositing

    In a press release published on 26 December 2013, HM Treasury confirmed new proposals which mean that consumers will be able to use their smartphones to send a picture of a cheque to their bank, in order to pay it in to their account.

    Consumers would no longer have to queue up in bank branches to pay-in cheques (albeit this option would still be available) and the new technology would mean that cheques are processed within 2 days, rather than the 6 days it currently takes for cheques to clear.

    What this means for you

    A few years ago proposals were made for cheques to be phased out by October 2018 -news that was greeted with disappointment by sole traders, small businesses, clubs, charities and schools who rely on cheques for payments. Since then the UK Payments Council has committed to keeping cheques for as long as customers need them and this latest confirmation by HM Treasury, that “cheques are still a crucial part of the British payments landscape”, will come as welcome news to many.

    Cheque imaging is already widely used in the USA, France and Asia but a change in legislation would be required before it could be introduced in the UK. This is because the current law allows the accepting bank to demand the cheque be physically present before deciding whether or not to honour it. This allows the accepting bank to satisfy themselves that the cheque is genuine and not fraudulent prior to crediting the beneficiary’s account. Concerns that a move to cheque imaging would increase the incidence of cheque fraud have been played down by bank sources which claim that the new technology could in fact help to eliminate fraud. The potential for fraudulently altered or created cheque images to be deposited is countered by the fact that cheque details and signatures would be verified by a computer system within the branch, eliminating the risk of human error in identifying anomalies.

    The government will consult this year on introducing the proposed legislation. If passed, consumers will see a real difference as they will no longer have to wait up to 6 days before knowing that the money is theirs to spend, and small businesses, who accounted for over 370 million cheque transactions in 2012, will also be delighted by the move.

    In response to the news, the UK Payments Council acknowledged that, “given that customers have made it clear that they want cheques to stay, it’s entirely right that the government consults to understand the public’s view on speeding up the clearing of cheques.”

    UK Payments Council announces extension to authorising payments for multiple signatories

    On 20 December 2013, the UK Payments Council published a press release announcing an extension to the ways that charities and businesses can authorise their payments if they are reliant on more than one signatory.

    What this means for you

    The UK Payments Council says in its press release that from 2014 nominated signatories will be able to authorise payments using either online banking or phone banking facilities, instead of relying on cheques. The UK Payments Council confirms that customers will be able to continue to use cheques, as the industry has committed to make cheques available for as long as customers need them (as discussed above).


    European Parliament proposes amendments to regulation on interchange fees

    On 24 July 2013, the European Commission adopted a proposal for a Regulation on interchange fees for card-based payment transactions (the MIFs Regulation). Since then, new versions of the MIFs Regulation have been published as well as a draft Opinion on the proposal by the European Parliament’s Committee on the Internal Market and Consumer Protection (IMCO).

    On 20 December 2013, IMCO published further amendments (dated 12 December 2013) to the MIFs Regulation.

    What this means for you

    The amendments build on the previous draft Opinion of IMCO, dated 9 November 2013. In this latest Opinion, a number of “Rapporteurs” provide suggested amendments to the proposed MIFs Regulation, on which the Parliament will now need to decide.

    On 20 February 2014, the European Parliament Committee on Economic and Monetary Affairs (ECON) is expected to vote on the proposal for the MIFs Regulation and then on 2 April 2014, the European Parliament is expected to vote in the Plenary on the proposal.

    However, to meet the European Parliament’s schedule, and to achieve adoption in the first reading in this session of the Parliament, it would be necessary for the Council to take a position on the proposed MIFs Regulation in February. As the Council had not made such plans and was busy with other dossiers, it seems more likely that the MIFs Regulation (and the revised Payment Services Directive, which the European Parliament has decided to address simultaneously) will be adopted by the end of 2014.

    EBA warns consumers of risks from virtual currencies

    On 13 December 2013, the European Banking Authority (EBA) issued a warning to consumers to highlight the possible risks arising from buying, holding or trading virtual currencies.

    The EBA warned that consumers should be aware that exchange platforms tend to be unregulated and are not banks that hold their virtual currency as a deposit. It also highlighted that at present, no regulatory protections exist in the EU that would protect consumers from financial losses if a platform that exchanges or holds virtual currencies fails. The EBA also stated that cases have been reported of consumers losing significant amounts of virtual currency, with little prospect of having it returned.

