First, we believe that the appointment of a CCP should not be required when an institution provides its services in a host member state under a Services Passport. We also believe that requirements to appoint a CCP should only take into account activities carried out under an Establishment Passport, in the cases where both passporting regimes are used in a host member state. Indeed, we believe that some activities involving local third-party intermediation does not trigger the establishment of the institution. For example, the simple physical distribution of payment instruments without allowing funding or usage of these instruments does not automatically trigger the necessity to operate under an agency model and under an Establishment Passport. Such models, which are usually applied for some services aimed at financial inclusion and alternative banking as well as for gift card activities. Appointing a CCP in such circumstance would neither seem useful, nor efficient, as no payment services is being provided.
Secondly, we believe that the appointment of a CCP, for the activities carried out under an Establishment Passport, should be determined using a risk-based approach. In this perspective, we do not think that the simple thresholds proposed capture the actual risk of the payment services provided, for example the types of payment service activities provided, value and volume of payment services. The risk-based approach should recognise the fact that low-risk payment service activities (such as but not limited to making payment for goods and services) may not require the appointment of a CCP as much as higher risk payment service activities, even if the thresholds are met. In this perspective, we would like to point out strong risk mitigating factors that we have identified based on our own experience, and that could be considered as triggering a lower need for CCPs:
- payment services (or e-money) provided to corporate clients;
- services that only allow low value payments;
- services that only allow making payments for goods and services.
We hence urge the EBA to consider the relevance of a risk-based approach of CCP appointment instead of the threshold-based approach as proposed.
Finally, we believe that the requirement to appoint a CCP should take into account the costs of such CCP, and that the revenues generated in the host member state should be sufficient to support the additional role that is being contemplated, otherwise the institutions will withdraw their services from the market of the host member state, which we do not believe is the objective of PSD2, which foster more competition and innovation on the payment field.
Our estimate of the annual cost of a CCP per Member State is between €80k - €120k (although this will vary significantly from country to country, and could potentially exceed this range). This estimated cost is for having an individual person and takes into account the proposed functions of the CCP, which include:
• Single provider and single point of collection of the reporting obligations of the appointing payment institution to the competent authorities of the host Member State pursuant to Article 29(2) of Directive (EU) 2015/2366, including the delegated act referred to in Article 29(7) thereof, in relation to payment services provided in the host Member State through agents under the right of establishment;
• Single point of contact of the appointing payment institution in communications with the competent authorities of the home and host Member States in relation to the payment services provided in the host Member State through agents under the right of establishment, including by providing competent authorities with documents and information on request;
• Facilitating the on-site inspection by competent authorities of the agents of the appointing payment institution operating in the host Member State under the right of establishment and the implementation of any supervisory measures adopted by the competent authorities of the home or host Member States pursuant to Directive (EU) 2015/2366.
We estimate that institutions will be able to absorb such additional cost of CCP if they generate an annual payment transaction volume above €25 million. Indeed, as interchange levels have been limited to 0.2% for most prepaid and debit cards, such products that rely mostly on interchange need €50 million transactions to generate €100k. As institutions that designed payment services solely relying on interchange are diversifying their revenues sources, we estimate that €25 million volumes would be sufficient to cover the costs for most institutions. In any case, such amount remains very far from the contemplated €3 million threshold, above which the cost of CCP will clearly exceed the benefit of addressing a host member state’s market, leading to institutions stopping to provide services under an Establishment Passport in such markets.
We hence urge the EBA to consider significantly higher monetary thresholds, if it deems that applying such thresholds remains relevant.
As explained above, we believe that an appointment of CCP should be driven by risk-based approach. The different thresholds proposed in Article 2 are significantly low and should be increased to 25 agents, annual threshold of EUR 25 million and 200,000 transactions to be able to absorb the cost of appointing a CCP.