Alternative payment methods

The use of alternative payment methods to cash when making purchases has become the order of the day. Credit and debit cards are now widely used as invaluable tools in everyday life. Undoubtedly, wise use of these cards provides peace of mind and, to a certain extent, financial freedom. Yet, peace of mind and financial freedom can only be achieved if there are proper security standards which are accepted and enforced by all, as well as wide recognition of payment cards beyond the country where they are issued.

The Single Euro Payments Area (SEPA) is an initiative of the European banking industry that is intended to ensure that all electronic cross-border payments are as easy as domestic payments within one country. In fact, it enables a consumer to make payments in euro when shopping abroad or online across 32 countries under the same basic rights and obligations.

The objectives of SEPA can only be achieved if standards are set and applied within the card payment chain. Achieving greater standardisation in the European card world is a necessity to achieve a single payment area in the EU. Recognising this, the European Payments Council (EPC) developed a cards standardisation programme defining the functional and security standard requirements as well as a method designed to achieve interoperability within SEPA. The EPC is now calling on industry stakeholders to provide their feedback in a consultation process that will end on 29 July.

Comments are expected in relation to the recent updates carried out by the EPC to the standardisation programme. The most recent version of these standards includes updates with regards to dynamic currency conversion, mobile payments, and surcharging.

In relation to cross-border payments, consumers may choose at payment stage the currency in which they want to be billed in. The terminal or attendant must give the cardholder the opportunity to select the currency the transaction will be performed in. To exercise this choice, the cardholder must be informed of the transaction amount in the card acceptor’s currency, in the cardholder’s currency and the conversion rate between these two amounts. If the choice of the transaction currency is different from that of the original price with which the product is tagged, such original amount must still be printed on the receipt.

As regards surcharging, different rules apply depending on whether the payment is made with a card from a shop, whether a street or an online one, or from an ATM. In the first case, any kind of surcharge must be part of the agreed total sales amount. Therefore the shop cannot support any specific handling of surcharging for card services.

If a surcharge is applied at the ATM for a cash withdrawal, the surcharge must be displayed to the cardholder, and the cardholder must have the opportunity to abort the transaction or to continue with the understanding of a surcharge being applied. For a cash withdrawal with surcharge, the transaction amount will then be the total of the withdrawal amount and the surcharge amount.

Considering that mobile phones are becoming a strong channel for accessing payment and bank services, new standards relating to mobile payments have also been introduced. There are two ways to use the wallet in your mobile phone. The latter can be used as a mobile contactless payment where the mobile interacts with a terminal to perform a payment transaction. We can therefore soon see mobiles being waved at cash registers in grocery stores without the need of card swiping or cash fumbling.

Mobile phones can also be used to make remote payments to purchase goods and services via the internet or through voice or data call. In such cases consumers will be able to make mobile payments without being bound to a specific mobile network operator or particular mobile equipment and will retain their current ability to switch between payment services pro­viders.

Comments on this public consultation are expected to be received on the proper forms available on the EPC website.

jgrech@demarcoassociates.com

Dr Grech is an associate with Guido de Marco & Associates and heads its European law division.