Banking industry welcomes payments deadline

The European financial services industry has welcomed the migration deadline for the Single European Payments Area (SEPA). The European Parliament (EP) has adopted the Regulation Establishing Technical Requirements for Credit Transfers and Direct Debits in Euros (CTDD), which includes the legally binding deadline of 1 February 2014, as proposed by the European Council in 2011. For non-euro countries, such as the UK, this is 31 October 2016.  

The deadline “effectively means that by these respective dates existing national euro credit transfer and direct debit schemes will have to be replaced by SEPA schemes,” explains Michael McKee, a Partner at DLA Piper.

“The passing of the regulation delivers a necessary certainty to the industry. After a long marathon we hear the gun for the sprint to the finish,” said Sean Fitzgerald, Chief Executive Officer at Sentenial. “For the most part the debate can finish and the implementation phase commence in earnest.” 

EU Commissioner for the Internal Market Michel Barnier declared that “the move to a single pan-European payment system in Europe” had become “a reality”, while Gertrude Trumpel-Gugerell, of the European Central Bank, “very much welcomed” the EP’s vote.

Among other things, CTDD sets out details for a harmonised use of the account and bank identifiers IBAN and BIC, makes it mandatory for payment service providers to offer specific mandate checking features and contains detailed provisions with regard to direct debit transactions. 

According to SEPA rapporteur and EP Member Sari Essayah,  "[CTDD] really benefits citizens. It will enable them to make payments from one bank account to another all over Europe, just like a domestic payment.” She stressed that businesses will benefit too, by “not needing more than one bank account in Europe for each payment purpose”.

But some experts believe SEPA still has a long way to go. “For the last 10 years, the payments industry has been working towards achieving SEPA”, said Zilvinas Bareisis, a Senior Analysts at Celent. “The SEPA vision might be simple and laudable, the solution is far from simple. With continued questions about the future of the Euro, and the domino effect that it might entail, questions have naturally been raised about whether SEPA is still a valid objective,” Bareisis said.

Michiel Willems © 2012 CP Publishing Ltd. London, UK. Pictures: recent-ecl.blogspot.com (top) / Wikipedia.org (above)

French internet service providers to be financially compensated

Internet service providers in France will be compensated for blocking access to unlicensed gambling websites by the Autorité de Régulation Des Jeux en Ligne (ARJEL), France's regulatory body for online gambling stated in a decree it recently issued.

Victoriano Melero, a Partner at Clifford Chance LLP in Paris, points out that the impact of the decree, which came into force on 1 January 2012, "lies mainly in the fact that it ends possible litigation", while Annabelle Richard, a Partner at Ichay & Mullenex Avocats in the French capital, expects that now "the issue of costs has been settled, ARJEL shall face less reluctance from ISPs to block access". 

Service providers have been facing costs since the French Gambling Act was adopted in May 2010, which has given courts the power to order internet service providers block unlicensed websites. Since May, several ISPs have made repeated attempts to challenge the website blocking. 

The French gambling law did state that a decree should be issued specifying how the costs faced by providers are compensated. While French courts have ordered providers to block websites, a German court ruled this week such a move would be in conflict with the European E-Commerce Directive, although Melero thinks "the fact that internet service providers are not responsible for the content of their customers' websites, does not mean that they cannot be subject to enforce a judicial decision". 

Richard also thinks "[Germany and France] boil down to the same principle, only a judicial injunction can compel ISPs to block access to websites". 

Michiel Willems © 2012 CP Publishing Ltd. London, UK. Picture: CP Conferences 2011.

Foreign websites "accessible from anywhere in Germany"

BERLIN - German internet service providers do not have to block foreign-based websites, a German court has ruled. The Administrative Court of Düsseldorf decided that Deutsche Telekom, one of Germany's biggest internet service providers, did not have to block its customers from accessing foreign gambling and gaming websites, even if they are considered 'illegal' under German law. 

The DENIC, the central registry for all domains under domain '.de', won a similar proceeding last December. The Düsseldorf Court said in that case the central registry did not have to act because it is not responsible for the content of websites. The ruling has shocked German politicians since "the decision makes clear that German authorities do not have, and will not have, effective means to prevent German citizens from participating in foreign gambling activities", said Dr. Christoph Enaux, Counsel at Olswang LLP. "Foreign gambling websites are currently accessible from anywhere in Germany."

The Judge has "applied the current German Telemedia law, under which a provider cannot be held responsible for the website content", said Barabara Ploeckl, a Partner at Freshfields Bruckhaus Deringer. "The access provider's sole knowledge of the fact that certain content on a website is illegal does not establish a responsibility under the Telemedia law". 

The German Telemedia Law is in line with the European E-Commerce Directive, which protects ISPs from liability for material they have not created or monitored. "If the Federal States really want to dry out the 'grey' foreign gambling market, it therefore seems indispensable to establish a regulatory regime which is attractive enough to prevent citizens from participating in such foreign activities", said Enaux. "The current draft Interstate Treaty does not fulfil this goal." 

