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Global Payments Newsletter December 2015 & January 2016 Issue
Hogan Lovells – Global Payments Newsletter 1
Key Developments Key developments of interest over the last two months include:
To me, to you: This newsletter focuses heavily on remittances – global leaders aim to reduce transfer costs to 3%; PayPal acquires Xoom and WorldRemit expands into Vietnam.
1st
XI: US Government sale of over 44,000 Silk Road bitcoin attracts just 11 bidders.
Kerching!: Diebold, the US ATM manufacturer, agrees $1.8 billion takeover of Wincor Nixdorf.
Shaken, not stirred: Hogan Lovells hosts its annual Global Payments Conference, at Atlantic House London, where debate and expertise were intermingled at a time of disruption in the Payments world.
Regulation, Regulation, Regulation: Payment Accounts Regulations 2015 and PSD2 published
Welcome to the Hogan Lovells Global Payments Newsletter. In this publication we provide an overview of the most recent payments, regulatory and market developments from major jurisdictions around the world as well as sharing interesting reports and surveys on issues affecting the market.
For our latest news and commentary on payments innovation, follow us on Twitter @HLPayments.
2 Hogan Lovells – Global Payments Newsletter
Europe
United Kingdom: HM Treasury publishes summary of responses and draft regulations on implementing Payment Accounts Directive
On 16 November 2015, HM Treasury published
a summary of responses received to its
consultation on implementing the Payment
Accounts Directive (2014/92/EU) (PAD),
together with a draft version of the Payment
Accounts Regulations 2015 and an impact
assessment (dated 6 August 2015). The final
regulations were published on 16 December
2015.
HM Treasury consulted on the implementation
of the PAD in June 2015. The summary of
responses sets out the HM Treasury's formal
response to individual issues raised by
respondents.
Among other things, HM Treasury has:
Amended regulation 13 (on packaged bank
accounts) of the Payment Accounts
Regulations to align it more closely with the
PAD and to clarify that its provisions will
apply in cases where both the payment
account and the other products and
services are available separately from the
same provider;
Decided not to include a "genuine interest"
test in the Payment Accounts Regulations.
The purpose of such a test would have
been to assess whether customers had a
genuine interest in opening a basic bank
account; and
Amended regulations 19 and 20 (on the
features and costs of basic bank accounts)
of the Payment Accounts Regulations to
clarify that firms will only be required to
provide the services outlined in regulation
19 for free if the services involve
transactions in sterling. Any fees that a
credit institution charges for non-sterling
services must be reasonable and take into
account certain criteria specified in
regulation 20.
The Regulations implement the Payment
Accounts Directive (2014/92/EU) (PAD). The
Regulations are set out as follows:
Part 2 imposes obligations on payment
service providers (PSPs) (principally banks
and building societies) that are intended to
help consumers make an informed choice
when choosing payment accounts;
Part 3 requires PSPs to offer a service that
allows its payment account customers to
switch between payment accounts;
Part 4 requires credit institutions, which
have been designated by HM Treasury in
accordance with the relevant requirements,
to offer eligible consumers a payment
account with basic features; and
Part 5 makes provisions regarding the
FCA.
The Regulations will come into force on 18
September 2016.
Regulatory Developments
Hogan Lovells – Global Payments Newsletter 3
United Kingdom: Transposition note released for UK implementation of Payment Accounts Directive
On 17 November 2015, a transposition note for
the UK implementation of the Payment Accounts
Directive (2014/92/EU) (PAD) was published.
The transposition note provides a summary of
the main requirements of the PAD and details of
how the UK will transpose individual articles of
the PAD, which will be primarily through the
Payment Accounts Regulations 2015. A draft
explanatory memorandum has also been
published too.
United Kingdom: Free basic bank accounts available from 1 January 2016
On 27 December 2015, HM Treasury published a
press release announcing the launch of free
basic bank accounts from 1 January 2016.
The accounts will be available to anyone who
does not already have a bank account, is
ineligible for a standard current account or who
cannot use their existing account due to financial
difficulty. Among other things, the accounts will
not impose bank charges if a direct debit or
standing order fails, removing the risk that basic
bank account customers will be forced into
overdraft because of fees and charges.
