The Czech Parliament has passed the new Payment Services Act, which will implement the Payment Services Directive (PSD2) with effect from 13 January 2018 in the Czech Republic. The Payment Services Act requires current providers of payment services to re-think their business models to adapt to the new regulatory requirements. Modern FinTech firms may also seek the opportunity to enter the market and take a significant market share from traditional banks.
New payment services
The Payment Services Act introduces the following newly regulated activities:
- Payment Initiation Service – initiating payment orders via the internet on behalf of and with the consent of the customer.
- Account Information Service – providing aggregated information about payment accounts maintained by other payment service providers via the internet to the customer.
To provide these services, it is necessary to have a licence from the local regulator, the Czech National Bank (CNB). However, neither the licence of a small-scale payment service provider nor the small-scale electronic issuer is sufficient. This creates an incentive for such providers to re-licence to a "regular" payment institution or electronic money institution, or to obtain a newly introduced licence of an administrator of payment account information.
The clear regulatory framework now opens the door for innovative payment products. Third-party payment initiation and data aggregation will be possible, allowing for competition for management of personal finance through modern, user-friendly interfaces.
Various specific changes have also been made, including:
- new notification duties; providers must report any serious security and operational incidents and also inform the CNB annually of any security and operational risks.
- obligatory use of strong customer authentication for online payments based on the use of two or more elements (eg a password, message token, biometric scan).
- customer liability for unauthorised transactions is reduced to EUR 50 (from EUR 150).
- exemption of payments for low-value digital content remains, but the exemption has been limited to digital content, entrance or transport tickets, or an individual charity donation not exceeding EUR 50 or EUR 300 per month.
Current and future players in the field of payment services must consider reviewing their internal processes, security measures and complaint handling procedures to determine the extent to which their business model is affected by the Payment Services Act. Contractual documentation may also need to be revised and adjusted.
Those wishing to provide the new payment services must evaluate their existing licences and business model, and potentially re-licence in order to provide the new services. Providers should also consider the opportunity to develop their businesses in a period of growing personal data aggregation.
Finally, all existing providers may continue to provide their current services only temporarily. To avoid losing their licences, every licenced provider must undergo notification proceedings with the CNB within 3-9 months (depending on the specific licence) of the Payment Services Act becoming effective.