Global Payments Newsletter, July 2021

In this Newsletter:

• Regulatory Developments
• Payment Market Developments
• Surveys and Reports

For previous editions of the Global Payments Newsletter, please visit our Financial Services practice page.

Regulatory Developments

Europe: EBA consults on proposed guidelines on limited network exclusion under PSD2

On 15 July 2021, the EBA published a consultation paper (EBA/CP/2021/28) proposing guidelines on the limited network exclusion (LNE) under PSD2.

The EBA explains that Article 3(k) of PSD2 introduced an exclusion for services based on specific payment instruments that can be used only in a limited way. It believes that the implementation and application of the LNE requirements diverges significantly between member states, which impedes the single market for payment services in the EU and creates opportunities for regulatory arbitrage. The EBA also believes that consumers are sometimes unaware that they do not benefit from the protection envisaged under PSD2.

It is therefore proposing guidelines to bring about convergence on a number of aspects of the LNE. In particular:

• The draft guidelines look at the requirements for each type of limited network exclusion under Article 3(k) of PSD2, including, where relevant, criteria and indicators on how to assess limited network of service providers and the meaning of a limited range of goods and services.

• The guidelines also cover the EBA's expectations on the use of payment instruments within a limited network, the application of the LNE by regulated PSPs and electronic money issuers, and the application of the notifications to competent authorities.

The deadline for responses is 15 October 2021. The EBA will publish final guidelines after the end of the consultation period.

Back to top

UAE: Central bank issues Retail Payment Services and Card Schemes Regulation

On 17 July 2021, the Central Bank of the UAE (CBUAE) announced the introduction of the new Retail Payment Services and Card Schemes Regulation (the Regulation). This is the fourth regulation in the UAE’s “enhancement journey” towards an improved digital payments infrastructure.

The Regulation introduces a licensing regime for payment services providers (PSPs) providing, or wishing to provide, one or more of nine payment services or payment card schemes in the UAE: payment account issuance, payment instrument issuance, merchant acquiring, payment aggregation, domestic and cross-border fund transfers, payment tokens, payment initiation, and payment account information services.

Through the Regulation, the CBUAE aims to promote digital innovation while maintaining the safety and integrity of payment systems and services.

Back to top

United Kingdom: HM Treasury consults on access to cash

On 1 July 2021, HM Treasury published a consultation paper which marks the next step in the government’s development of legislation to protect access to cash. The consultation follows the government’s October 2020 call for evidence on the key considerations associated with this topic, which has already resulted in legislation for cashback without a purchase as a non-regulated activity as part of the Financial Services Act 2021.

Despite the decline in cash use in recent years and the acceleration of the move to digital forms of payment during the COVID-19 pandemic, cash remains an important method of payment for millions of people across the UK. In particular, vulnerable groups such as low-income households and those without internet access are much more likely to use cash. However, the lower consumer demand is reducing economic incentives for providing cash infrastructure which has led to fears that the cash system could collapse in the coming years.

The government intends to provide HM Treasury with powers to introduce legislative geographic access requirements providing for cash access facilities to be available within maximum distances of a minimum percentage of the population. Furthermore, HM Treasury would have the power to designate firms (principally large banks and building societies) upon whom these cash access requirements may be imposed. These designation decisions will be flexible, and take into consideration firms’ respective geographic coverage and distribution of customers, as well as their share of the UK’s payment account market. The FCA has been put forward as the lead regulator for overseeing the retail cash system, with responsibilities for ensuring designated firms comply with the requirements and reporting to HM Treasury, and appropriate powers of investigation and enforcement.

The consultation closes on 23 September 2021. For further information, see this House of Commons Library research briefing.

Back to top

Europe: ECB launches digital euro project

On 14 July 2021, the ECB launched the investigation phase of a digital euro project. The project aims to ensure that in the digital age citizens and firms continue to have access to what the ECB considers to be the safest form of money - central bank money.

The investigation phase will address key issues regarding design and distribution, including:

• Meeting the needs of Europeans while simultaneously preventing illicit activities and undesirable impacts on financial stability;
• Complementing, rather than replacing, cash;
• Identifying changes needed to the EU legislative framework in cooperation with European co-legislators;
• Intensifying technical work on the digital euro; and
• Assessing the possibility of a digital euro on the market, including design options to ensure privacy and avoiding risks for Euro Area citizens.

The ECB has been conducting experiments alongside national central banks over the last nine months in preparation for the investigation phase. Experiments were conducted in the following four areas: the digital euro ledger; privacy and anti-money laundering; limits on digital euro in circulation; end-user access while not connected to the internet and facilitating inclusiveness with appropriate devices. No major technical obstacles were identified to any of the assessed design options.

The investigation phase will last 24 months. For further information, see this October 2020 ECB report on a digital euro.

Back to top

United Kingdom: PSR second annual review of specific direction on protected ATMs

On 1 July 2021, the Payment Systems Regulator (PSR) published a report following its second annual review of specific direction 8 (SD8), together with a paper setting out stakeholder responses to its call for views.

SD8 requires LINK (the UK's largest ATM network) to do all it can to fulfil its commitment to maintain the broad geographic spread of free-to-use (FTU) ATMs. Based on the evidence the PSR has collected and its analysis of stakeholder responses, it considers that SD8 should remain in place until it expires in January 2022. The PSR has also identified three areas for further action by LINK:

• Reviewing its financial incentives for maintaining and replacing protected ATMs;
• Publishing further details on the efficiency and transparency of direct commissioning; and
• Improving resilience to support continued access to cash in the future.

The PSR has engaged with LINK directly regarding its conclusions, and will agree timescales with LINK for further work in due course. It will also continue to monitor LINK's commitment and how it is being met.

The PSR is currently minded to issue a new direction to replace SD8 when it expires. However, it plans to assess the evidence in detail over the summer and if it decides that a new direction is required, it will consult on a draft later in 2021.

Back to top

Europe: ECB publishes keynote speech confirming "cash is still king in times of COVID-19"

On 15 June 2021, Fabio Panetta, Member of the Executive Board of the ECB, spoke about the crucial role cash continues to play in the Euro Area. In his speech, Panetta expressed the Eurosystem’s commitment to safeguarding cash as an accepted means of payment despite the potential launch of a digital euro, which would serve as a complement as opposed to a replacement.

COVID-19 has reduced the use of cash in day-to-day payments, with the volume of cash being lodged at central and commercial banks falling by approximately 20-25% in the Euro Area since early last year. Although cash payments have declined, there has been an increase in the demand for banknotes, with an increase of  EUR 190b between March 2020 and May 2021. Research shows that a reason for this could be that consumers with low income cut spending and increased their holding of cash. Panetta also pointed to evidence suggesting that without cash, both merchants and consumers would be significantly worse off; particularly those with low income and older people.