The Payment Accounts Directive (2014/92/EU)
(PAD) requires that payment accounts with basic
features are made available to all consumers in
the EU. The banks and building societies that
have committed to provide the accounts did so to
address the financial inclusion agenda and are
separate from the implementation of the PAD.
However, the PAD will affect the delivery of basic
bank accounts. The UK government is
transposing the PAD in such a way as to
preserve the UK's existing basic bank account
policy as far as possible, while creating the
necessary legal certainty for consumers that is
required by the PAD. The Payment Accounts
Regulations 2015 (SI 2015/2038) were published
on 16 December 2015 and will come into force
on 18 September 2016.
United Kingdom: Payment Card Interchange Fee Regulations 2015 published
On 17 November 2015, the Payment Card
Interchange Fee Regulations 2015 (SI
2015/1911) were published, together with an
explanatory memorandum and final impact
assessment dated 18 September 2015.
The Regulations implement the Regulation on
interchange fees for card-based payment
transactions ((EU) 2015/751) (Interchange Fee
Regulation (IFR) or MIF Regulation) in the UK.
In particular, the Regulations:
• Appoint competent authorities (that is,
the FCA and the Payment Systems
Regulator (PSR)) to monitor and enforce
compliance with the IFR and enable non-
compliance to be penalised;
• Exercise options available to the UK on
some of the requirements of the IFR; and
• Give the PSR power to publish guidance
relating to the IFR. HM Treasury expects
the PSR to publish guidance on its
approach to enforcing the IFR in
December 2015.
The Regulations came into force on 9 December
2015.
Regulation 24 requires HM Treasury to review
the Regulations every five years and publish a
report, setting out its conclusions, following each
review.
4 Hogan Lovells – Global Payments Newsletter
United Kingdom: PSR requests information relating to Interchange Fee Regulation
On 19 November 2015, the Payment Systems
Regulator (PSR) published a press release
announcing that it had contacted a number of
payment schemes requesting information to
help it understand whether or not any scheme
qualifies for a temporary exemption from part of
the Regulation on interchange fees for card-
based payment transactions ((EU) 2015/751)
(Interchange Fee Regulation (IFR) or MIF
Regulation).
The IFR gives some discretion to national
governments, and the UK government has
decided to grant a time-limited exemption from
domestic interchange fee caps to certain three-
party schemes.
To qualify for the exemption, the value of a
scheme’s annual UK domestic transactions
must be less than 3% of all card-based
transactions in the UK. HM Treasury has asked
the PSR to calculate the market share of six
schemes that might benefit from an exemption.
The PSR will use the data it receives from its
information request to these schemes to
calculate each of their market share. It will
communicate its provisional findings before the
interchange fee caps take effect.
The PSR has also published the information
request that it has sent to the six relevant
schemes. The schemes had been asked to
respond by 3 December 2015.
United Kingdom: PSR report issued on access and governance of payment systems
On 15 December 2015, the Payment Systems
Regulator (PSR) issued its first annual report on
the progress that the operators of designated
payment systems have made towards achieving
more open and flexible direct access to payment
systems, and inclusive and more transparent
arrangements.
As part of its analysis, the PSR received
compliance reports from operators showing how
they are complying with measures introduced by
the PSR, which are aimed at improving direct
access and governance. The PSR intends to, on
an annual basis, collate the relevant access
information, report on the operators' progress
and highlight any areas that it thinks need more
attention. Future reports may have a broader
scope and include aspects of indirect access as
well.
Overall, the PSR is encouraged by the work that
operators have already done. However, it states
that operators should focus on the following
areas:
• Further work on access models and their
requirements, which could support more
proportionate and open access for
smaller banks and non-bank payment
service providers (PSPs).
• Streamlining the onboarding process to
make it quicker and easier for new
members to join the schemes.
• Building on work that has been started to
ensure that all stakeholder views are
considered as part of the decision-
making process.
Chapter 4 of the report describes the initial
issues the PSR has identified around access and
governance and chapter 5 sets out what
operators have done in response to the PSR's
directions. Chapter 6 identifies the areas where
the PSR thinks that more work needs to be done.
An accompanying press release states that the
PSR is also conducting an in-depth market
review on indirect access and will be publishing
an interim report in the first quarter of 2016.
