Retail payment systems and services
Retail payments, which constitute the bulk of payment transactions in the economy, include consumer and corporate payments, but exclude high-value payments generated within the interbank space.
While cash constitutes legal tender and is thus the basis of the monetary system, its drawbacks are becoming more evident in a modern economy. In particular, its use entails physical transfer to a payee, making it inefficient to process and handle. Above all, cash escapes the banking system and is thus more prone to be used in money laundering and terrorist funding. On the other hand, retail payments are increasingly being carried out by non-cash payment instruments, including credit and debit cards, credit transfers and direct debits. While cheques have been the traditional non-cash retail payment instrument of choice in Malta, electronic payment services bring the costs and inefficiencies of cheque processing to light.
Efficient and reliable retail payment services are essential for the smooth functioning of the economy. With the introduction of the euro, Malta became a full member of the Eurosystem, whose objective is to create a single payments market for the euro and to promote the harmonisation and efficiency of domestic and cross-border euro payments in terms of delivery and costs. The three main policy goals of the Eurosystem, in terms of payment systems, include:
- the promotion of transparency in the operation of payment systems and services;
- monitoring the determination of fees and charges;
- the encouragement of competition, efficiency and market access.
Within this context, the European banking industry created the Single European Payments Area (SEPA) to build an area where consumers, companies and other economic actors are able to make and receive payments in euro, whether within or across national boundaries, under the same basic conditions, rights and obligations, regardless of location. SEPA comprises the following payment instruments: credit transfers, direct debits and card payments. The SEPA credit transfer was introduced in 2008 and SEPA direct debit in 2009.
EU Regulation No 260/2012 establishes the technical and business requirements for credit transfers and direct debits in euro. The SEPA project also introduced the International Bank Account Number (IBAN), a set standard for bank account numbers that uniquely identify a customer’s bank account held at a bank anywhere in the world.
Another important aspect of retail payment systems and services is the Malta Clearing House, which the Central Bank of Malta set up in virtue of its authority to promote the establishment of a bank clearing system for retail payments and to provide facilities for it.
Legislation in respect of retail payment services includes EC Regulation 924/2009, which replaced EC Regulation 2560/2001, on cross-border payments in the Community. This Regulation eliminates differences in charges for cross-border and national payments in euro and applies to all electronically processed payments, including credit transfers, direct debits, cash withdrawals at cash dispensers (ATMs), debit and credit card payments and money remittance in euro, up to the value of €50,000 in all EU Member States.
The Payment Services Directive 2007/64/EC (PSD) lays down rules on the execution of payment transactions in which the funds are electronic money as defined in Article 1(3)(b) of Directive 200/46/EC. Furthermore, the PSD establishes rules concerning transparency of conditions and information requirements for payment services, and the respective rights and obligations of payment service users and payment service providers in relation to the provision of payment services as a regular occupation or business activity. The PSD is transposed in CBM Directive No. 1 on the Provision and Use of Payment Services.
Directives published by the Central Bank of Malta under the Central Bank of Malta Act in respect of retail payment services can be found here.