Charges to use ATMs in certain instances are not the result of an EU directive but a “commercial decision” made by the banks, according to the European Commission.
The clarification was made after this newspaper reported that charges starting from €2.50 for every cash withdrawal from automated teller machines could be introduced on Thursday.
The issue affects HSBC and Bank of Valletta customers.
The decision follows the termination of an agreement whereby BOV Cashlink users were able to use their cards at ATMs owned by HSBC and HSBC Quikcash holders could do the same from ATMs belonging to BOV.
Both banks informed their customers over the past weeks that the so-called “interoperability arrangement” would no longer apply after January 31.
The banks said the decision was “triggered” by the Payment Services Directive (PSD 2), which, they added, did not allow further use of so called “closed-loop” cards that can only be used in Malta.
Sources close to both financial institutions said this left the banks with no option but to make use of international debit and credit cards. The use of such cards in third-party ATMs carried charges, the amount ultimately being in the bank’s discretion.
HSBC and BOV customers are now likely to stick to their bank’s ATMs to avoid incurring charges.
Interoperability agreement no longer applicable after Wednesday
BOV card holders who do not change their habit will be charged €3 plus 0.33 per cent – this presumably applying to the amount being withdrawn from an ATM belonging to HSBC.
In the case of HSBC, the charge is €2.50 per transaction from BOV machines, though the charge is being absorbed by HSBC for Premier and Advance account holders.
Furthermore, the Quikcash is being gradually phased out and replaced by the Visa Electron while BOV Cashlink cards will be substituted by a new one equipped with this feature.
When this newspaper approached the European Commission about the matter, a spokeswoman insisted that the directive had nothing to do with the change.
“The possible decision of some banks in Malta to charge ATM withdrawals performed by their customers outside their ATM network is a commercial decision. It bears absolutely no relation to the implementation of PSD 2,” she added.
The spokeswoman noted that the directive was neutral with regard to the pricing of ATM withdrawals, though it obliged banks to inform the customers of the charges that would be incurred before the transaction was made.
The practice was widespread in many EU Member States where banks allowed free-of-charge withdrawals for customers using their ATM networks but levied a charge on withdrawals from outside their network, she said.
However, while some banks levied charges on the first withdrawal outside their networks others had a mechanism whereby customers were allowed a fixed number of free-of-charge withdrawals over the year before being charged, she continued. Some banks could even decide not to levy any charges at all.
“While PSD 2 introduces higher security requirements for online payments by mandating the application of strong customer authentication, that obligation is already met in a number of situations, for instance where a PIN code is required to validate a payment transaction in a shop when paying by card any time the payment terminal requires the keying in of the card PIN code or, likewise, at an ATM when withdrawing cash,” the spokeswoman said.
She added that all ATMs within the EU had for years required the keying in of a PIN code for the withdrawal to be validated and effected.
In view of the above, the Times of Malta asked both large commercial banks whether they still felt that the interoperability agreement was directly linked to the directive.
A BOV spokeswoman remarked that unless both cards (Cashlink and Quikcash) were on the market, the elements for reciprocity were no longer present and, hence, the agreement would no longer apply.
No reply was forthcoming from HSBC by the time of writing.
PSD 2 demands
The Malta Financial Service Authority directed this newspaper to the Central Bank of Malta, which, it said, dealt with matters like PSD 2.
The Central Bank of Malta noted that, under the PSD2, banks were obliged to implement strong customer authentication on the cards and were, therefore, compelled to migrate their local debit cards from magnetic stripe to ‘chip and pin’ technology.
Since the upgrade would potentially see such cards being co-branded with international card schemes, effectively there was no longer scope for such an agreement on the interoperability of ATMs, the Central Bank of Malta said.
What about APS customers?
While BOV and HSBC will terminate their ATM interoperability agreement on Wednesday, APS Bank cardholders will still be able to use ATMs in the BOV network at no extra charge.
An APS spokesman confirmed that the existing arrangement, which has been in place for years, would be kept “for the time being”. This means that APS customers having the Premier, VISA and Student cards will not be charged for using ATMs belonging to BOV.
Asked whether APS had decided to absorb any charges, the spokesman declined to comment. Likewise, BOV would not reply either, saying it was a commercial issue.
However, a Central Bank of Malta spokesman noted that if a bank decided to retain the existing arrangement allowing its customers to continue using the ATM network of the other bank without incurring any charges, it effectively meant it would have decided to absorb the charges rather than passing them on to customers.