Hogan Lovells – Global Payments Newsletter 5
France: Implementation of free, online and public bank charges comparison tool
Decree n° 2015-1432 of 5 November 2015,
relating to the modification of Article D. 614-1 of
the French Monetary and Financial Code (the
"Decree"), has been published in the Official
Journal of the French Republic on 7 November
2015.
The Decree entrusts the Financial Sector
Advisory Committee (Comité consultatif du
secteur financier) to set out and manage a
public online comparison tool allowing natural
persons, not acting for business purposes, to
freely compare the main fees of various
credit/payment institutions.
The Decree has been adopted in application of
Article 7 of the European Directive
n° 2014/92/EU of 23 July 2014 on the
comparability of fees related to payment
accounts, payment account switching and
access to payment accounts with basic features.
France: New rules for prepaid cards to halt terrorist financing
Further to the Paris terrorist attacks, the French
Finance Ministry has announced the forthcoming
adoption of a set of measures aimed at
combating terrorist financing.
The main measure the government intends to
adopt would involve better supervision of prepaid
cards. This will be implemented by lowering the
thresholds under which such cards may be used
anonymously (i.e. €250 for a non-rechargeable
cards and €2,500 for a rechargeable cards).
These new rules will be detailed by decree prior
to the end of the first quarter of 2016.
Poland: Polish KNF adopt internet payment guidelines
The Polish equivalent of the Financial Conduct
Authority, the KNF, has adopted guidelines on
the security of internet payments.
The KNF's guidelines largely mirror the EBA's
guidelines, with some minor changes. Firstly,
penny-transfers, which are used by payment
service providers to verify customer identity when
opening an account, are prohibited from being
used to open a second account that is also
verified by penny-transfers.
The KNF guidelines explicitly require payment
service providers to inform customers that
sharing credentials with third parties are
prohibited too.
The guidelines are applicable from no later than
21 December 2015.
Estonia: Court vs. Government in battle over bitcoin
The Estonian Supreme Court has asked the
country's central bank, two civil ministries and
the financial regulator to clarify the position on
bitcoin.
The key questions centre on the application of
anti-money laundering statutes to bitcoin
activities and the Interior and Finance Ministries
and the Estonian Financial Supervision Authority
must respond to the court's request by 11
January 2016.
This follows a lawsuit filed by Otto de Voogd,
operator of bitcoin trading platform BTC.ee, in
February 2014. Trading was suspended on the
platform as a result of threats by the Estonian
police. De Voogd has criticised the Estonian
state for not embracing disruptive innovation
that does not come top-down from the state.
Europe: PSD2 published in OJ
On 23 December 2015, the text of PSD2 ((EU)
2015/2366) was published in the Official Journal
of the EU (OJ).
The Council of the EU adopted PSD2 in
November 2015, following adoption by the
European Parliament in October 2015.
PSD2 will enter into force on 12 January 2016
(that is, the 20th day following the date of its
6 Hogan Lovells – Global Payments Newsletter
publication in the OJ). The deadline for member
states to transpose PSD2 into their national laws
and regulations is 13 January 2018.
Europe: EBA consult on passporting, customer authentication and secure communication under PSD2
On 11 December 2015, the European Banking
Authority (EBA) published a consultation paper
on draft regulatory technical standards (RTS) on
the framework for cooperation and exchange of
information between competent authorities for
passport notifications under PSD2
(EBA/CP/2015/25). Only two days previously, on
9 December 2015, the European Banking
Authority (EBA) published a discussion paper
(EBA/DP/2015/03) (dated 8 December 2015) on
draft regulatory technical standards (RTS)
relating to strong customer authentication and
secure communication under PSD2.
Article 28 of PSD2 requires an authorised
payment institution to inform the competent
authorities of its home member state if it wishes
to provide payment services for the first time in
one or more member states other than its home
member state. Article 28(5) gives the EBA a
mandate to develop draft RTS, specifying
method, means and details of the cross-border
cooperation between competent authorities in
the context of passport notifications of payment
institutions. The RTS must include the scope of
information to be submitted, a common
terminology and standard templates, to ensure
that the process is consistent and efficient.
