The changing regulation around mobile payments

The changing regulation around mobile payments

With approximately 93% of adults owning or using a mobile phone in the UK and the introduction of tokenisation services using near-field communication (NFC) technology, the idea of using mobile devices to pay is becoming increasingly common. Ed Bodey, senior associate at Foot Anstey, and Nikki Johnstone, associate at Paul Hastings, explore the regulatory environment for providers of mobile payment solutions and the commercial challenges likely to influence their development.

What constitutes a mobile payment, and what is the current legal framework around mobile payments?

Nikki Johnstone (NJ): The concept of a mobile payment has been defined by the European Commission in its Green Paper, ‘Towards an integrated European market for card, internet and mobile payments’ as:

‘payments for which the payment data and the payment instruction are initiated, transmitted or confirmed via a mobile phone or device. This can apply to online or offline purchases of services, digital or physical goods’.

The sector therefore covers a broad range of solutions, transaction types and technologies.

The impact of regulation on providers of mobile payment solutions will ultimately depend on whether the provider has a direct relationship with the customer. While the customer relationship has historically been the domain of banks and credit card providers, the emergence of new payment technologies (particularly in the mobile space) is beginning to challenge the status quo.

Mobile payments activities are principally governed by the EU Payment Services Directive 2007/64/EC (PSD 1), which introduced—for the first time—a uniform regime for regulation of payment services applicable across the European Economic Area (EEA). PSD 1 introduced:

  1. an authorisation regime for ‘payment institutions’ (PIs), which enables PIs to carry on a range of payment services (eg money remittance, the operation of payment accounts, the execution of payment transactions), with the additional advantage of being able to ‘passport’ a licence obtained in one country to do business in all other EEA countries

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