Roberto Garavaglia, CloseToPay: "The Italian regulatory framework for mobile payments: constraints and waivers"

In Italy, mobile payments are regulated by PSD (Payment Services Directive 2007/64/EC) and EMD2 (New Electronic Money Directive 2009/110/EC), transposed by Legislative Decree No. 11 of 27 January 2010 (entered into force 1 March 2010) and Legislative Decree No. 45 of 16 April 2012 (entered into force 13 May 2012), respectively. For the former, Bank of Italy has disposed specific measures by the “Implementation of Title II of legislative Decree n. 11 of 27 January 2010 on payment services” (entered into force 1 October 2011). The latter legislative decree shall apply only for electronic money products (e.g. SVA wallet) used for buying goods or services via a mobile payment service provider be it banks, electronic money issuers or post office giro institutions which are entitled under national law to issue electronic money.

What’s in the Positive scope and what’s not
For mobile payments, PSD lays down specific rules by determining what have to be considered a payment service (Positive Scope) and what is not (Negative Scope).

In the Legislative Decree 2010/11, payments executed by means of a telecommunication shall constitute payment services where the following conditions are met:

a) consent to execute the payment transactions is given by means of a telecommunication device;
b) the payment is made to the network operator responsible for managing the device mentioned in the previous point;
c) the operator acts exclusively as an intermediary between the payment service user and the supplier of the goods and services.

For example, services for payment by means of mobile phone managed by a telecommunication operator for the purchase of goods or services, including physical goods and services, at acquired points of acceptance are among those considered as payment services, hence they fall into the Positive Scope; as a consequence of that, a Payment Services Provider license must be acquired for providing specifically designed services.

To determine what mobile payment services fall in the Negative scope, it’s more complex. Bank of Italy has provided some relevant and useful clarifications in the above mentioned action (“Implementation of Title II of legislative Decree n. 11 of 27 January 2010”) by defining that payment services operated by telecommunication are excluded from the scope upon the occurrence of all the following conditions, they must be existent at the same time.

a) the payment transactions must refer to the purchase of digital goods or services;
b) the telecommunication operator must not be acting merely as an intermediary between the payment service user and the supplier of the goods and services, but must contribute with an added value (e.g. access, search or distribution functions) without which it would be impossible to use the good in the same manner;
c) the delivery or use of the goods and services in question must be executed by means of the telecommunication device managed by the operator.

Regarding the requirement referred to at point a), the good or service can be defined as digital if there is no way it can be used to obtain goods or services in the physical world;
Concerning the requirement referred to at point b), the value added provided by the telecommunication operator must play an essential role, so that in its absence it wouldn’t have been possible to make use of the good or service or it would have been possible but only with completely different procedures (e.g. supply of access codes with memorization of the authorization granted for subsequent uses).

Finally, as per the requirement referred to at point c), the exemption applies if the use or delivery of the digital good or service is effected on a device or by means of a data transmission service controlled by the operator. However, this condition does not preclude the digital content being used on other devices subsequent to delivery (e.g. in the case of downloading).

Mobile payment regulatory system in Italy is tricky and the boundary lines between constraints and waivers sometime don’t make a clear demarcation. Those who want to deal with a business proposition in such a field have to move with the sharpness and gentleness of the butterfly, by understanding the right way (often the sole viable way). This is not a warning: it’s just a suggestion.

About the author
Roberto has more than two decades of experience in Payment Systems in different views and accomplishments, such as R&D and management positions. In several companies leader in e-payments arena, he led complex projects in Italy and around the Europe ranging in SEPA, m-payment, ecommerce. Experienced in market analysis and great expert in European regulatory for SEPA (PSD, EMD, PSD2, EMD2, etc.), since 2003, Roberto works as a freelance Senior Management Consultant, dealing with a strategic consultancy offering for banking institute and new-comers who are interesting to compete in the Retail Payment Services and Mobile Payment market as Payment Institutions, EMIs, Issuers/Acquirers or processors. Since 2009, as a member of AITI (the Italian EACT – European Association of Corporate Treasures) in the Payment Commission, Roberto is responsible for Innovative Payments (Card Payments, e/m-Payments). Since 2011 he’s also associate member of EPC (European Payments Council) - CSG (Cards Stakeholder Group). Since 2008 Roberto works with Politecnico di Milano at “Osservatori Digital Innovation”. In March 2008, Roberto created and launched CloseToPay (www.closetopay.com ) the first Italian blog fully committed on the e/m-payments knowledge transfer, pursuing the goal to bridge the gap between user and providers of Electronic Payment Services. Roberto advises several companies in Italy, as payments strategy advisor, by helping them to assess the right business model for innovative payment propositions or new services/products.