The draft RTS proposed by the EBA specify the
information that national supervisors will have to
exchange with one another. They distinguish the
notifications related to branch establishments,
agent’s engagement and free provision of
services. They also provide some specific
features that the notifications must have, in
terms of format, transmission channel and
language.
With regards to the discussion paper on
customer authentication and secure
communication, the aim of the discussion paper
is to obtain early input into the development of
draft RTS, which Article 98 of PSD2 requires the
EBA to deliver by January 2017.
The EBA seeks views on issues related to
strong customer authentication, including
comments on:
Exemptions to the application of strong
customer authentication.
Protection of payment service users'
personalised security credentials.
Requirements for common and secure
open standards of communication.
Possible synergies with the Regulation on
electronic identification and trust services
for electronic transactions in the internal
market (e-IDAs) ((EU) 910/2014).
The closing date for responses is 8 February
2016. The EBA will publish draft RTS in summer
2016, for a consultation period of three months.
Europe: European Payments Council releases proposals for pan-European instant credit transfer scheme
The European Payments Council (EPC) has
designed a pan-European instant credit transfer
scheme with the aim of bringing real-time money
transfers across the Single Euro Payments Area
(SEPA) by November 2017.
The EPC has received approval from the Euro
Retail Payments Board for the plans, in an
attempt to avoid a fragmented market for instant
payments across Europe. The emergence of
new domestic platforms like UK's Faster
Payments scheme is a challenger to a unified
pan-European network.
Clearing and settlement arrangement
discussions are currently being carried out with
the view of publishing a final proposal in
November 2016.
Hogan Lovells – Global Payments Newsletter 7
Americas
USA: US Government sell 44,341 bitcoins from Silk Road proceeds
US Marshals Service held their fourth and final
auction of the bitcoin confiscated from the Silk
Road investigations on 5 November 2015.
However, the auction turned out to be a bit of a
damp squib in terms of bidders. Only 11
registered bidders submitted a total of 30 bids,
despite over 44,000 bitcoins on offer.
USA: New York State Department of Financial Services sends open letter to address cybersecurity
The New York State Department of Financial
Services (NYDFS) has outlined in an open letter
to state and federal regulators a plan to outline
proposals to strengthen cybersecurity
regulation.
The letter aims to invite dialogue on how
cybersecurity standards can be enhanced for
financial institutions. Some of the proposed
plans include organisations having in place
written cybersecurity policies and when
contracts are executed with third parties, they
must include rules designed to keep sensitive
data safe with the use of multi-factor
authentication and encryption.
Asia and Oceania Hong Kong: Clearing and Settlement Systems (Amendment) Bill 2015 passed On 13 November 2015, the Hong Kong
Legislative Council passed the Clearing and
Settlement Systems (Amendment) Bill 2015,
introducing a new regulatory framework for
stored value facilities (SVF) and retail payment
systems (RPS).
Both types of payment service will be
administered under the Payment Systems and
Stored Value Facilities Ordinance (the
"Ordinance").
The Ordinance represents a significant step
forward for Hong Kong's regulation of mobile
payments, eliminating a regulatory gap that
previously existed in relation to non-card based
SVF. Subject to limited exemptions, all multi-
purpose SVFs, whether card-based or not, must
now be licensed in Hong Kong.
A one year transition period for existing issuers of
SVF obtaining a licence will expire 12 November
2016.
The Ordinance will separately bring mandatory
regulation to card schemes (which until now have
been operating under a voluntary code of
practice) as designated RPS. Other significant
RPS will also be regulated under the new regime.
The Hong Kong Monetary Authority (the HKMA)
has issued an Explanatory Note on Licensing for
Stored Value Facilities (the SVF Guidance Note),
which sets out the scope of the licensing regime
as well as licensing criteria and particulars of the
licensing process.
Our Payments Team in Hong Kong (Mark Parsons,
Partner, and Tommy Liu, Associate) have written a
briefing on the Bill that will likely be published in the
coming months.
8 Hogan Lovells – Global Payments Newsletter
Hong Kong: NFC Smart Technology still at risk of security breach
Our Hong Kong Payments Team have just been
published in the e-finance & payments law and
policy journal on recent HK near field
communications (NFC) breaches.
