Presentation by Paul Anning, Partner at Osborne Clarke, on 1 April at the International Payments Summit 2014

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International Payments Summit 2014 – Boot Camp
European Interchange Regulation: State of Play
Paul Anning, Partner
1 April 2014

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Agenda
European Interchange Regulation: State of Play
• Overview of MIF Regulation (as proposed):
‒ Interchange fees
‒ Business rules
• Points under amendment

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MIF Regulation
Overview
• Regulation, not a Directive
• Immediate entry into force (once published)
• Two key elements:
‒ sets caps on interchange fees
‒ details a series of business rules applicable to payment card
schemes and related contractual (typically licensing)
arrangements
• Scope and definitions are key

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MIF Regulation
Interchange fees - Overview
• Sets immediate caps on interchange fees:
‒ cross-border debit card transactions: 0.2% per transaction
‒ cross-border credit card transactions: 0.3% per transaction
• Extends cap after 2 years to ALL debit/credit card transactions (i.e. including
domestic transactions)
• Caps apply only to payment card transactions carried out within the EU
where both payer's and payee's PSP are established in the EU
• Interchange fee caps do not apply to:
‒ limited networks
‒ commercial cards
‒ ATM cash withdrawals
‒ 3-party payment card schemes

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MIF Regulation
Interchange fees – Points to note
• Provisions apply to PSPs, not card schemes directly
• Definition of interchange fee is broad:
‒ "interchange fee or other agreed remuneration with an equivalent
object or effect"
‒ any net compensation received by an issuing bank is treated as
part of the interchange fee
• Similarly, definition of card based payment transaction is broad
• Debit card transactions include prepaid card transactions
• Charge cards?
• 3-party schemes caught where third party PSP is licensed

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MIF Regulation
Interchange fees – Points under amendment
• Transitional period – now (cross-border) and 2 years
(domestic); or just 1 year (both cross-border and domestic)
• Scope – application to (business and) commercial cards; 3-
party schemes below a threshold; newly established schemes;
etc
• Cap – debit: the lower of 7 euro cents or 0.2%; Member States
may set lower caps; definition of "net compensation" adjusted
• MIFs – no higher for cross-border than domestic; applicable fee
is the Member State where acquirer is situated

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MIF Regulation
Business rules - Overview
Co-badging
Steering
rules
Unblending
Honour All
Cards rules
Separation
of scheme
and
processing
Licensing
MIF
Regulation

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Further reading
• Payment Services Directive
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32007L0064:EN:NOT
• Electronic Money Directive
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32000L0046:EN:NOT
• European Commission’s Green Paper: Towards an integrated European market for card, internet and
mobile payments
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:52011DC0941:EN:NOT
• European Commission's draft proposal for a Network and Information Security Directive
http://ec.europa.eu/information_society/newsroom/cf/dae/document.cfm?doc_id=1666
• ECB's Recommendations for the Security of Internet Payments
http://www.ecb.int/pub/pdf/other/recommendationsforthesecurityofinternetpaymentsen.pdf
• Single Market Act II
http://ec.europa.eu/internal_market/smact/docs/single-market-act2_en.pdf
• European Commission's proposal for a Payment Account Directive
http://ec.europa.eu/internal_market/finservices-retail/inclusion/index_en.htm
• European Commission's July 2013 package of draft legislative proposals for a revised PSD and a new
Interchange Fees Regulation
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2013:0550:FIN:EN:PDF
• ECB's draft Recommendation for the Security of Mobile Payments
http://www.ecb.europa.eu/paym/cons/pdf/131120/recommendationsforthesecurityofmobilepaymentsdraftpc201311en.pdf

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Contact details – Paul Anning
Paul Anning is head of European law-firm, Osborne Clarke's Financial Institutions Group and a
specialist financial services lawyer. Paul has market leading experience and expertise in the
payments industry where he has guided clients through new product development, regulatory
change and transformational projects, such as the creation of the UK's Payments Council (which
sets the strategy for UK payments), the merger creating VocaLink (the UK’s largest payments
processor), the UK's first NFC enabled stored value mobile payment solution (QuickTap) and the
acquisition of one of Europe's leading prepaid card issuers.
Paul is well versed in the complexities of the payments industry's network arrangements. He also
has a deep knowledge of legal and regulatory developments affecting the payments industry,
including key European developments such as the Single Euro Payments Area (SEPA), the
Payment Services Directive (PSD) and the Second Electronic Money Directive (2EMD). On PSD
specifically, he has been involved since its inception in 2003 and has been advising the UK's
Payments Council, banks and other payment service providers.
Paul and the Osborne Clarke Payments team act for a range of clients from infrastructure
providers and traditional credit institutions and GTS businesses through to electronic money
issuers and corporates and retailers (including on corporate card and co-branded arrangements).
Their Payments practice is recognized externally as top-tier ranking, with commentary such as -
"Osborne Clarke is one of the leading practices working in the payments services sphere" and in
July 2012 an award for "TMT Team of the Year 2012" at The Lawyer Awards for their work on
Everything Everywhere and Barclaycard's QuickTap product.
Paul Anning
Partner
T+44 (0) 20 7105 7446
paul.anning@osborneclarke.com
TMT Team of the Year
2012
The Lawyer Awards
IT Firm of the Year 2012
JUVE Awards