The European Banking Authority (EBA) has announced it will be taking action to harmonise payments regulation and banking supervision across the EU to fulfil its mandates under the upcoming revised Payments Services Directive (PSD2) and the Interchange Fee Regulation (IFR).

This will ensure secure, easy and efficient payment services across the EU, says the EBA, which has also issued final Guidelines for the security of Internet payments that are applicable from 1 August 2015.

But what do these developments in European payments entail? And how will they affect corporate treasury departments?

1. Payments Services Directive 2

Under the Payments Services Directive (PSD2), the EBA is expected to introduce requirements to improve operational and security for payment services. The EBA will develop this work in close cooperation with the European Central Bank (ECB), through the Forum for the Security of Retail Payments (SecuRe Pay), which the ECB and the EBA are chairing jointly.

2. Interchange Fee Regulation

The EU regulation on interchange fee rates has also been finalised. It was passed in March 2015 and is expected to come into effect in EU member states by the end of this year. The legislation will cap domestic credit card interchange fees at 0.3% of transaction value, and domestic debit card transactions at 0.2% on a weighted average basis. According to economic research consultancy group, Europe Economics, when similar regulations have been implemented in countries such as Spain, Australia and the US, they have been associated with “reduced revenue for banks; reduced costs for large retailers; and an overall increase in costs for consumers as banks pass on increased costs at a higher rate than retailers pass on savings (there is no evidence of savings being passed on so far).”

However, the effect on merchants is likely to be potentially 'devastating', according to Callum Godwin, CMS Payments Intelligence (CMSpi), who writes in The Paypers: “Up until March, 2015, UK merchants did not pay more than GBP 0.08 for any EMV face-to-face Visa consumer domestic debit card transactions. With the IFR however, there will potentially be no limit at all. Across the UK, CMSpi estimates that the exemption of the EUR 0.07 cap will cost merchants GBP 363 million (USD 566 million) and, for merchants with a high average transaction value, this will have a potentially devastating effect.”

3. Internet payments security guidelines

The EBA's Guidelines on the security of Internet payments will set minimum security requirements for payments service providers across the EU, and will provide enhanced protection of EU consumers against payment fraud on the Internet. Corporates in the retail sector are likely to notice most difference.

According to the EBA's Dirk Haubrich, head of Consumer Protection, Financial Innovation and Payments: “This work will ensure increased confidence in Internet payments for consumers and firms in the EU, and is aimed at allowing this sector of the payments market to continue to grow.”

However, Estonia, Slovakia and the UK have already stated that they are unable to comply with the EBA's Internet payment guidelines, while Cyprus and Sweden say they will comply only partially.

The EBA's full statement can be read on its website.