Last month, Hong Kong's banking regulator, the
Monetary Authority (HKMA), reportedly directed a
number of banks to review their use of NFC
smart card technologies after reports emerged
that security defects were exposing cardholders
to a risk of unauthorised access to personal data.
The incident was followed by a media release
from Hong Kong's privacy regulator, the Privacy
Commissioner for Personal Data (the PCPD),
who announced a review of these allegations
from a privacy standpoint.
While no official investigation report or other
account has been published as yet, we
understand that concerns were raised that
personal information could be extracted from a
number of payment cards simply by tapping the
card against an NFC-enabled handset equipped
with one of several readily available apps
designed for this purpose.
Extracted information included cardholders'
names, credit card numbers and expiry dates.
The possibility of accessing sensitive personal
data stored on NFC-enabled smart cards raised
concerns that "electronic pick-pockets" equipped
with basic, easily obtained technology would be
in a position to take this data and use it to carry
out fraudulent transactions in cardholders'
names.
Hogan Lovells – Global Payments Newsletter 9
United Kingdom: Santander and UBS discuss blockchain at Bank of England's Open Forum
Jose Maria Fuster (the global head of innovation
at Santander), Alex Weber (the chairman of
investment bank UBS) and Blythe Masters
(Digital Assets Holding CEO) discussed the
possibilities of blockchain technology at a recent
Open Forum hosted by the Bank of England.
Their words have been complemented by action
as Santander InnoVentures launched a global
blockchain competition and participated in
Ripple's $32 million Series A funding.
Meanwhile, UBS launched a blockchain
research laboratory in April.
United Kingdom: BBVA purchases 29.5% stake in UK digital bank Atom
Spanish bank BBVA has invested £45 million
into Atom, the digital-only bank, thus acquiring a
29.5% stake.
BBVA is now the largest shareholder in the
digital start-up and with BBVA's investment it
brings a total of £135 million investment into
Atom.
BBVA has a history of investing in neo- and
digital banks having acquired US bank Simple
for $117 million and having set up a £100 million
venture to invest in fintech start-ups.
United Kingdom: Bring the Med to the Isle of Dogs
Last November, Level39, the Canary Wharf
innovation centre, hosted 24 fintech startups
from across the Mediterranean for a two day
programme organised by UK Trade and
Investment.
The event is a microcosm of the successes
London has seen in becoming a global hub for
fintech. Over £300 million in investment has
been ploughed into the capital's fintech
ecosystem in just the first six months of 2015.
Global: Amazon chooses Payoneer as its cross-border payment solution
Payoneer, an online payments company, has
been selected by Amazon to expand the online
marketplace's cross-border payment facility to
sellers from 24 countries.
Now sellers, who sell on marketplaces in the
US, Spain, France, Italy, Germany and the UK,
can transfer and receive Amazon disbursements
from countries including China, Japan, South
Korea, Thailand and Argentina.
This is the first time Amazon has expanded their
Seller Central cross-border payment solution to
an external network.
Global: R3 swells to 30
R3, the bank-backed collaboration to create
global standards for distributed ledger
technology, has five new members.
This takes membership to 30 with BNP Paribas,
Canadian Imperial Bank of Commerce, ING
Bank, Macquarie Bank and Wells Fargo the
latest banks to sign up.
Payment Market Developments
10 Hogan Lovells – Global Payments Newsletter
Global: European and African leaders aim to reduce remittance costs
European and African leaders met in early
November to slash the costs of remittances from
a global average of 8% to 3% by 2030.
This proposal is part of a package of aid pledges
aimed at reducing migration from Africa to the
EU.
Lower remittance fees will likely reduce the
number of unregulated channels which operate
to transfer funds and will likely result in less
money disappearing along the chain.
Global: PayPal procures Xoom
PayPal has completed the final stages of
acquiring money transfer company Xoom.
By acquiring Xoom, PayPal is combining global
remittances with digital payments and nudges a
movement away from cash-based transfers
which can be "time consuming, insecure and
expensive." Dan Shulman, the PayPal CEO,
added that this deal is a sliver of a global
remittances market which sees $600 billion
transferred each year.
Global: Embracing disruption in the payments ecosystem
16 November 2015 marked an auspicious day in
the payments world – the firm's annual Global
Payments Conference.