Given its many functions, Panetta expects cash to survive the digital revolution, listing goals to facilitate this in the Eurosystem’s Cash 2030 Strategy:

• To continue providing an efficient and robust supply of cash;
• To ensure that euro banknotes and coins continue to be universally accepted by merchants and available to consumers as part of the basket of payment instruments;
• To continue providing safe, state-of-the-art euro banknotes, recognising their role as a powerful symbol of European integration; and
• To assess and reduce the environmental footprint of cash via new products and processes.

Back to top

Russia: Central bank to begin pilot testing a digital ruble platform

On 2 July 2021, it was reported that the central bank of Russia will begin the pilot phase of its digital ruble project. At this stage, the pilot will involve testing a digital ruble platform between twelve Russian banks, to determine the feasibility of a new payment infrastructure. Participant banks will use the pilot to adapt their technical capabilities to support the introduction of a digital ruble. 

The central bank intends to complete the development of the digital ruble prototype by December 2021 and to begin testing the prototype in practice in January 2022. Testing will take place in several stages, with the goal of creating a roadmap for a potential widespread implementation of the digital ruble.

Back to top

Singapore and France: Central banks test cross-border CBDC exchange

On 8 July 2021, the Monetary Authority of Singapore announced that it had successfully completed a wholesale cross-border payment and settlement central bank digital currency (CBDC) experiment with the Banque de France. The experiment was supported by JP Morgan’s Onyx.

The two central banks noted that cross-border payments lack transparency on foreign exchange rates because they rely on correspondent banking arrangements. To combat this issue, the experiment used simulated cross-border transactions involving multiple CBDCs on a common network between Singapore and France.

The experiment also found that by using a multiple CBDC network, the number of correspondent banking parties involved in the payment chain for cross-border transactions could be reduced and the associated costs could be cut down. The design of the multiple CBDC network used in this experiment can be scaled up to allow for other central banks to join.

Back to top

France: Central bank conducts new CBDC experiment

On 21 June 2021, the Banque de France announced that it had conducted a new experiment around the use of a central bank digital currency (CBDC) in the settlement of listed securities. The experiment consisted of using the CBDC to simulate the settlement of listed securities and thus trigger their delivery. The Banque de France simulated the issuance of CBDC on public blockchain, while preserving the control and confidentiality of the simulated transactions.

The experiment was run in collaboration with SEBA Bank, the Banque Internationale à Luxembourg and LuxCSD, and it is part of a wider experimental programme launched by the Banque de France in March 2020 as part of France’s contribution to the Eurosystem’s more global reflection on CBDC.

Back to top

Global: Joint CPMI, BIS, IMF and World Bank report on CBDC for cross-border payments

On 9 July 2021, the Committee on Payments and Market Infrastructures (CPMI), the BIS Innovation Hub, the International Monetary Fund (IMF) and the World Bank published a joint report to the G20 on central bank digital currencies (CBDC) for cross-border payments. As the G20 has identified cross-border payments as a priority and endorsed a comprehensive programme to address key challenges to cross-border payments, BIS has analysed the extent to which CBDCs could be used internationally.

The report acknowledges that, to date, no major jurisdiction has launched a CBDC and many design and policy decisions are still unresolved, and that most CBDC investigations by central banks focus on domestic issues and use cases. It then goes on to make a series of recommendations that could enhance the possibility of implementing a connected network of CBDCs in the cross-border payments context, including:

• The G20 should consider a system involving some degree of interoperability between CBDCs based on access and settlement arrangements to facilitate the cross-border use of CBDCs from two or more jurisdictions;
• Multilateral collaboration to agree on design principles will be key to addressing concerns of central banks regarding currency substitution risk, capital flow volatility, and contagion risk;
• Cross-border CBDCs could offer the opportunity to address the frictions inherent in current cross-border payment systems and arrangements from the outset, for example through offering secure settlement, reducing costly and lengthy intermediation chains throughout the payment process, and eliminating operating hour mismatches by being accessible 24/7; and
• It is necessary to undertake an investigation into global stablecoin arrangements and the feasibility of new multilateral platforms for cross-border payments.

Back to top

Global: G20 communiqué from July 2021 meeting of finance ministers and central bank governors

On 12 July 2021, the G20 published a communique following a meeting of finance ministers and central bank governors in Venice on 10 July 2021.

Among other things, the communique states that the G20:

• Reiterates its commitment to a timely and effective implementation of the G20 Roadmap to enhance cross-border payments by relevant authorities. It looks forward to the FSB report setting quantitative global targets for addressing the challenges of cost, speed, transparency and access, which is to be delivered in October 2021. It reiterates that no global stablecoins should commence operation until all relevant legal, regulatory and oversight requirements are adequately addressed through appropriate design and by adhering to applicable standards; and
• Welcomes the Financial Action Task Force (FATF) work on money laundering risks resulting from environmental crimes, and recognises the links between climate and biodiversity threats and other serious crimes. It reaffirms its commitment to implementing and strengthening global standards on beneficial ownership transparency and virtual assets regulation and supervision within its jurisdictions. It strongly supports the FATF's ongoing project to revise the current recommendation on beneficial ownership transparency.

Back to top

Global: IADI and IFSB finalise core principles for effective Islamic deposit insurance systems

On 12 July 2021, the International Association of Deposit Insurers (IADI) and the Islamic Financial Services Board (IFSB) published the text of core principles for effective Islamic deposit insurance systems (CPIDIS).

 The CPIDIS consists of 17 core principles for the development and implementation of an effective Islamic deposit insurance system (IDIS). The principles take account of the specificities of Islamic banks, while complementing existing international standards in this area, primarily IADI's core principles for effective deposit insurance systems.

The aim is for jurisdictions to use the CPIDIS and their compliance assessment methodology as a benchmark for assessing the quality of their IDIS and for identifying gaps in their Islamic deposit insurance practices, including measures to address them.

A related press release states that the IADI and the IFSB will continue their work on this issue with a series of pilot tests for the CPIDIS that will be used to help develop a joint IADI-IFSB handbook for the assessment of compliance with the CPIDIS.

Back to top

UK and Singapore: HM Treasury and MAS sign MOU on financial services regulatory cooperation

On 30 June 2021, the UK and Singapore agreed a landmark Financial Partnership for financial services, formalised in a Memorandum of Understanding (MOU). This partnership will facilitate closer regulatory cooperation between the UK and Singapore and the Asia-Pacific region more generally.

The MOU aims to reduce frictions for firms serving the UK and Singapore markets by committing to work towards the compatibility of their respective regimes and to reduce unnecessarily burdensome or duplicative regulatory requirements. For the purposes of this MOU, regulatory standards adopted by international standard-setting bodies (e.g. the Financial Stability Board and the Financial Action Task Force) to which both nations have agreed can be considered as internationally agreed standards. The MOU also provides that either nation may defer to the regulatory and supervisory frameworks of the other where practicable and permissible.

