IP/08/1491

Brussels, 13 October 2008

Electronic money: Commission proposes clear legal framework for innovative payment solutions

(see MEMO/08/616)

The European Commission has put forward a proposal revising the current rules governing the conditions for issuing electronic money in the EU. The proposal follows extensive consultation (see IP/05/930) which showed that the current rules, dating from 2000, have hindered the take-up of the electronic money market, hampering technological innovation. The revised rules will facilitate market entrance for new providers and contribute to develop an industry whose expected volume could reach up to EUR 10 billion by 2012.

Internal Market Commissioner Charlie McCreevy said: “The e-money industry has significant untapped growth potential. I believe that the new rules will accelerate the up-take of electronic money in Europe. These modern rules will foster competition and innovation, while ensuring market confidence and a high level of protection for consumers. This will be an important contribution to our broad objective of creating a Single Market for electronic payments."

Proposed new rules for issuing e-money

The proposal provides for a modern and coherent legal framework for issuing electronic money, with the aim of promoting the emergence of a true single market for electronic money services in the European Union. The main innovations proposed are as follows:

• a technologically neutral and simpler definition of "electronic money", covering all situations where the payment service provider (an e-money institution or a credit institution) issues a prepaid stored value in exchange of funds. Electronic money is therefore defined as monetary value stored electronically on receipt of funds and which is used for making payment transactions. This definition covers e-money held on payment devices in the holder's possession (pre-paid cards or electronic purse) or stored remotely at a server (network or software money).
• a new prudential regime, ensuring greater consistency between prudential requirements of electronic money institutions and payment institutions under the Payment Services Directive 2007/64/CE (IP/07/1914). The new prudential requirements include an initial capital of EUR 125.000 enabling market entrance for smaller players and a new formula to determine ongoing capital. The waiver regime, according to which small entities can obtain derogation for some of the authorisation requirements, is aligned with that of payment institutions under the Payments Services Directive, and anti-money laundering requirements are updated.
• a clarification of the application of redemption requirements, with special reference to their application to mobile telecommunications. Consumers would have the right to claim back their electronic money at any moment, under conditions laid down by the new rules.

Background

The E-Money Directive (2000/46/EC) sought to facilitate access by non-credit institutions to the business of e-money issuance. However, electronic money is still far from delivering the full potential benefits that were expected at the time of its adoption and is not yet considered a credible alternative to cash. Figures on the limited number of fully licensed electronic money institutions or on the low volume of electronic money issued demonstrate that electronic money has not yet really taken off in most of the Member States. The evaluation of the application of this Directive has shown that some of its provisions seem to have hindered the take-up of the electronic money market, hampering technological innovation.

The proposal aims at enabling new, innovative and secure electronic money services to be designed, providing market access to new players and fostering real and effective competition between all market participants. As all provisions have been amended and the structure was revised, it is proposed to repeal the existing E-Money Directive and replace it by a new directive. The proposal now passes to the European Parliament and the Council of Ministers for consideration.

The proposal is available at:

http://ec.europa.eu/internal_market/payments/emoney/index_en.htm