The only option for authorities "is regulated in Article 9 of the current draft of the new Interstate Treaty. The provisions give allowance to the authorities to request from banks and financial services institutions, after prior notice, to stop processing payments in connection with illegal gambling," said Stefan Bolay, Junior Partner at Hambach & Hambach. "[This ruling] shows once again that the internet cannot be switched off. The only reasonable way to control internet gambling is to regulate the market as Schleswig-Holstein is currently doing."

Michiel Willems © 2012 CP Publishing Ltd. London, UK. Picture: fanpop.com

 

Google disables prepaid cards due to security issues

Google has temporarily disabled the provisioning of prepaid cards for its mobile wallet after researchers found a number of security flaws in the application. 

Research revealed in January how an attack on rooted mobile phones could expose a user's PIN, as well as flaws in resetting payment options, which allow anyone to take over the wallet function on an Android phone. Both issues are said to be being addressed by Google following an announcement regarding the disablement on the Google Commerce blog. Google Wallet VP Osama Bedier explained Google “took this step as a precaution until we issue a permanent fix soon".

Google Wallet is an application that makes use of near field communication technology, which enables users to store card details onto their mobile devices and upload money in order to make transactions.
Despite the security set back and potential damage to consumer confidence, Bedier insists that “you can be confident that the digital wallet you carry provides defenses that plastic and leather simply do not”.

Michiel Willems © 2012 CP Publishing Ltd. London, UK. Top picture: Androidpit.com

Indian Court orders websites to remove 'offensive' material

Leading internet websites in India - including Google, Orkut and Facebook - have begun removing material from their Indian websites. Following a complaint, the Delhi High Court threatened to block websites that failed to remove 'offensive' material. 

"This ruling "surely has an impact on the e­commerce industry", said Sajai Singh, Partner at J. Sagar Associates. "Websites will be required to remove objectionable content if any user complains." 

Google and Facebook are among 21 internet companies that have been accused of hosting material that may cause civil unrest and had been given until 6 February to remove all 'anti-social' and 'anti-religious' content on their sites.  

"If they had not removed the offensive material they could have been penalised, fined and also imprisonment, as these offences are considered criminal in nature", said Vaibhav Parikh, a Partner at Nishith Desai Associates. "Under Indian law material is considered to be [offensive] if it is obscene, hurts religious sentiments, and incites violence and public disorder", explained Parikh.

"Both Google and Facebook hold a global policy of non-interference," said Singh. "But the companies have been warned that this will not work in India so have been asked to develop a mechanism to block objectionable material."

However, the Information Technology Rules - enacted by the Department of Information Technology in 2011 to regulate e-content in India - notes "that intermediaries are liable only if they are aware that such content has been stored on their computer system and they have not taken any action to remove such material", said Singh. "Nowhere the Rules stipulate any screening of information."

Since India "ranks third in terms of the number of internet users it is evident that Google and Facebook do not want to be on the wrong side of the law and jeopardise the Indian market", Singh added. "Though Google and Facebook may have complied with the court order, they will challenge the order of the trial court in the High Court." 

Singh also thinks that "with the current order one would tend to believe that Facebook and Google may adopt some electronic mode of screening". However, experts have expressed serious doubts with regard to the success of such a screening. Singh: "Whether there will be stringent requirement of screening will depend on the final order of the Delhi High Court." 

Michiel Willems © 2012 CP Publishing Ltd. London, UK. Top picture: Cia.gov

Jordan: immune to the Arab Spring?

While many of its neighbouring countries are currently experiencing turbulent political times, and some even regime changes or civil war, Jordan has remained relatively peaceful and stable in the last few years. While the Jordanian Government is trying to navigate the prosperous kingdom through the tense regional situation, the country's capital has become a beacon of peace and prosperity in the Middle East. These days, Amman is one of the trendiest and most developed cities in the Arab world and much richer than most of its neighbours.

Please find below some pictures I took during a recent trip to the country. Apart from Amman, I also visited the ancient and world famous City of Petra, 300km south of Jordan's capital. Get a glimpse of a country squeezed in between Babylon and the Holy Land, where magnificent scenery goes hand in hand with impressive historical sights... and a lot of sand.

Petra

Amman

Dinner in Amman

Approaching Petra

'End of the World' view

With Mohammad, at his place

Bus stop just outside Amman

Michiel Willems © 2011-2012

Change in view on scope of US Wire Act

The US Department of Justice has concluded that the 1961 Wire Act is 'not to be implicated by online wagering on activities other than sports'. The DoJ made public the Opinion of the Office of Legal Counsel (OLC), who concluded that the Wire Act should only be applied to sports betting activities. 