It is intended that the increased financial services activity and information sharing between the two countries, particularly in areas such as fintech, green finance, and cyber security, will increase employment, trade and investment, as well as promoting financial stability, improving market integrity and competition and creating a transparent and predictable environment for consumers, investors, depositors and suppliers.

For further information, see this press release from HM Treasury.

Back to top

India and United Kingdom: Joint statement on first India-UK Financial Markets Dialogue

On 8 July 2021, HM Treasury published a press release on the first India-UK Financial Markets Dialogue. Financial cooperation is one of the key pillars of the 2030 Roadmap adopted by the two countries during the recent meeting of their two Prime Ministers.

The Dialogue focused on four main themes, including banking and payments. Participants expressed their desire to increase cross-border payments and banking activity, and agreed to consider the topic when negotiating a future India-UK Free Trade Agreement. Negotiations for the Free Trade Agreement are expected to take place later this year.

For further details on the 2030 Roadmap, see this UK government policy paper.

Back to top

United Kingdom: IRSG report on UK regime for overseas firms

On 8 July 2021, the International Regulatory Strategy Group (IRSG) published a report on the UK regulatory regime for overseas firms.

The report considers whether the current regime could be improved, with a view to enhancing the UK's global competitiveness. It follows an interim report, which the IRSG published in November 2020, and builds on the issues raised in that report. It also identifies overlaps between the various mechanisms that should be addressed to enable overseas firms to navigate the regime.

The report makes recommendations to the UK government and regulators in four areas:

• The regulatory perimeter for cross-border business;
• Regimes for cross-border access;
• Regulation of branches of overseas firms; and
• The UK equivalence framework.

Back to top

United Kingdom: Treasury Committee report on future framework for regulating financial services

On 6 July 2021, the House of Commons Treasury Committee published its Fifth Report of Session 2021-22. In the report, which includes a series of recommendations, the Committee considers the future of financial services following the Brexit transition period and examines how financial regulations should be set and scrutinised by Parliament.

Back to top

Italy: Government takes further steps toward establishing FinTech Sandbox

On 2 July 2021, the Italian Official Gazette published a decree for the establishment of a FinTech Committee and the launch of a FinTech Sandbox. The Decree entered into force on 17 July 2021.

The FinTech Committee, chaired by the Italian Minister of Economy and Finance, will be tasked with monitoring the evolution of fintech at the national, European and international level. It will foster the development of fintech in Italy, reduce the relevant administrative burdens and develop guidelines and best practices. It will also improve communication between market operators, institutions and supervisory authorities and promote collaboration and information exchange with foreign institutions.

The FinTech Sandbox will serve as an environment to test technologically innovative activity affecting the banking, financial or insurance sectors. Entities wishing to request access to the Sandbox must meet specific requirements, as must the innovative activity they wish to test. The Decree sets out the content of an application, which must include, among other things:

• a detailed description of the project;
• the reasons why the testing period is requested;
• a proof of concept including an evaluation of the project’s financial sustainability;
• a risk assessment with appropriate remedial measures; and
• user safeguarding measures.

Each eligible project will have a maximum duration of 18 months, although this may be extended in specific circumstances. The FinTech Committee will maintain a register of the entities admitted to the Sandbox, and the relevant supervisory authorities will monitor and report on the activities continuously and report back to the Committee.

For further information, see this Engage article.

Back to top

United Kingdom: FCA announces successful applicants to seventh cohort of regulatory sandbox

On 10 June 2021, the FCA published a new webpage providing details of the 13 firms that were successful in applying to begin testing in the seventh cohort of the regulatory sandbox.

The FCA received 58 applications, with applications coming from firms operating in the UK and overseas. Applications primarily came from firms looking to operate in the retail banking and retail lending sectors. In light of COVID-19, the FCA was interested in more innovation and testing from firms developing businesses, products or services designed to detect fraud and scams, support the financial resilience of vulnerable consumers, or improve access to finance for SMEs.

The FCA also refers to the cross-border testing environment developed by the Global Financial Innovation Network (GFIN), stating that the GFIN is working with a select group of firms to agree cross-border testing plans, and two firms have been accepted to begin domestic tests in the FCA's regulatory sandbox.

The sandbox is currently run on a cohort basis, but the FCA intends to move to "Always Open" later in 2021. It will also expand and clarify the scope of qualifying propositions. The FCA will make further announcements about these changes.

Back to top

United Kingdom: BoE and BIS launch Innovation Hub London Centre

On 11 June 2021, the Bank of England (BoE) and the Bank for International Settlements (BIS) published a press release announcing the launch of a new BIS Innovation Hub London Centre. The London centre will help advance the Innovation Hub's work on priority themes, which currently focus on six areas: use of technological innovation in supervision and regulation (SupTech and RegTech); next generation financial market infrastructures; central bank digital currencies (CBDCs); open finance; cyber security; and green finance. Work on these themes is distributed across the various hub centres.

This is the fourth new innovation hub centre to be opened in the past two years, with existing hubs already established in Basel, Hong Kong and Singapore. BIS also plans to open further new centres in due course including in Toronto, Frankfurt, Paris and Stockholm. In January 2021 BIS signed a memorandum of understanding for a strategic collaboration with the Federal Reserve System in New York.

Back to top

United Kingdom: Chancellor sets out financial services roadmap

On 1 July 2021, HM Treasury published the 2021 Mansion House Speech delivered by the Chancellor of the Exchequer, Rishi Sunak. The speech sets out the Chancellor’s vision for a UK financial services roadmap to ensure that the sector remains competitive following Brexit. Also published was a HM Treasury document entitled "A new chapter for financial services", which is introduced by Mr Sunak, Andrew Bailey, Bank of England (BoE) Governor, and Nikhil Rathi, FCA Chief Executive. The document sets out the government's vision for an open, green and technologically advanced financial services sector that is globally competitive and acts in the interests of communities and citizens, creating jobs, supporting businesses and powering growth across the UK.

In his speech, the Chancellor stressed the UK’s focus on innovation and the adoption of cutting-edge financial technologies, but also explained that access to more traditional payment methods must be preserved to promote financial inclusion. To that end, the Chancellor highlighted the importance of the HM Treasury consultation on access to cash, which is covered earlier in this newsletter.

Other key priorities include:

• Requiring companies, pension schemes, financial services firms and investment firms to report on their environmental impact such that consumers can have the full climate impact picture before choosing to pay for a product;
• Enhancing the UK’s strengths as a global financial hub by promoting ties with other jurisdictions through agreements and partnerships, such as the recent UK-Singapore partnership (see the separate item on this in this newsletter); and
• A fundamental review of the prospectus regime and wholesale capital markets.