The conversations we shared, both formal and
informal, demonstrated that this is an
exhilarating time for the payments industry and
that bringing together a range of expertise to
share ideas can be a catalyst for the
collaborations that seem sure to shape the
future of payments.
2016 looks set to be action-packed for the
payments industry and for the Hogan Lovells
Global Payments team with:
our collaboration with Innovate Finance;
the launch of our Financial Regulatory
Consulting business; and
with us becoming the launch sponsors
of Money 20/20 Europe.
Europe: Vodafone adds MasterCard to NFC wallet
Vodafone Wallet users will soon be able to
make contactless MasterCard payments in
European markets. Users need to add their
MasterCard number to the Vodafone Wallet app
and to have a Vodafone NFC sim card and a
compatible smartphone.
Vodafone Wallet is currently available in
Germany, Hungary, Italy, the Netherlands,
Spain and the UK.
Vodafone made a similar deal with Visa in
March, but despite announcing Visa-based
payments in the second quarter of 2015, it has
yet to launch.
Africa: M-Pesa connections become more impressive
MFS Africa, a pan-African fintech company
connecting mobile wallets across the continent
has partnered with Vodafone to expand M-Pesa.
M-Pesa allows users across Africa the chance
to send and receive money across borders and
networks and this partnership between MFS
Africa and Vodafone builds on the existing 65
million mobile wallet users in Africa and the
partnership in early 2015 that enabled mobile
money transfers between Kenya and Rwanda.
Hogan Lovells – Global Payments Newsletter 11
USA: "Kerching" for Wincor Nixdorf
US ATM manufacturer Diebold has agreed a
$1.8 billion takeover of Wincor Nixdorf, creating
a company with an installed base of 1 million
cash machines worldwide and combined
revenues of $5.2 billion.
Under the terms of the agreement, Diebold will
offer Wincor Nixdorf shareholders €38.98 in
cash plus 0.434 Diebold common shares per
Wincor Nixdorf share. This represents a
premium of approximately 35% over the
German firm's closing share price in mid-
October when the deal was first considered.
The combined company will operate as Diebold
Nixdorf and will compete with ATM rival NCR
which earlier in November received a $820
million injection from private equity firm
Blackstone.
USA: US Bank develops MSA Pay
US Bank has launched MSA Pay, a mobile
payment app to meet the ordering, payment and
back office needs of pilots.
MSA Pay can allow aviators to notify airports
and bases of their arrivals, special needs and
service requests. Pilots are now better informed
of invoices, flight planning, reservations and
scheduling.
Canada: The youth of today have it all, neobanks and more…
Koho, the Canadian neobank, which focuses on
18-34 year olds, has secured a deal with Visa in
an attempt to disrupt the hold of established
banks in the financial sector.
Koho, in combination with payment processor
Galileo, is planning on moving away from
"antiquated" banking practices and high bank
fees. Koho is squeezing into a market which
generated $29 billion in profits for the five
biggest banks in Canada in 2014.
South Korea: LG Pay born out of coalition
Korean mobile handset manufacturer LG has
formed a partnership with Shinhan Card and KB
Kookmin Card to launch LG Pay.
LG will initially launch the product in South
Korea, following Samsung who reported a $30
million surge in payment volume within its first
month of launch in the country.
Switzerland: SwissWallet digital payment service launched
Netcetera, Swisscard and Aduno Group have
formed a joint venture for the development and
operation of digital payment products called
SwissWallet.
The service operates in conjunction with
MasterCard and can be used in online shops.
Kenya: Verve swerves into Kenya
Nigerian e-payment company Verve has entered
the Kenyan market to provide a mobile payment
method. Verve is the first African card that
competes with Visa and Mastercard.
Verve has over 40 banks in West Africa issuing
the cards and the company plans to issue credit
and debit cards in 2016 alongside its mobile
payment platform.
Taiwan: Processed by Alipay
Alipay, the payments subsidiary of Alibaba has
expanded its mobile payments service to
Taiwan.
With Alipay's expansion into Taiwan, the mobile
payment service is likely to reach 3,000 vendors
by the end of the year in the country.
12 Hogan Lovells – Global Payments Newsletter
Vietnam: WorldRemit kickstarts its service in Vietnam
WorldRemit, a global remittance provider, has
launched its remittance service in Vietnam.
