EU2019/518 – Getting to Grips with the Legislation
Across Europe, project teams within Banks, Card Issuers and Acquirers have begun preparing for the varying requirements of EU2019/518, the new EU Cross-Border Payments Regulation.
By April 2020, now less than six months away, consumers will be able to “pull” comparative pricing directly from their own card issuing bank websites.
By April 2021, cardholders will receive “push” notifications from their card issuer proactively comparing the bank’s own charges to the daily ECB reference rate, that will greatly increase consumer awareness of differing pricing points and the value available from different payments providers.
Emerging Considerations
As project teams consider both the regulatory requirements and the impact on the consumer experience of both deadlines, a number of considerations are beginning to come to light:
Banks have a variety of cross-border payments pricing strategies across multiple lines of business, all of which can be benchmarked to the latest ECB reference rate. For example, it would not be uncommon for a bank to have as many as eight different pricing structures for payments made to/from a specific foreign currency*. Project teams are considering whether to provide a consistent pricing experience across all of these product lines in addition to what is required for card programmes in the legislation.
Many banks source their cross-border currency rates from multiple sources depending upon the payment type. Such varying pricing mechanisms mean that complying with the EU regulation via a manual data collection effort creates an undesirable operational risk. The operational risk increases with the number of pricing points and the number of currency pairs disclosed.
Although the regulation is limited to European Union currencies, Banks are considering whether to apply the regulation to all the major currencies in which their customers transact, in order to present a consistent customer experience.
Delivering a consistent customer experience is seen as the major challenge for the 2021 deadline. Whereas the payment card crossborder pricing information will be available for customers to “pull” by early next year, in 2021, this information will be “pushed” to consumers at the point of purchase – greatly increasing visibility. This increased visibility will likely create queries and confusion where pricing varies by product, by currency & by day and will result in consumers changing behaviour by taking more active decisions around how to spend in a different currency.
Each consideration above represents a challenge for banks, card issuers and acquirers to address in a relatively limited timeframe. Click here to contact us
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*1. DCC; 2. Credit Transfer – Consumer; 3. Credit Transfer – Business; 4. Bureau de Change; 5. Mastercard Debit Product - % currency conversion cost; 6. Visa Debit Product - % currency conversion cost, minimum charge; 7. Mastercard Credit Product - % currency conversion cost, minimum charge; 8. Visa Credit Product - % currency conversion cost.