Back to top

United Kingdom: FCA publishes 2021/22 business plan

On 15 July 2021, the FCA published its 2021/22 business plan setting out three priorities for the year ahead:

• Continuing to deliver for consumers by taking forward the FCA’s priorities from its previous business plan, as well as the new Consumer Duty;
• Continuing to enhance market integrity; and
• Focusing on six important cross-market issues, namely fraud, financial resilience, operational resilience, improving diversity and inclusion, enabling a more sustainable financial future, and international cooperation.

One of the key areas of focus for the FCA is the proposal for a new Consumer Duty for financial services firms including payment and e-money institutions. Over the next year, the FCA will investigate harmful business practices, including strategies which make it difficult for consumers to cancel a product or service online. The new Consumer Duty seeks to address these practices and to enhance consumers’ ability to make informed and timely decisions about their purchases. For further information on the proposed Consumer Duty, see the May edition of the Global Payments Newsletter and this Engage article.

The FCA is also looking to improve diversity and inclusion in financial services, both with respect to the financial inclusion of vulnerable groups of people and promoting diversity within financial services firms. 

For more on the FCA’s 2021/22 business plan, take a look at this Engage article.

Back to top

United Kingdom and Singapore: Government starts negotiations on digital trade agreement with Singapore

On 28 June 2021, the UK and Singapore began negotiations on a cutting-edge digital trade agreement that could remove barriers to digital trade and enable UK exporters to expand into high-tech markets.

The UK is the first country in Europe to start negotiations on a Digital Economy Agreement (DEA), and this is part of the government’s strategy to enhance the country’s status as a global hub for services and digital trade. The negotiations will focus on:

• Securing open digital markets for exporters and allowing them to expand into new markets to sell traditional products in new ways;
• Ensuring free and trusted cross-border data flows, while upholding high standards of personal data protection;
• Cutting red tape for UK businesses by promoting digital trading systems such as digital customs and border procedures, to save time and money when exporting;
• Upholding consumer rights and protecting businesses’ valuable intellectual property like source code and cryptography; and
• Deepening cooperation on future growth sectors like fintech and lawtech, while working with Singapore to strengthen collective cybersecurity.

Back to top

El Salvador: World Bank rejects El Salvador's request for assistance with implementation of Bitcoin as legal tender

On 17 June 2021, it was reported that the World Bank had rejected a request from El Salvador to help with the implementation of Bitcoin as a legal tender, citing concerns over transparency and the environmental impact of Bitcoin mining.

El Salvador recently became the first country in the world to officially categorise Bitcoin as a legal currency. Although discussions with the International Monetary Fund (IMF) over the adoption of Bitcoin were claimed to have been successful by El Salvador’s Finance Minister, concerns over macroeconomic, financial and legal issues were later expressed by the IMF.

For more information on the country’s announcement to classify Bitcoin as legal tender alongside the USD, see the June 2021 edition of the Global Payments Newsletter.

Back to top

Europe: ECON adopts report on proposed Regulation on pilot regime for market infrastructure based on DLT

On 13 July 2021, the European Parliament's Economic and Monetary Affairs Committee (ECON) published a press release announcing that they had adopted a report on the proposed Regulation on a pilot regime for market infrastructures based on distributed ledger technology (DLT) (2020/0267(COD)) and highlighting elements of the amendments proposed by ECON in the report.

Back to top

India: Finance Minister confirms that crypto bill is finally ready

On 7 July 2011, it was reported that India’s Finance Minister had confirmed that the Cabinet note on the much awaited Cryptocurrency and Regulation of Official Digital Currency Bill 2021 is ready to be discussed in Parliament.

The content of the bill has not been published, although the Finance Minister has stated that at the very least some exceptions will be available for fintech, experimenting and pilot projects. In the past, the Indian Parliament has hinted at the possibility of prohibiting all private cryptocurrencies, although it is unclear whether this position remains the same in the finalised draft.

For further details on India’s cryptocurrency regulation, see the February 2021 edition of the Global Payments Newsletter.

Back to top

Spain: New law to combat tax fraud extends to crypto services and new digital services tax regulations introduced

On 9 July 2021, Act 11/2021 on measures to prevent and combat tax fraud was published. The Act extends tax reporting obligations to certain crypto service providers. The reporting obligation applies to transactions involving the acquisition, transmission, exchange and transfer of virtual currencies, as well as collections and payments made in crypto-currencies in which they have been involved.

Entities resident in Spain and permanent establishments in Spain of non-resident entities that provide services to safeguard private cryptographic keys on behalf of third parties to hold, store or transfer virtual currencies, will have to provide the Spanish tax authorities (AEAT) with information on all the virtual currencies held in custody.

Entities resident in Spain and permanent establishments in Spain of entities resident abroad that:

• Provide exchange services between virtual currencies and fiat money or between different cryptocurrencies;
• Intermediate in any way in the performance of exchange transactions;
• Provide services on behalf of third parties to safeguard private cryptographic keys to hold, store and transfer virtual currencies; or
• Make initial offerings of new virtual currencies, in respect of which they deliver in exchange for the contribution of other virtual currencies or fiat money,

will also have to report to the Spanish tax authorities.

Spain has also recently introduced regulations implementing Law 4/2020 of 15 October 2020 on Certain Digital Services Tax (Impuesto sobre Determinados Servicios Digitales), which creates a new indirect tax in Spain, popularly known as the "Google tax", that applies to the provision of certain digital services to users located in Spain. The following services are not subject to the Spanish Digital Services Tax:

• E-commerce, i.e. the sale of goods or services contracted through platforms in which the supplier does not act as an intermediary;
• The underlying transactions between users within the framework of an online intermediation service;
• The provision of online intermediation services consisting of only digital content, communication services, or payment services;
• The provision of regulated financial services and data transmissions provided by regulated financial institutions; and
• The provision of digital services carried out between entities that are part of a corporate group with a direct or indirect participation of 100% between them.

For further information on the Spanish Digital Services Tax, see this analysis on Engage.

Back to top

Global: BCBS consults on prudential treatment of cryptoasset exposures

On 10 June 2021, the Basel Committee on Banking Supervision (BCBS) published a consultative document (BCBS519) on the prudential treatment of banks' cryptoasset exposures.

In the paper, the BCBS divides cryptoassets into two groups:

1. Cryptoassets eligible for treatment under the existing Basel framework (with some modifications), such as stablecoins; and
2. Cryptoassets, such as bitcoin, that are not eligible and would therefore be subject to a new conservative prudential treatment.

The BCBS explains that its proposed prudential treatment of cryptoassets is guided by three general principles: same risk, same activity, same treatment; simplicity; and minimum standards.

Responses are requested by 10 September 2021.

