Payment instruments
The past few years have seen the emergence of so-called alternative payment methods, which allow transactions to be carried out in units other than legal tender. These include crypto-assets, which do not constitute payment instruments in the legal sense.
A crypto-asset is a digital asset created using cryptographic technologies. They are so named because they resemble financial assets and are created and used by means of encryption technologies. Crypto-assets are sometimes incorrectly referred to as cryptocurrencies, but they should not be regarded as a currency.
There are several types of crypto-asset. First-generation crypto-assets, such as Bitcoin and Ethereum, are not legal tender and have no intrinsic value. They are therefore speculative and highly risky assets. More recently, "stablecoin" projects (such as DIEM) have been trying to overcome these limitations by aiming to have a more stable value. To achieve this, their price is supposedly linked to that of a benchmark asset (gold, the euro, the dollar, a group of currencies, etc.), which anchors their movement to the real economy and reduces the amount the fluctuate – hence their name. Stablecoins can be regarded as the second generation of crypto-assets.
In the absence of international regulation of crypto-asset services, a number of initiatives have been launched in recent years in various countries. France is at the forefront of jurisdictions that have very quickly provided responses to players in this segment. The PACTE Law (Law No. 2019-486 of 22 May 2019 on the growth and transformation of companies) introduced the status of digital asset service provider (DASP), which covers the following activities: custody of digital assets on behalf of third parties, purchase/sale of digital assets in exchange for legal tender (or other digital assets), operation of a digital asset trading platform, reception and transmission of orders on behalf of third parties, portfolio management on behalf of third parties – as well as other complementary services (consultancy, underwriting, guaranteed and non-guaranteed investment). The custody of digital assets on behalf of third parties and the purchase/sale of digital assets in exchange for legal tender must be registered with the Autorité des marchés financiers (AMF – Financial Markets Authority). DASPs wishing to do so may also apply for an optional licence from this institution.
To provide a European solution to these issues, in 2020 the European Commission published a draft regulation on markets in crypto-assets (MiCA), which introduces a pilot scheme for market infrastructures wishing to trade and settle transactions in financial instruments in the form of crypto-assets.
The term "Big Tech" refers to the companies that dominate the information and communication technology sector. These include the US GAFAM corporations (Google, Apple, Facebook, Amazon and Microsoft), but also the Chinese companies known by the acronym BATX (Baidu, Alibaba, Tencent and Xiaomi).
Although present across a wide range of activities, from e-commerce to electronic equipment, these companies are increasingly investing in financial services. They are capitalising on the data collected in the course of their activities, and taking advantage of their position as an interface to offer payment services to their customers. At present, their main segment of activity in the payment sphere is digital wallets.
Digital or electronic wallets allow you to entrust your payment card or bank details to a trusted third party.
These days, most major e-commerce retailers allow customers to register their payment card details to make it easier to make payments, which amounts to creating a number of so-called merchant wallets (not linked to the card issuer). In addition, the digital giants have taken advantage of the growing use of smartphones to provide the same digital wallet model for so-called "proximity" payments, i.e. in physical shops on an electronic payment terminal. These apps allow customers to digitise their payment card so that it can be stored on a phone, thereby turning the smartphone into a payment card. The cards are "tokenised": the card number is turned into a token, with the list of payment card numbers and corresponding tokens held by a service provider. The token is stored in a secure environment on the smartphone, either physically (in a secure element) or in software (host card emulation). These security features make it more difficult to use the payment card without the user's knowledge. In addition to tokenisation, mobile digital wallets are based on the development of contactless technology for card payments and the equipping of smartphones with NFC (near field communication) technology.
Other mobile payment apps have been developed by new players or commercial banks. These apps generally provide a digital wallet and a person-to-person payment solution. The latter utilises users' telephone numbers to replace bank details for credit transfers (proxies). While several solutions of this type have met with moderate success in France (Paylib, Lydia, etc.), they have the potential to be very widely adopted by users. In Sweden, Swish is used by 70% of the country's citizens. In the Netherlands, the iDEAL solution is used by 10 million people. Blik (in Poland) and Bizum (in Spain) are also highly successful.
Request-to-pay (RTP) is a messaging service used to transmit a claim accompanied by a request for payment, and to obtain the debtor's agreement (or otherwise), on the basis of which payment can then be initiated where appropriate. It is part of the changes that have taken place in the payments landscape in recent years, with the growth in the use of SEPA payments, the digital economy and the digitalisation of the invoicing-payment process.
As RTP is not a payment service, its provision is not restricted to payment services providers licensed by the supervisory authorities. To providers are reliable, however, they must be approved and comply with the rules laid down by the European Payments Council (EPC).
Open payment is a concept that enables contactless payment cards, smartphones and connected watches to be used to pay for and access transport services. Here, the bank card or digital wallet becomes a travel card, providing a better user experience by eliminating the need to go to a ticket office or machine to buy a ticket. The main advantages for users are the ease of use of this service and the guarantee of the best fare based on their actual consumption. Open payment is a subset of a broader concept known as account-based ticketing, which allows customers to simply scan a secure token, linked to an account in the system's back office, to buy a ticket and make a journey.
The world of payments is constantly evolving, and the development of new technologies is playing a major role in updating the range of services on offer and changing user habits. A number of innovations currently offer significant potential for the payments sector.
Blockchain and distributed ledger technologies offer new ways of managing and processing transactions, for example in connection with the design of digital currencies. New methods of digital identification and authentication can have a positive impact on the ease of user transactions and the security of remote payments. Data sharing and artificial intelligence already offer interesting use cases in the area of payments, particularly in the fight against fraud. Finally, the internet of things could eventually lead to increasing automation of payments, which already raises a number of technical and legal questions.
Account aggregators provide customers with an interface that offers a consolidated view of their payment account(s) held at one or more institutions. Account aggregators have been covered by a legal framework since the second Payment Services Directive. In particular, they receive authorisation from the Autorité de contrôle prudentiel et de résolution (ACPR – Prudential Supervision and Resolution Authority) to carry out their activities, which are also subject to the ACPR's oversight.