Vietnam's diaspora numbers 4 million people
worldwide and remittances play an essential role
in the economic growth of the country.
Vietnamese abroad sent home $12 billion in
2014, or 6.4% of Vietnam's GDP.
In February 2015, WorldRemit received a $100
million investment injection led by Technology
Crossover Ventures – an early investor in
Facebook, Spotify and Dropbox.
Australia: Adyen arrives Down Under
Adyen, the global payments technology
company has announced the launch of its
payment solution in Australia.
Adyen enables businesses to process payments
across online, mobile and Point-of-Sale with
over 250 payment methods and 187 transaction
currencies.
Japan: Rakuten establishes $100 million fintech fund
Japanese e-commerce business Rakuten has
started a $100 million fintech fund for disruptive
early to mid-stage startups in Europe and North
America.
Rakuten state they want to bridge entrepreneurs
to Rakuten's financial services, granting access
to the Japanese company's expertise in
banking, credit cards, insurance, securities and
asset management.
Rakuten has prior experience in the fintech
space with investments in Currency Cloud,
WePay and Bitnet.
India: Ola, the taxi-hailing company, valued at $5 billion
Ola, a leading taxi-hailing app in India has
raised $500 million in fresh capital valuing the
company at $5 billion.
An injection of capital was received from
Edinburgh-based Baillie Gifford and further
funding from DST Global, Tiger Global and
SoftBank of Japan.
Ola, according to the FT and funding figures has
effectively doubled in value since raising $400
million at a $2.4 billion valuation in 2014.
Ola operates around 350,000 cars in India; a
similar amount to Uber and yet Ola possesses a
market share of 80% and operates in more
cities.
Ola, last month, also launched their mobile
wallet: Ola Money. Ola Money can be used to
make peer to peer payments, mobile recharges
and cashless payments to several brands.
Hogan Lovells – Global Payments Newsletter 13
United Kingdom: Payments UK report over 7.3 billion automated payments made in 2014
Payments UK, the trade association, published
their new report on 19 November: UK
Automated Payments 2015. The report
highlights that more automated payments were
made in the UK in 2014 than ever before.
Over 7.3 billion CHAPS, Bacs, Direct Debits,
Direct Credits and Faster Payments were made
in 2014; an increase of 3.6% from 2013. These
payments accounted for 38% of all non-cash
payments in the UK, with a total value of £5,571
billion (up 7% from 2013).
In 2014, internet banking was the most popular
method of remote banking. Online banking was
utilised by 33.3 million people, but mobile
banking has grown substantially, dwarfing
telephone banking for the first time in 2014, to
15 million users.
India: GSMA report India's mobile subscribers to surpass 500 billion by 2016
GSMA's report, "The Mobile Economy: India
2015" finds that 13% of the world's mobile
subscribers reside in India and that subscriber
growth is set to reach half a billion by the end of
2015.
India's (mobile) industry is migrating to new
mobile networks, services and devices and with
rising investment and government backed
schemes, GSMA suggest by 2020, mobile
subscribers could number 734 million.
Global: Mobile banking yet to reach critical mass
According to Digital Banking Report, despite
mobile payments growing in popularity, the
adoption is still low: 63% of surveyed consumers
said they did not have any plans to use a mobile
wallet now or in the future.
The main reasons were a lack of consumer
interest and security concerns. However, an
interesting trend was that whilst 73% of
respondents in 2013 highlighted security
concerns, only 62% reported security concerns
as an issue now.
In 2015, mobile payment solutions, whilst
attracting investment and consumer attention,
according to this study are only globally
responsible for 8% of payments made.
Global: CPMI report on digital currencies
Our 24 November 2015, the Committee on
Payments and Market Infrastructures (CPMI)
issued a report on digital currencies.
In the report, the CPMI considers:
The key features and uses of digital
currencies. The CPMI highlights the
importance of the assets (such as bitcoins)
featured in digital currency schemes, the
use of distributed ledger technologies and
the variety of third-party institutions,
typically non-banks, that have been active
in developing digital currencies and
distributed ledgers.
Surveys and Reports
14 Hogan Lovells – Global Payments Newsletter
Factors influencing the development of
digital currencies, including the role of
regulation.