Back to top

United States: White House encourages CFPB to issue rules on banking data sharing

On 9 July 2021, President Biden issued an Executive Order on Promoting Competition in the American Economy (the Executive Order). The Executive Order was prompted by President Biden’s observation that barriers to competition are driving up prices for consumers and holding back economic growth and innovation.

To promote competition, the Executive Order requests financial institutions to facilitate the portability of consumer financial transaction data so that consumers can more easily switch to other financial institutions and use new, innovative financial products.

For further analysis on the content of the Executive Order, see this White House fact sheet. 

Back to top

Italy: Bank of Italy implements PSD2 provision on the obligation to inform consumers of their rights

On 1 July 2021, the Bank of Italy implemented Article 106 of PSD2 by publishing an amendment to the Bank of Italy Transparency Rules (BTR). This amendment sets out an obligation for payment service providers (PSPs) to inform consumers of their rights in the context of the provision of payment services.

The BTR, as amended, provide that PSPs must make the European Commission’s leaflet listing consumer rights under PSD2 easily accessible and understandable (including to persons with disabilities). Paper versions must also be made available free of charge at PSP branches and at entities that the PSP is involved with.

The revised version of the BTR will be published in the Italian Official Gazette and will come into force the following day. PSPs must comply with the amendments within three months.

For further details, see this Engage article.

Back to top

Europe: EBA report on PSP readiness to apply SCA for e-commerce card based payments

On 11 June 2021, the EBA published a report on payment service provider (PSP) readiness to apply Strong Customer Authentication (SCA) for e-commerce card-based payments in the EU.  The EBA reports on the progress made by issuing and acquiring PSPs in enrolling online merchants, payment cards and payment service users into SCA-compliant solutions, and in requesting SCA for online payment transactions after 31 December 2020.

The report concluded that 99% of EU merchants are ready to support SCA and 94% of all payment cards in the EU are SCA-enabled. In addition, 92% of e-commerce card-based authentication requests by acquires are compliant with SCA requirements as compared to 89% of like transactions reported by issuers.

However, the EBA expressed concerns that PSPs in some jurisdictions, such as Slovenia, Malta and Portugal, are lagging behind others in enabling SCA on their payment cards and on enrolling payment service users on SCA-compliant solutions.

Back to top

Europe: European Commission adopts draft Delegated Regulation supplementing PSD2 with RTS on framework for home host co-operation and information exchange

On 21 June 2021, the European Commission published a draft Delegated Regulation (C(2021) 4273) and accompanying Annex supplementing PSD2 with regard to regulatory technical standards (RTS) specifying the framework for co-operation and the exchange of information between competent authorities of the home and the host member states in the context of supervision of payment institutions (PIs) and electronic money institutions (EMIs) exercising cross-border provision of payment services. The Commission adopted the draft Delegated Regulation on 18 June 2021.

The Council of the EU and the European Parliament will now scrutinise the draft Delegated Regulation.

Back to top

United Kingdom: The Payment and Electronic Money Institution Insolvency Regulations 2021 (SI 2021/716) made

On 17 June 2021, The Payment and Electronic Money Institution Insolvency Regulations 2021 (SI 2021/716) (the Regulations) were made. They came into force on 8 July 2021, meaning that from that date new special administration procedures will be available for payment institutions and electronic money institutions. Where such an institution becomes insolvent, the new special administration procedures are designed to improve returns to consumer creditors and the speed of the process, compared with an administration process under Schedule B1 to the Insolvency Act 1986 (IA 1986).

An explanatory memorandum to the Regulations has also been published, but no further detail on the draft insolvency rules to accompany the new special administration processes has been made available. The explanatory memorandum states that the relevant rules (made under section 411 of the IA 1986) "will be made in due course in England and Wales", and will be put before the Insolvency Rules Committee. These rules will need to become effective before it is practicable to use the new special administration procedures created by the Regulations.

Back to top

United Kingdom: Joint FCA, PRA and BoE discussion paper on diversity and inclusion in financial services

On 7 July 2021, the FCA, the PRA and the Bank of England (BoE) published a joint discussion paper on diversity and inclusion in the financial services sector. The purpose of the discussion paper is to engage financial firms and other stakeholders in a discussion on how the three regulator can accelerate the pace of meaningful change and what role they can most usefully play to support this change.

The policy scope of the discussion paper recognises that prudent decision‑making, aided by diverse and inclusive working cultures that foster diversity of thought, is a necessary part of ensuring that payment, settlement and clearing services are robust and reliable. To that end, the three regulators are seeking stakeholder views on quantitative and qualitative targets for diversity and inclusion to support prudent decision-making.

Additionally, views are also sought on:

• The role of the regulators in making policies more inclusive;
• How to measure firms’ progress and how to collect and monitor diversity and inclusion data;
• Suggestions on how the regulators should approach scope and proportionality; and
• Guidance on how diversity and inclusion relates to the Threshold conditions.

Views on the discussion paper are welcomed until 30 September 2021.

Back to top

United Kingdom: Government response to House of Lords Liaison Committee report on tackling financial exclusion

On 17 June 2021, the Government published its response to the House of Lords Liaison Committee’s follow-up report on tackling financial exclusion. The paper sets out the Government’s response to each of the Committee’s conclusions and recommendations.

Some of the Government’s key responses include:

• The Government is committed to legislating to protect access to cash for those who need it, and to ensuring the UK's cash infrastructure is sustainable for the long term (see the separate item on HM Treasury’s access to cash consultation in this newsletter);
• The Government agrees with the Committee’s conclusion that digital inclusion needs to be promoted alongside financial inclusion, especially as COVID-19 has exacerbated digital exclusion challenges;
• The Government will publicly consult on policy proposals relating to buy-now-pay-later (BNPL) products and will then bring forward secondary legislation to regulate these products as soon as parliamentary time allows. The government will also appoint an organisation to deliver the pilot No-Interest Loans Scheme;
• The Government will improve access to basic bank accounts, which it considers to be vital for financial inclusion, as they enable people to manage their money on a day-to-day basis effectively, securely and confidently; and
• Whilst decisions on opening and closing bank branches are commercial decisions in which the Government does not intervene, the Government believes that the impact of branch closures should be understood, considered, and mitigated where possible.

Back to top

United Kingdom: LSB summary report on review of firms' approach to reimbursing customers under CRM Code

On 16 June 2021, the Lending Standards Board (LSB) published a summary report on the follow-up review of the Contingent Reimbursement Model Code for Authorised Push Payment Scams (CRM Code). The CRM Code is a voluntary code setting out good industry practice for preventing and responding to Authorised Push Payment (APP) scams. The LSB is the governing body of the CRM Code.

The report focuses on a section of the CRM Code relating to the reimbursement of customers who have fallen victim to an APP scam. The CRM Code requires that where a customer has been the victim of an APP scam, firms should reimburse the customer, unless an exception applies under provision R2(1)(c).

