Out-Law News 2 min. read

Many telecoms companies will not seek PSD2 licence, says expert


Few telecoms companies will seek to become licensed under the EU's new Payment Services Directive (PSD2), one expert has predicted.

The majority of telecoms businesses will be put off by the prospect of an increased regulatory burden, but many will be keen to participate in the reformed payments market by taking advantage of the telecoms exemption available under PSD2, said telecoms law expert Diane Mullenex of Pinsent Masons, the law firm behind Out-Law.com.

“Strictly speaking when you look at PSD2 it doesn’t open up opportunities per se for telcos in payments processing," Mullenex said. "But if you think outside the box and look at the scope of operations telcos can do without being fully licensed – up to €50 per transaction and €300 per billing month per account – that is quite interesting. There is no requirement to actually seek a full PSD2 licence; they just need to declare themselves to the relevant regulatory authority."

"Telcos have the easiest way to collect payments on behalf of digital content providers, and I think they do want to play a role in that and will use the exemption in every way they can," she said.

Mullenex's comments were published in a new report that looks at the business and technology implications of PSD2 by Finextra Research in association with CA Technologies. She said that telecoms companies would be wary of adding to the "tremendous pressure" they already face in the European market by adding to their compliance burden by establishing "a whole new" payments arm to their business.

"Telcos would have to invest a lot of money into a financial product offering, a lot of anti-money laundering (AML) in light of the EU's fourth AML Directive, and also there is high pressure to invest in their networks, to digitally upgrade – and roaming charges are over," Mullenex said. "All that makes quite a big issue."

"The more you add financial products, the more you get regulated. It is true that the regulatory requirements they face related to monitoring traffic for security are close to what is needed for PSPs. For telcos it’s not so much the technical processes as the burden of new business processes. We will, however, see telcos continuing to form strategic alliances," she said.

In its report Finextra said that banks should be encouraged to "take a leaf out of the fintechs’ book and pilot new products and services that could flourish in a PSD2 environment, and reduce the risk by leveraging test environments and data".

It also said that banks and other payment service providers should look to collaborate with financial technology companies to improve their payment products and services.

"PSD2 will unleash considerable new competition into the market, but while being realistic about this, players also need to partner and collaborate with new and existing providers," Finextra said. "Even if you don’t subscribe to the ‘appstore’/portal app view of the world, your business – and your customer – can benefit from access to innovative products and services from fintechs to complement the services you already provide, and this can be a quicker and possibly cheaper way to access new capabilities than building them all inhouse."

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