    The EBA is currently assessing all relevant issues associated with virtual currencies to identify whether they can and should be regulated and supervised.

    What this means for you

    The proclamation from the EBA will not be a great surprise to users of virtual currencies as, in many ways, they utilise methods of payment which exist only in the ‘virtual’ world. Therefore it should not be a surprise to them that ‘real’ world remedies may not be available.

    However, the EBA statement also reflects the ongoing debate as to the vices and virtues of virtual currencies, with many now seeing both sides of the coin, so to speak. At the heart of the debate remains the unanswered question as to whether or not such currencies are regulated by any laws at all; countries across the globe have been examining the issues for several years now. We have seen the US take action, but in the UK the consensus remains that currencies such as Bitcoin probably do not fall within any current payment legislation, nor is it viewed as ‘legal tender’.

    This debate will not go away and, indeed, all commentators view the issue as one which will continue to give rise to conundrums for regulators, enforcement agencies and governments for some time to come. The EBA’s statement does not provide any solution, but instead demonstrates the need for clarification of the legal status of virtual currencies sooner rather than later.

    European Parliament and Council to negotiate Payment Accounts Directive

    On 12 December 2013, the European Parliament published a press release announcing that, at its plenary session on 12 December 2013, it voted to adopt a report by the European Parliament's ECON committee on the proposed draft directive aimed at improving the transparency and comparability of information on fees related to payment accounts (the Payment Accounts Directive). The European Parliament has since published a document containing the provisional texts adopted at the plenary session which includes the amendments it has adopted to the Payment Accounts Directive.

    Meanwhile, on 19 December 2013, the Council of the EU published a note (dated 18 December 2013) from the Presidency of the Council to the delegations, containing a proposed general approach on the proposed Payment Accounts Directive. The note states that the general approach had been prepared with a view to a meeting of the Permanent Representatives Committee (COREPER (Part 2)) on 20 December 2013.

    On 20 December 2013, the Council of the EU published a press release announcing that COREPER had, on the Council's behalf, agreed a general approach on the proposed Payment Accounts Directive.

    What this means for you

    The European Parliament’s amendments constitute the mandate for the Parliament Rapporteur, Jurgen Klute, to negotiate a first reading agreement with the Council of the EU and European Commission. Negotiations between the European Parliament and the Council will therefore now commence, with the aim of adopting the Directive at first reading.

    Single Euro Payments Area (SEPA) updates

    SEPA is a project to harmonise the way the ECB makes and processes retail payments in Euro. The goal is to make payments in Euro and across Europe as fast, safe and efficient as national payments are today.

    • On 19 December 2013, the European Central Bank (ECB) published a press release announcing the creation of the Euro Retail Payments Board (ERPB), which replaces the SEPA Council.

    • On 20 December 2013, the European Central Bank published a new Single Euro Payments Area (SEPA) webpage and an updated webpage.

    • On 7 January 2013, the European Payments Council and the Cards Stakeholders Group published version 7.0 of the Single Euro Payments Area (SEPA) cards standardisation volume (SCS volume).

    What this means for you

    The ERPB's composition and mandate will be broader than those of the SEPA Council. Seven representatives from the demand side (e.g. consumers, retailers and corporations) and seven representatives from the supply side (e.g. banks and payment and e-money institutions) will sit on the board. This compares with five each on the SEPA Council. They will be joined by five representatives from the Euro area national central banks and one representative from the non-Euro area EU national central banks (all on a rotating basis). The ERPB is to be chaired by the ECB and the European Commission is invited to join as an observer.

    The ERPB's work will consist mainly of identifying strategic issues and work priorities (including business practices, requirements and standards) and ensuring that they are addressed.

    The ERPB starts its work as the payments sector prepares for the deadline for full migration to SEPA credit transfers and SEPA direct debits in the Euro area, of: 1 February 2014 for the Euro area and 31 October 2016, for non-Euro area Member States.

    The SCS volume contains a standard set of requirements to ensure an interoperable and scalable card and terminal infrastructure across SEPA, based on open international card standards. All stakeholders active in the SEPA cards domain are encouraged to introduce services and products in line with the SCS volume by January 2017.

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    Training and events

    Payments Intensive 2014: Future Development and Regulation

    Date: Thursday 6th February 2014
    Time: 09:00 - 14:00
    Venue: One Wood Street, London, EC2V 7WS

    Click here for more information and to book.