The LSB’s review revealed that:

• There are a number of systemic failings relating to the implementation of the requirements of provision R2(1) (c);
• Firms have made varying degrees of progress on their individual action plans from its initial review and a number of actions remain open;
• Incorrect information provided to customers regarding the timescales for a reimbursement outcome, as well as poor explanations or no explanation of the reimbursement process and liability assessment, was evidenced across many firms; and
• Overall, the LSB was unable to gain assurance that the steps taken by firms have fully addressed the concerns and key themes raised within its initial review. 

Following the review, the LSB has sent individual report letters to each signatory firm setting out timebound actions for remediation.

Back to top

France: SCA now required for all online purchases

On 15 May 2021, in accordance with the implementation of the final stage of the migration plan towards strong customer authentication (SCA) as provided for by PSD2, it was announced by the French Banking Federation (Fédération Bancaire Française) that the implementation of SCA measures is now required by French payment service providers (PSPs) for all online payments.

Following a one-month gradual adaptation period, from 15 June 2021 a PSP can decline any non-compliant transaction other than where the PSP is relying on an exemption.

Back to top

Europe: European Commission writes to major credit card companies about issues with recurring subscription payments

On 21 June 2021, the European Commission and consumer protection (CPC) authorities, led by the Danish Consumer Ombudsman, announced that they had written to three major credit card companies (Visa, Mastercard and American Express) to request that all necessary information is presented in the payment window for the consumer when they make a payment involving recurring subscription fees.

The request was prompted by recent research suggesting that one in twelve EU and UK consumers have previously ordered products or services online, only to find out that they had been unknowingly lured into a monthly subscription. The Commission identified hidden or small print about recurring payments as the primary cause of this issue.

Back to top

United Kingdom: Alan Turing Institute publishes report on AI in financial services

On 14 June 2021, the Alan Turing Institute published a report exploring the use of artificial intelligence (AI) and its importance for responsible innovation in the financial services sector.

The report identifies consumer protection, financial crime, competition, the stability of firms and markets, and cybersecurity as areas which could be impacted by an increase in the use of AI. With respect to consumer protection, the report recognises that AI can both improve and harm financial inclusion and that governments must consider ethical issues relating to financial inclusion before implementing AI legislation.

The report also notes the possible uses of AI in the prevention of financial crime by enabling improvements in systems used to prevent financial crime as well as those that provide safeguards. However, unexpected weaknesses in the performance of AI systems could make them less effective and AI systems could also contribute to the occurrence of market abuse.

Back to top

Europe Council of EU publishes text of proposed codified Regulation on cross-border payments

On 14 July 2021, the Council of the EU published the text (PE-CONS 34/1/21) of the proposed Regulation on cross-border payments in the EU, codifying and replacing the existing Regulation on cross-border payments (924/2009) (2020/0145(COD)).

According to a Council information note dated 25 June 2021 (10104/21), the European Parliament adopted the Regulation at first reading on 23 June 2021. The note states that the Parliament's position reflects what had been agreed between the institutions in informal contacts and consequently the Council should be in a position to approve the Parliament's position. The Council's Permanent Representatives Committee (COREPER) voted to approve the Regulation on that basis on 7 July 2021, according to a Council note (10760/21) dated 14 July 2021.

The next step will be for the Council to approve the Parliament's position, as set out in PE-CONS 34/1/21.

Back to top

United Kingdom: BoE and Pay UK outline future collaboration on implementation of ISO 20022 payment messages

On 24 June 2021, the Bank of England (BoE) and Pay.UK published a joint press release announcing their collaboration on ISO 20022 payment messages. The BoE and Pay.UK are implementing ISO 20022 in CHAPS and the New Payments Architecture (NPA) as part of their objectives to improve resilience, security, user experience and innovation in the UK's payments industry.

Key areas of collaboration will include:

• Working with UK Finance and the Payments Standards Strategy Group on the strategic direction for the governance of payment standards in the UK;
• Working closely with industry to develop meaningful use cases and end-to-end journeys;
• Providing to industry a CHAPS and NPA schema comparison view against the original pacs.008 Common Credit Message; and
• Further developing the requirements with industry for how the key enhanced data would be consistently implemented.

Back to top

United Kingdom: BoE speech on evolution of UK real time gross settlement system

On 21 June 2021, the Bank of England (BoE) published a speech given by Victoria Cleland, Executive Director for Banking, Payments and Innovation, on the evolution of payment systems in the UK. Among other things, in the speech, Ms Cleland talks about the BoE's real time gross settlement (RTGS) system. The BoE is currently in the midst of a multi-year programme to review its RTGS service. This will enhance resilience and also support greater competition and innovation.

The first key milestone is in June 2022, with CHAPS moving to the global standard for financial messaging in payments, ISO 20022 (on a like-for-like basis). The BoE will transition to enhanced ISO 20022 messaging in February 2023, and in September 2023 will introduce a state-of-the-art core settlement engine. The move to ISO 20022 is a key step that will enable many future changes, both domestically in the renewal of RTGS and internationally including enhancing cross-border payments.

Realising the benefits of ISO 20022 relies on the quality of data submitted being sufficiently high and consistent. The BoE will mandate the sending of enhanced data in due course, starting with purpose codes and legal entity identifiers (LEIs) within certain CHAPS messages from spring 2024. It is also working closely with the industry to develop best practice market guidance, through mapping existing industry conventions and identifying further opportunities where a standardised approach to submitting enhanced data can address specific pain points in the market.

Back to top

United Kingdom: FCA Dear CEO letter to retail banking portfolio on common AML failings

On 29 June 2021, the FCA published a Dear CEO letter previously issued to firms in the retail banking sector on 21 May 2021. The letter outlined the actions firms need to take to address common control failings in their anti-money laundering (AML) frameworks.

In the letter, the FCA sets out six non-exhaustive areas of common weaknesses of financial crime systems and controls among retail banks:

• Governance and Oversight: firms often confuse the responsibilities of the first and second lines of defence, and first-line employees often do not understand the financial crime risks their employer faces. Also, firms often rely too heavily on ready-made controls, frameworks and products, and they often lack the necessary governance sign-off by senior management of high-risk scenarios;
• Business-wide Risk Assessment: these assessments are often too generic and inadequately evidenced;
• Customer Risk Assessments: customer risk assessments tend to be too generic and inconsistent, and often disregard non-AML-related risks such as tax evasion or bribery;
• Customer Due Diligence (CDD) and Enhanced Due Diligence (EDD): due diligence processes are often inadequately informed and conducted;
• Transaction Monitoring: the FCA identified instances in which group-led transaction-monitoring solutions were implemented without adequate calibration to local regulations, nor to the relevant business activity, product or customer; and
• Suspicious Activity Reports (SARs): the process for filing internal Suspicious Activity Reports (SARs) is often unclear or poorly understood by employees.

