Week In Brief - December 17, 2021

December 17, 2021
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A short roundup of some of the week's payments news you may have missed. This week we look at the UK Payment Systems Regulator's update on SD2 and SD3, the first group of European ACHs' technical account migration to TIPS, the latest U.S. actions concerning consumer privacy, fines in Cyprus, and a new cross-border taskforce set up by the Bank for International Settlement.

UK: PSR Updates SD2 And SD3 To Lower NPA Delivery Risks

The Payment Systems Regulator (PSR) has published final variations to its Specific Directions 2 and 3 with the hope to “lower risks to the successful delivery of the New Payments Architecture (NPA)”.

Originally issued in July 2018, the specific directions require the operator of the Bacs payment system (SD2) and of the Faster Payment Scheme (SD3) to procure any future contracts for central infrastructure services in a competitive manner.

In July, the PSR decided that Pay.UK should phase the development of the NPA by narrowing the scope of the NPA central infrastructure services (CIS) contract. To implement that decision, the agency proposed variations to SD2 and SD3.

The new directions will come into force on January 1, 2022 and the PSR said it “will carefully monitor Pay.UK’s compliance with the requirements of the updated directions”.

Earlier in December, the PSR published a regulatory framework for the NPA, laying out requirements for both Pay.UK and any future central infrastructure provider to address risks, and promote competition and innovation.

EU: First Batch Of ACHs Move Technical Accounts To TIPS

Following the announcement on Monday that EBA CLEARING’s pan-European instant payment services, RT1, had successfully moved its technical accounts from TARGET2 to the TARGET Instant Payment Settlement (TIPS) system, the European Central Bank (ECB) has confirmed other automated clearing houses (ACHs) have also moved. The latest batch of ACHs to migrate their technical accounts to TIPS are Iberpay (Spain), STET (France), DIAS (Greece), EKS (Latvia) and CENTRO (Lithuania).

The big advantage of this move is it creates interoperability between TIPS and different ACHs, meaning a transaction can be sent from EBA CLEARING’s RT1 to an account that may only be connected to the TIPS service.

For banks, this could mean significant savings. For example, a large French bank may be connected to STET, to EBA CLEARING and TIPS. This means having to manage participation fees and liquidity pools in three separate systems.

This new arrangement could potentially create greater efficiencies by reducing the need for the bank to participate directly in multiple systems and ease the liquidity burden.

The ECB had mandated that all PSPs in TARGET2 that had adhered to the SCT Inst scheme should become reachable in TIPS, either as a participant or as a reachable party.

From an ECB point of view, this helps to make good its commitment to ensure full reach of instant payments services at the EU level.

According to the ECB: “These measures will ultimately enable European citizens and businesses to send and receive electronic instant payments from and to any country in the EU, both at the point-of-sale and online.”

The next ACH migration waves are expected to take place on January 21 and February 25, 2022.

U.S.: FTC Is Looking At Privacy Again

The U.S. Federal Trade Commission (FTC) has settled a case with advertising platform OpenX over deceptive business practices concerning users’ privacy rights, while it is considering a rulemaking to protect users from privacy abuses.

On December 15, the FTC announced that advertising platform OpenX had agreed to pay $2m to settle charges that it collected geolocation data from users who opted out of being tracked.

OpenX is a programmatic advertising exchange that enables advertisers to deliver targeted ads to their preferred audiences based on selected criteria.

According to the FTC, OpenX, which offers its services to 1,200 premium publishers, 50,000 apps and tens of thousands of advertisers, ad agencies and ad networks, deceived people about their right to opt out of the collection of precise location data.

OpenX used a pathway that ignored the permissions-based model incorporated within consumers’ apps and made false or misleading representations.

“The case sends a loud-and-clear 'listen up' message to the ad tech industry. All companies – especially members of the ubiquitous (but often invisible) ad tech industry – should pay attention to the information they’re collecting. Gathering massive amounts of data “just because” is an unwise approach that sensible businesses abandoned in the last century,” the agency said in a blog post.

Meanwhile, a proposed regulatory action posted on the Unified Agenda and Regulatory Plan reveals that the agency is considering initiating a rulemaking “to curb lax security practices, limit privacy abuses, and ensure that algorithmic decision-making does not result in unlawful discrimination.”

Although at this point there is very little information known about the agency’s plans, the agenda shows that the FTC is planning to issue an advance notice of proposed rulemaking next February.

Brazil: Sao Paulo Legislature Withdraws Bill To Ban PIX

A bill in the Sao Paulo Legislative Assembly to ban the use of instant payment service PIX has been withdrawn, less than two weeks after the announcement made headlines.

The original bill had claimed that the unintended consequences of the “enormous ease and convenience” of the payment service had made it a “temptation of bandits”. Citing the use of PIX in kidnappings, violence and threats of death, legislatures wanted to suspend the use of PIX in order to “protect the safety and physical integrity of citizens”.

No details were given to exactly how PIX was responsible for the “drastically increasing rates of crimes of this type”; however, the service is primarily used for making person-to-person (P2P) transactions.

According to data published by the Central Bank of Brazil (BCB), roughly three-quarters of all payments across PIX were P2P.

PIX has arguably been the payments success story of 2021 and has taken Brazil by storm since launching at the tail-end of 2020. In the 11 months ending November 2021, 8.2bn transactions had been made across the service. This represents one of the fastest-growing instant payments services on record.

As part of Brazil’s open banking initiative, in October it became possible for consumers to initiate payments across PIX outside their banking app through third parties.

No details were given for the withdrawal of the bill.

Cyprus: Central Bank Slaps Fine On Bank Of Cyrpus

The Central Bank of Cyprus has imposed a fine amounting to €790,000 on Bank of Cyprus, the island’s largest bank, for its failure to comply with anti-money laundering laws.

“The CBC, on the basis of its findings resulting from an examination conducted during 2018 and 2019 decided on 9 December 2021 to impose a fine on Bank of Cyprus Public Company Ltd. amounting to €790,000,” it said in a statement.

If the fine is paid within a specific period of time, however, then it is reduced by 15 percent, or €118,500.

This is not the first time this year, or even this quarter, that the Bank of Cyprus has been hit with a fine by the island’s financial supervisor.

In October, the bank was fined €277,000 over violations of the anti-money laundering law conducted in the period 2008 until 2015.

International: BIS Sets Up Cross-Border Payments Taskforce

The Bank for International Settlements (BIS) is setting up a task force that is mandated to define common features of cross-border payment service levels.

Starting in early 2022, the task force will meet every six to eight weeks, and its findings will feed into the development of a service level template that stakeholders can use as a starting point when establishing agreements.

It will not suggest any specific service levels but will reflect how the elements relevant for cross-border payments can be addressed consistently, the BIS said.

Stakeholders now have until January 14 to express an interest in being part of the group.

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