Implications for central banks of digital
currencies and their underlying
decentralised payment mechanisms,
including the potential impact on financial
market infrastructures (FMIs) and on
financial stability.
The CPMI concludes that digital currencies, and
the use of distributed ledgers, have the potential
to disrupt existing business models and systems
and may lead to the emergence of new financial,
economic and social interactions and linkages. It
suggests that holders of digital currency may
face substantially greater costs and losses
associated with prices and liquidity risk than
holders of sovereign currency. It considers that
there will need to be a substantial increase in
the use of digital currencies or distributed
ledgers (or both) for there to be a significant
impact on retail payment services and FMIs or
on monetary policy or financial stability.
The CPMI recommends that central banks
continue monitoring and analysing the
implications of developments relating to digital
currencies and distributed ledger technology. It
suggests that central banks could consider
investigating the potential uses of distributed
ledgers in payment systems or other types of
FMIs, as a policy response to these
developments.
Miscellaneous: Turning those pennies into pounds
One of bitcoin/digital currencies' greatest virtues
is the possibility of micropayments.
Micropayments are an opportunity in the
payment world to make fractions of currencies
(pennies, cents, Satoshis) work.
Whilst for traditional currencies, the costs of
transacting would not allow for fractions of the
lowest denominator of money to operate and it
is more vogue to focus on the increase in value
of legal tender, the digital development of
payment could allow for a new payments
ecosystem to develop.
The blog post below, amongst one article citing
the potential of micropayments, demonstrates
how 'liking' a post, tipping or reading an
individual news article could all be activities
undertaken by micropayments where these
current 'tiny' denominations of currency are
currently laying idle.
Hogan Lovells – Global Payments Newsletter 15
Hogan Lovells’ global payments practice is made up of financial services and technology lawyers working closely together as a single team from our network of offices, including offices in all the major financial centres.
The practice covers traditional payment services as well as technology driven innovations that affect products, business structures, services and markets.
Our Clients
The team provides strategic advice to all market participants including:
lenders
card issuers (including banks and e-money institutions)
acquirers
money remitters
payment schemes
mobile operators
retailers
payments platform or technology providers
payments processors
networks and settlement services
How we can help
In addition to advising on payment specific regulation, the team:
advises on all related regulation such as money laundering, data and privacy, technology law and IP, e-commerce and consumer protection
negotiates commercial contracts
leads or supports on mergers and acquisitions in the payments sector
engages with Government on new regulation and implementing new legislation
advises on multi-party arrangements to develop new payment services or networks and on related loyalty and incentive programmes
negotiates outsourcing of payments processing and settlement
drafts related customer and commercial documentation
The global payments practice is part of Hogan Lovells market leading Financial Institutions Group, one of the largest practices of its kind with approximately 200 lawyers worldwide.
Our Global Payments Team
16 Hogan Lovells – Global Payments Newsletter
Local Contacts
Primary Contacts
Europe Americas Asia
Roger Tym London T +44 20 7296 2470 [email protected]
Veronica McGregor Silicon Valley T +1 415 374 2308 [email protected]
Andrew McGinty Shanghai T +862 1 6122 3866 [email protected]
Europe
Emily Reid London T +44 20 7296 5362 [email protected]
London Roger Tym Julie Patient Emily Reid Jonathan Chertkow
Amsterdam Victor de Vlaam
Frankfurt Richard Reimer Nils Rauer Tim Brandi
Madrid Joaquin Ruiz Echauri Miguel Garcia Stuyck
Warsaw Beata Balas-Noszczyk Anna Tarasiuk-Flodrawska
Moscow Alexander Rymko
Paris Sébastien Gros
Rome Jeffrey Greenbaum
Johannesburg Leishen Pillay
Singapore Stephanie Keen
Brazil Claudette Christian Wylie Levone
Hong Kong Mark Parsons
Shanghai Andrew McGinty
Beijing Roy Zou
San Francisco/Silicon Valley Veronica McGregor
Washington Timothy Tobin Christopher Wolf Mark Brennan
Caracas Gonzalo Rodriguez-Matos
Miami Jose Valdivia Gaston Fernandez
Mexico City Federico De Noriega Olea Juan Fransisco Torres Landa Ruffo
17
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