Back to top

United Kingdom: Money Laundering and Terrorist Financing (Amendment) (No 2) (High Risk Countries) Regulations 2021 made

On 12 July 2021, the Money Laundering and Terrorist Financing (Amendment) (No 2) (High-Risk Countries) Regulations 2021 (SI 2021/827) were made, and came into force on 13 July 2021.

The Regulations amend the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (SI 2017/692) by substituting the list of high-risk third countries in Schedule 3ZA for a new list. On the new list, Ghana is no longer classed as a high-risk country for the purposes of enhanced customer due diligence requirements in regulation 33(3). Haiti, Malta, Philippines and South Sudan are now classed as high-risk countries for the purposes of enhanced customer due diligence requirements in regulation 33(3).

HM Treasury has also published updated advisory notices about the risks posed by unsatisfactory money laundering and terrorist financing controls and money laundering and terrorist financing controls in overseas jurisdictions.

Back to top

Global: FATF second report on review of revised AML and CTF standards on virtual assets and virtual asset service providers

On 5 July 2021, the Financial Action Task Force (FATF) published a report on the findings from its second 12-month review of its revised anti-money laundering (AML) and counter-terrorist financing (CTF) standards on virtual assets (also known as cryptoassets) and virtual asset service providers (VASPs).

The review looks at how jurisdictions and the private sector have implemented the revised standards since the FATF's first 12-month review in July 2020. It also looks at changes in the typologies, risks and the market structure of the virtual assets sector.

The FATF states that all jurisdictions need to implement the revised FATF standards, including travel rule requirements for VASPs (a key AML/CFT measure which mandates that VASPs obtain, hold and exchange information about the originators and beneficiaries of virtual asset transfers), as quickly as possible. It will undertake the following actions focused on virtual assets and VASPs:

• Focus on implementing the current FATF standards on virtual assets and VASPs, including through finalising the revised FATF guidance on virtual assets and VASPs by November 2021;
• Accelerate the implementation of the travel rule; and
• Monitor the virtual asset and VASP sector, but not further revise the FATF standards at this point in time (except to make a technical amendment regarding proliferation financing).

Back to top

Global: FATF reports on data pooling, analytics and data protection and opportunities and challenges of new technologies for AML and CTF

On 1 July 2021, the Financial Action Task Force (FATF) published a report on data pooling, collaborative analytics and data protection, setting out how developments in technology allow financial institutions to analyse large amounts of structured and unstructured data and to identify patterns and trends. By pooling data and using collaborative analytics, financial institutions can better understand, assess, and mitigate money laundering and terrorist financing risks.

A list of actions to support the use of new technologies for AML and CTF has been published alongside the report. These focus on ensuring privacy and data protection when implementing new technologies and developing regulatory approaches that are technology-neutral and in line with a risk-based approach.

Also on 1 July 2021, FATF published a report on opportunities and challenges of new technologies for AML and CTF. The FATF's findings led its members to adopt the list of actions mentioned above.

The FATF plans to continue working with supervisors, technology developers and financial institutions to ensure that new technologies can contribute to AML and CTF work, consistent with data protection frameworks.

Back to top

Global: FATF guidance on assessing and mitigating proliferation financing risk

On 29 June 2021, the Financial Action Task Force (FATF) published guidance on proliferation financing risk assessment and mitigation. The guidance has been developed following the introduction of new obligations on proliferation financing risk assessment and mitigation, which were introduced in October 2020 by way of amendments to FATF recommendation 1, and a March 2021 consultation.

The guidance explains how both public and private sectors should conduct risk assessments in the context of proliferation financing, and how identified risks can be mitigated. It emphasises the need for supervisors, financial institutions and other relevant entities to apply the obligations in a manner that is proportionate to the risks identified, to avoid contributing to de-risking or financial exclusion.

Back to top

Europe: European Court of Auditors report on money laundering in the banking sector

On 29 June 2021, the European Court of Auditors (ECA) published a report about money laundering in the banking sector.

The ECA's report focuses on institutional fragmentation and poor co-ordination at the EU level when it comes to actions to prevent money laundering and terrorist financing. Its recommendations include:

• The Commission should prioritise money laundering and terrorist financing risk more clearly and should make use of regulations (rather than directives);
• The EBA should put in place rules to prevent members of the Board of Supervisors from seeking to influence panel members. It should also issue guidelines to facilitate harmonised information exchanges between supervisors; and
• The ECB should put more efficient internal decision-making procedures in place and make changes to its supervisory practices.

Back to top

France: Scope of exercise of GDPR rights by agent under PSD2 clarified

On 27 May 2021, the French data protection authority (Commission nationale de l'informatique et des libertés, CNIL) published a Position on the exercise of rights through agents. The Position clarifies the scope of application with regard to payment service providers (PSPs) whose activity is regulated by PSD2. In particular, account information service providers may exercise the rights provided for by the GDPR as an agent if some conditions are met.

Back to top

Global: Wolfsberg Group publishes statement on demonstrating effectiveness of AML / CTF programmes

On 30 June 2021, the Wolfsberg Group, an association of global banks that develops financial industry standards for AML / CTF and KYC policies, published a statement for financial institutions (FIs) on demonstrating the effectiveness of their AML and CTF programmes.

The Group warns that there is a tendency amongst FIs to focus AML/CTF risk assessments on data, documentation, and process (i.e. technical compliance with requirements), rather than considering holistically how effectively the FI’s efforts detect and prevent financial crime. In order to improve effectiveness, risk in priority areas must be assessed differently. In particular, FIs should focus on threats related to specifically defined national or supra-national priorities. Where specifically defined priorities do not exist, FIs are encouraged to use the relevant jurisdiction’s National Risk Assessment (or equivalent publication) to define core areas.

Back to top

Europe: EBA report on market analysis of EU RegTech landscape

On 29 June 2021, the EBA published a report outlining the results and conclusions of its market analysis of the current RegTech landscape in the EU. It has also published an "at a glance" factsheet on RegTech and steps firms can take.

The report is based on surveys and interviews with financial institutions, RegTech providers and competent authorities, and assesses the benefits and challenges faced by financial institutions and RegTech providers in the use of RegTech and the potential risks of RegTech solutions that supervisors will need to address.

The EBA emphasises its commitment to technological neutrality and recommends certain steps to support sound adoption and scale-up of RegTech solutions. It will hold a public online webinar in Q4 2021 to present and discuss the main findings of the RegTech market analysis in the EU.

Back to top

Payment Market Developments

Australia: Visa approves issuance of debit card allowing CryptoSpend app users to pay with Bitcoin

On 14 July 2021, it was reported that Visa has approved the issuance of a physical debit card that will allow users of Australian startup CryptoSpend’s app to pay using their Bitcoin and other supported cryptocurrencies including Ether, XRP, Bitcoin Cash and Litecoin. This is reportedly the first example of cryptocurrencies being spent using a payments card issued in Australia that runs on the network of one of the international card schemes.

