Electronic Payment Rules in Europe: 6 Points Merchants Should Know

Electronic Payments in Europe

For a business, electronic payments can be a rather complex affair to navigate. In Europe, there are a whole lot of payment methods available to merchants. As well as regulatory norms to adhere to, such as the Payment Services Directive (PSD2) and Strong Customer Authentication (SCA). Running a business in Europe involves being up to speed with these changing developments – in payments, technology, regulation, and consumer behaviour.

E-commerce and online buying have shot up since the start of the pandemic. Digital payments have been steadily growing in popularity in Europe, where traditionally, cash has been king. But electronic payments can be a whole new monster. Hence, young businesses have to stay informed in a complex marketplace where a lot is happening, which frankly, can get overwhelming.

So, without further ado, here are six things you ought to know if you accept electronic payments from your customers.

Six points merchants should know while using Electronic Payments

1. Same bank rates for electronic payments

Under EU payment rules, bank charges for all electronic payments made in euros within the EU must be the same – whether the payment is domestic or cross-border. A bank cannot charge you extra fees for making or receiving a euro payment to/ from a cross-border bank account within the EU. They have to charge the same rate as a domestic transaction.

The same rules apply to banks that are based in the EU but outside the Euro area. They cannot charge more for a euro payment to or within another EU country than they do for a domestic payment in the national currency.

2. Card surcharges are not allowed

Revised PSD2 rules in Europe prohibit merchants from charging consumers surcharge fees when they pay using credit or debit cards. This applies to all card purchases, either online or in-store, throughout the EU. However, surcharges are allowed for corporate and non-EU cards.

In other words, for B2C payments, a merchant cannot apply a surcharge when:

• The customers pays in euros using a debit or credit card issued in the EU
• The customer pays in euros using SEPA direct debit or SEPA credit transfer
• The customer’s bank or card issuer and the merchant’s payment service provider are both located in the EEA.

In B2B payments, a merchant cannot apply a surcharge when

• The customer pays in euros using SEPA direct debit or SEPA credit transfer
• The customer’s bank or card issuer and the merchant’s payment service provider are both located in the EEA.

For both B2C and B2B payments, in cases where a merchant applies a surcharge, the surcharge amount cannot exceed the cost to the merchant for accepting the particular payment method.

3. Dynamic currency conversion

As a merchant, if you allow customers to pay in their local currencies, you can charge them currency conversion fees. However, you have to inform your customers about all currency conversion charges plus any additional markup you charge. You have to mention these charges as percentage markups over the latest available euro foreign exchange reference rates issued by the European Central Bank.

For example, if a customer shops from your online store and wishes to pay in their local currency, you should convert the bill amount using the ECB rate and inform them about the percentage markup you will charge on top of that amount.

4. Multi-factor consumer authentication

As per the revised PSD2 rules, you have to verify all online payments above €30 using strong customer authentication (SCA), such as two-factor or multi-factor authentication. 2-factor authentication verifies online transactions using at least two of three factors – a PIN or password, a card or phone, or a biometric (fingerprint/ iris) scan. Its main goal is to reduce payment fraud while keeping the payment process as frictionless as possible.

Your payments service provider can help you set up and apply SCA to your online payments.

5. Non-discrimination in accepting payments

You must accept payments from customers in the EU, irrespective of the customer’s or their payment service provider’s location within the EU. For example, if a customer in France shops from an online merchant in Germany using a Finnish credit card, the German merchant must accept the payment if their website states that they accept euro credit cards.

6. Anti-money laundering and terrorist financing rules

To prevent money laundering and terrorist financing, a merchant has to adopt measures when processing customer payments. These measures could apply to an individual transaction or several linked ones. In such situations, a merchant should apply customer due diligence, including verifying the identity of the customer, any person who owns or controls the customer, or on whose behalf the transaction is being made. If you notice any suspicious activity, immediately report it to the financial intelligence unit (FIU) in your EU country. Learn more here.

How Can Novalnet Help?

As a global PSP, many of Europe’s leading brands trust us with their payments. We can guide you on how to make your payments more efficient. We help you accept payments globally in 125+ currencies in 150+ automated country-specific payment methods. Set up your payments within minutes with minimal coding using our instant payment plug-ins. With our AI-based risk management solutions and advanced analytics, you can design the best payment experiences for your customers, all in a fully secure environment.

Reach out to us to know more about payment automation and how to use it to grow your business.

Antony Robinson

Antony Robinson is an experienced IT expert, information architect and a customer experience evangelist. He has over 30 years of experience in web technologies, user experience, media, and marketing. Antony is currently the CMO of Novalnet AG, a fintech company in Germany. As CMO, he leads the company’s marketing strategy and fosters collaborations. Antony’s expertise and dedication to technology and innovation make him a valuable leader in his field.