Cross-border Payments In The EU And Currency Conversion Charges: The Revised Cross-Border Regulation ( (2024)

Just under two decades ago, the European Parliament issued a Regulation on cross-borderpayments geared towards facilitating cross-border trade within theUnion by ensuring that cross-border payment charges across MemberStates are the same regardless of participation in the euro area,though unfortunately, this Regulation excluded non-euro area MemberStates ¹. For non-euro Member States, domestic paymentsin euro are very costly allowing for payment service providers(PSPs) to price a transaction differently where a currencyconversion is involved. This undoubtedly creates obstacles to thefull integration of businesses and citizens in non-euro area MemberStates affecting their competitiveness which is at the heart of theEuropean Single Market.

The CBPR2 seeks to address this situation as it introduces thefull transparency of currency conversion charges and sets standardrequirements for payments at the point of sale (POS) or at ATMmachines, as well as credit transfers. This, guides consumers tocompare the cost of different conversion options and make anequitable and informed choice². One of the mostimportant changes brought about by the CBPR2 is that charges leviedby PSP's for cross-border payments denominated in euros willhave to be the same as those for "national payments of thesame value in the national currency of the Member State" inwhich the PSP is located (which may either be euros or anothercurrency). For example, a consumer from Poland buying cheese from amerchant in France would be offered the ability to pay inZłoty rather than in euro (Złoty being the currency inwhich the consumer's card account is based) and the charges forthe euro payment must be levied by the PSP for "correspondingnational payments of the same value in the national currency of theMember State in which the payment service provider of the paymentservice user is located". This extends the concept of havingequal charges to the non-eurozone³.

Furthermore, the European Commission conceded to the ratherdisturbing fact that payment service users very often paid highlysignificant charges for currency conversion charges without beingaware of the said charges or the cost of such conversion. As may beassumed the CBRP2 has given rise to lengthy debates with one of thepropositions being that of imposing a requirement on PSP's todisplay their competing currency conversion rate in real time onthe POS/ATM screen, though this idea was not embraced.

The CBPR2 as it stands today requires that, prior to theinitiation of any card-based transaction thatinvolves a currency conversion at either an ATM or POS⁴,the PSP's must disclose the following information to thepayment service user/payee⁵:

(a) the total currency conversion, including:

• the charges for the currency conversion service as well as theexchange rate used (this information is to be provided pursuant toArticle 59(2) of PSD2),
• the percentage mark-up over the most recent euro foreignexchange rate issued by the ECB (new obligations under CBPR2),
• the amount to be paid in (i) the currency used by the payee and(ii) in the currency of the payer's PSP's account (newobligation under CBPR2),
• the possibility of paying in the currency used by the payee andhaving the currency conversion subsequently performed by thepayers' PSP, and
• the payee's right to refuse the currency conversion serviceand pay in the currency used by the payee instead (new obligationsunder CBPR2).

Card issuers will have to disclose the cost of their currencyconversion service that the payee would incur should it opt forcurrency conversion post payment. The information is to betransmitted via the card issuers' Terms & Conditions, aswell as through electronic messages immediately after a bankreceived a payment order denominated in another EU currency. Thiselectronic message should be sent once a month in the case ofrecurrent payments in said EU currency⁶.

Also by virtue of the CBPR2, prior to the initiation of acredit transfer initiated online directly (via awebsite or mobile app), PSP's must provide the payment serviceuser with (i) the estimated charges for the currency conversion and(ii) the estimated total of the credit transfer in the currency ofthe payer's account, (including transaction fees and anycurrency conversion charges) and the estimated amount to betransferred to the payment service user in the currency used by thesaid user.

The CBPR2 provisions on currency conversion became applicable onthe 19 April 2020, though the European Commission has issued astatementnoting that although PSP's and parties providing currencyconversion at a POS or ATM "had sufficient time to adjusttheir IT infrastructures and customer-facing interfaces to complywith the CBPR2" (the industry would be required to makechanges to both their contractual terms as well as IT systems inorder to ensure compliance within the required deadlines), theEuropean Commission favoured flexible enforcement by NationalCompetent Authorities in order to preserve "the stability andcontinuity of online banking interfaces under the presentcirc*mstances" in view of the extraordinary circ*mstancesrelating to COVID-19.

CBPR2 will lead to important discussions on its interpretation(for example the regulation lacks crucial definitions of the terms'point of sale', 'card-based transactions' etc) andapplication which may possibly lead to different supervisorypractices. Post-COVID, the industry, and industry players hope forofficial confirmation of the definitions used in the CBPR2 as withcertainty, the legislative application becomes uniform andchallenging.

Footnotes

1 Bulgaria, Croatia, Czech Republic, Denmark, Hungary,Poland, Romania, and Sweden.

2 According to Recital 10 of the Regulation, this isachieved by providing currency conversion charges information inPSP terms and conditions of their framework contract, make theinformation public on broadly available and easily accessibleplatforms, in customer websites, and mobile apps in an easilyunderstandable and accessible manner.

3 The following conditions must also be met: (a) thepayment transaction (as defined substantially in PSD2) must be ineuro (b) the payment transaction must be cross-border within the EUand (c) the transaction must be electronicallyprocessed.

4 And parties providing currency conversion services atan ATM or at the POS.

5 The information has to be disclosed on a durable mediumfollowing the initiation of the payment transaction.

6 The requirements for card-issues will apply from 19April 2021.

The content of this article is intended to provide a generalguide to the subject matter. Specialist advice should be soughtabout your specific circ*mstances.

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