ASX-listed payments company Novatti will issue the card, and the New York-licensed custodian BitGo  will have custody of the crypto holdings. Unlike some other products on the market, users of CryptoSpend’s app can make direct purchases without needing to convert from crypto to fiat currency.

Other recent Australian developments in this space include Hong Kong-based Crypto.com becoming a principal member of Visa Australia in March this year, which allowed the business to directly offer its version of a crypto Visa card in Australia.

Back to top

Zambia: Cellulant unveils digital payments platform for retailers

On 14 July 2021, it was reported that Pan-African payments business Cellulant has rolled out a digital payments platform to enable businesses to accept and make payments seamlessly. The platform aims to bridge the currently fragmented payments processes in the Zambian retail sector.

Back to top

Russia: Promsvyazbank adopts Bank of Russia open banking API

On 8 July 2021, it was reported that Promsvyazbank is collaborating with SMB financial services provider Tochka to launch open banking for its clients. The firms are using an API developed by the Bank of Russia and the Russian FinTech Association and it will become the first open banking use case in Russia.

Back to top

Europe: EasyEuro launches EU wide digital wallet for SMEs

On 9 July 2021, it was announced that EasyEuro is launching an EU-wide digital wallet dedicated to SMEs, traders and freelancers. The digital wallet includes features tailored to SMEs’ needs, including collection, payment, low-cost currency exchange and customised card issuing. It also supports SEPA, SEPA INSTANT, Faster Payments and SWIFT.

Back to top

Germany: OneFor unveils cross-border remittances app for migrant workers in Europe

On 1 July 2021, it was reported that the German startup OneFor has released a cross-border remittances and payments app targeting migrant workers in Europe. The app promises quick transaction times and up to 70% lower average transaction costs. The app is free but users will be charged a fixed fee for each transfer.

Back to top

Bulgaria: Fibank enables payments via Fitbit

On 29 June 2021, it was reported that Fibank, the third largest bank in Bulgaria, has enabled customers to make contactless payments using their Fitbit wearable fitness devices. Customers can make contactless payments either via the Fitbit Pay service or by connecting their Fibank Mastercard cards to their Fitbit device.

Back to top

Scandinavia: Vipps, MobilePay and Pivo partner on single cross-border digital wallet

On 30 June 2021, it was reported that Nordic mobile payment providers Vipps (Norway), MobilePay (Denmark) and Pivo (Finland) are creating a single cross-border digital wallet that can be used across all three countries as well as for cross-border payments. The single digital wallet will serve eleven million customers and over 330,000 shops and online stores.

Back to top

Russia: Fast food chain launches "pay with a glance" feature

On 25 June 2021, it was reported that the fast food chain Kio Kukhnya has rolled out a new biometric payment system to allow customers to “pay with a glance”. Users register for the service by saving their facial biometrics and payment card details to an app. They can then make payments by looking into the camera on a payment terminal at a Kio Kukhnya location.

Back to top

United States: Visa debuts cash to digital transactions

On 16 June 2021, it was announced that Visa has debuted Tap to Phone cash to digital transactions in the United States. Merchants across the United States will now be able to use mobile phones to accept payments from Visa cards, without needing additional hardware. The service is already live in 30 other markets worldwide.

Back to top

India: Google Pay expands tokenised payments in India

On 17 June 2021, it was announced that Google Pay has expanded its cards tokenisation feature to include HSBC India, the State Bank of India and other Indian banks. The feature allows users to make contactless payments with NFC devices at over 2.5m Visa merchant locations, as well as online merchants. 

Back to top

Netherlands: ABN Amro pilots payments solution for gig economy workers

On 14 June 2021, it was reported that ABN Amro has started piloting a payments tool allowing flexible, gig economy workers to have their earnings paid out instantly and easily. The tool aims to shorten the amount of time between completion of work and payment. The next phase of the pilot will involve temporary workers.

Back to top

Europe: Walletmor develops contactless payments implant

On 7 June 2021, it was reported that British-Polish startup Walletmor has launched a wearable contactless payments device that can be implanted under the surface of the skin. To date, the implant has already gained 200 users across the UK, Germany, Poland and other EU countries.

Back to top

Surveys and Reports

United Kingdom: UK Finance publishes 2021 Payment Markets Report

On 15 June 2021, UK Finance released its 2021 Payment Markets Report, providing an analysis of all forms of payments in 2020 and highlighting the impact of COVID-19 on the payments landscape.

The report details notable changes in the most frequently used types of payments, including:

• The number of contactless payments made in the UK increased by 12% to 9.6 billion payments. Contactless payments accounted for 27% of all UK payments and 83% of people in the UK now use contactless.
• Approximately 32% of the adult population was registered to use mobile payments by the end of 2020, an increase of 7.4 million people compared to 2019.
• 72% of UK adults used online banking, and 54% used mobile banking.
• The number of cash payments made in the UK fell by 35% in 2020, and cash was only used for 17% of payments in the UK, likely prompted by the COVID-19 pandemic.
• 13.7 million consumers used cash once a month or not at all, and only 1.2 million consumers mainly used cash for their day-to-day spending.

Back to top

United Kingdom and United States: TheCityUK report on UK-US financial innovation in digital payments

On 15 July 2021, TheCityUK published a report on UK-US financial innovation in digital markets. The report argues that although challenges prevail, removing regulatory obstacles to establish a deep and successful digital payments market would be one key area of focus and offer substantial mutual benefits to both markets.

The report presents five key conclusions:

• Open banking has the potential to act as a catalyst for innovation and competition in payment services;
• Clear and manageable rules regarding privacy, data use, and transfers of consumer data between the UK and the US will be critical to driving innovation and collaboration between the US and UK in financial services, including in digital payments;
• Licensing regimes will be crucial;
• Both countries should establish multi-national payment councils with industry participation to explore the most feasible approach to achieving interoperability; and
• As countries continue to accelerate the use of cashless payments, regulators and industry in the US and the UK should work together to ensure that future innovation in payments addresses the needs of the underbanked segments of both countries.

The report is the first in a series of six focused on financial innovation between the two markets.

Back to top

Germany: Bundesbank survey on the digital euro

On 16 June 2021, Bundesbank released a survey on German public opinion about the possible introduction of a digital euro.

Out of the households surveyed, 56% were cautious about the digital euro and were not convinced that it would offer sufficient additional value by comparison to existing payment methods. Additionally, 77% of respondents had never heard or read about a digital euro, showing a lack of awareness around the topic.

Back to top

 

 

 

Authored by Virginia Montgomery and Julie Patient

Hogan Lovells (Luxembourg) LLP is registered with the Luxembourg bar