Response to consultation on separation of payment card schemes and processing entities under the IFR

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1. Do you agree with the proposals outlined in Section 1 of the draft RTS regarding general provisions?

One of the objectives of the business rules’ section of Regulation (EU) 2015/751 being to create a more level playing field, the RTS’ General Provisions should, in order to remove any room for in-terpretation, specify (under e.g. an Article entitled “Scope”) that, although the main addressees of the RTS are companies that currently operate a payment card scheme and offer related processing services under a same roof, payment card schemes that are legally separated from processing enti-ties (or that will establish such a separation) are not exonerated from the requirements set down in this RTS, in particular with respect to Section 3 and Section 4. Equally, any business arrangement between a payment card scheme and a processing entity that implies a close relationship (such as a “strategic cooperation”) should lead the parties to comply with the dispositions of this RTS.

2. Do you agree with the proposals outlined in Section 2 of the draft RTS regarding accounting?

It is understood that payment card schemes and processing entities shall present the required in-formation in the form of a management report to their competent authorities.
In this exercise, activity-based costing is indeed the most appropriate method to allocate costs between a payment card scheme on one side and a processing entity on the other that currently operate under a same roof. As differences in interpretation between national competent authorities may potentially be an issue (please see our remark under Question 5 below), it is recommended to clarify in Article 4.2 (c) that the addressees have to allocate costs using the activity-based costing method and that, where this appears to them not practicable, the addressees have to explain their reasons, and the alternative method used, in the management report – which the competent au-thorities may accept, or refuse. The same requirement and procedure should apply to the separa-tion of assets and liabilities (Article 4.4).
In order to enable these same competent authorities to assess the management reports submitted by the payment card schemes and processing entities in their jurisdiction, it is recommended that the addressees also inform through the management report about the types and number of transac-tions that generate the revenues reported, as well as the share of revenues and transactions (by type) generated by the 5 largest customers. This should not be an issue as the management reports are not available to the public.
It should be further clarified that only data related to activities within the European Union and EEA countries is to be included in the management report.

3. Do you agree with the proposals outlined in Section 3 of the draft RTS regarding organisation?

Proposals regarding organization are supported. In particular the acknowledgement of innovation scenarios is welcome. In this respect any concern of a payment card scheme or a processing entity regarding confidentiality and intellectual property can be mitigated through non-disclosure agree-ments (NDAs) to be entered into with all companies to which a given project would have to be disclosed during the development process.

4. Do you agree with the proposals outlined in Section 4 of the draft RTS regarding independence of decision making process?

Proposals regarding decision-making processes are supported.

5. Do you have any other comments?

In its Consultation Paper, under 3. Background and rationale, EBA stresses that it “will not be able to ensure the consistent implementation of the RTS across EU Member States or address any other issue of insufficient regulatory or supervisory convergence that may arise in this market seg-ment. […] because the card payment schemes, processing entities, and overseeing authorities are not included in the scope of action of the EBA”. Under 3.2 Rationale EBA highlights that “the way separation has been implemented [in response to the SEPA Cards Framework] had varied in practice [between national banking communities and/or domestic or international card schemes] and was often subject to criticism from competing schemes and processors”.
Obviously, EBA’s limitation of scope in this area conflicts with the need for harmonious and ho-mogeneous interpretation and implementation. It must be a concern that, failing a coordinating authority to guide interpretation and monitor implementation, Regulation (EU) 2015/751 fails to deliver on its objectives, and leads to yet another round of damaging legislation.

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