Before its announcement, the DoJ applied the Wire Act to all forms of online interstate gambling, but Assistant Attorney General Virginia Seitz said that "interstate transmissions of wire communications that do not relate to a 'sporting event or contest' fall outside the reach of the Wire Act". 

"The news is big for US states and has spawned much speculation on how states and Congress will respond", said Linda Shorey, Partner at K&L Gates. While some industry experts claim the new approach by the DoJ paves the way for a regulation - and legalisation - of online gambling activities Shorey remains doubtful. "What the change means is the subject of much discussion. No consensus has emerged, yet." 

Michiel Willems © 2012 CP Publishing Ltd. London, UK. Picture: CP Conferences 2011.

 

Europe pushes for integration of card, online and m-payments

The European Commission (EC) has published its long-awaited Green Paper on how the European Union (EU) should overcome difficulties in creating an integrated market for card, internet and mobile payments.

"The Green Paper demonstrates that in 2012 the integration of the Euro payments market will enter a new and decisive phase", said Gerard Hartsink, Chairman of the European Payments Council. 

The EC expects that an integrated market will benefit consumers, merchants and providers since "such a market would result in increased competition, greater transparency, more innovation and better security", said Ben Regnard-Weinrabe, a Partner at Hogan Lovells, who welcomed the document. Internal Market and Services Commissioner Michel Barnier said legislative changes are needed since "we will not be able to reach this goal with the current level of market fragmentation".

With the Green Paper, the EC aims to create 'a payments market through electronic and mobile payments'. But John Worthy, Partner at Field Fisher Waterhouse, wonders what the value of this statement is: "The level of attention in the Green Paper to existing card based payments leaves open the question how far the Commission is giving equal weight to electronic and mobile payments". Hartsink also warned that "promoting EU integration is not for the faint hearted and requires focus on the long-term objectives".

The main issues the Green Paper addresses are market access (for existing and new payment providers), security and data protection concerns, interoperability issues and transparency of payment service prices.

A number of big players

"A key challenge is how to involve a wide community of stakeholders in the formulation of policy, and in standardisation initiatives, without creating paralysis", said Regnard-Weinrabe. "The holy grail is to achieve access to different systems, and interoperability between them, so that it becomes quicker and cheaper to push money around Europe. We can expect a degree of resistance from card schemes."

Worthy also thinks full market integration will be a challenge since "many existing and aspiring players in e-payments and m-payments markets come from different ecosystems from traditional payments providers".

Michiel Willems © 2012 CP Publishing Ltd. London, UK. Pictures EU / Simonwhatley.co.uk

Double interview: Peter Fleming and Steve Arundale

Many businesses, consultants and law firms are facing new challenges in the wake of the UK Legal Services Act, which came into force in October 2011. Michiel Willems spoke to Peter Fleming, Business Director Legal Services at Huthwaite International, and Steve Arundale, Head of Professional Sectors and Financial Institutions at the Royal Bank of Scotland, to have their views on the growth of 'e-lawyering' and the likely changes to the landscape in the provision of high street legal services.

The introduction of the UK Government's Legal Services Act 2007 ('LSA') is spearheading significant changes in the way legal services are delivered. Described as a 'Big Bang' moment for the legal profession, the upheaval caused by the LSA could be nothing short of seismic with industry experts such as Professor Stephen Mayson predicting that as many as 3,000 high street law firms, or 35% of the total, may have to disappear in the subsequent upheaval. What can you say about this? Do you think many small high street firms - who do not have a sophisticated website - will be affected by this new development? 
Steve Arundale: The LSA will clearly have a significant impact. Yet, to blame the projected changes on the legislation would be wrong, as the market for legal services in the high street was always going to change anyway. The reason is clear: in a tough economic environment and a fragmented market with too many providers, the level of client service simply has not kept pace with that of other providers of goods and services.

The fact that many firms lack an effective interactive website provides a powerful example of this shortfall. Nearly three quarters of businesses recognise the importance of technology in communicating more effectively with clients who are now more computer literate and buying more goods and services online every year. Yet, only one in four law firms have positively addressed this issue.

The emerging legal landscape poses serious challenges for traditional providers, but also presents a wealth of opportunities for those firms who are willing to make the most of the changes. The impact of the reforms and the implementation of legal technology will allow forward-thinking firms to carve out an increasing share of the market as others succumb to increased market pressures. What can you say about this? 

Peter Flemming

Peter Fleming and Steve Arundale: Firms must get closer to and become more interactive with their clients. What is certain is that large new entrants will be leveraging their own client base in this way - they have the budgets and the know-how to do this and it forms part of their everyday way of working. Many law firms by contrast do not have a good enough grasp of who their clients are, their buying patterns and where they are in the buying cycle.

Having said this, there is a great opportunity for those who get it right. Even though the buying landscape may change, the overall market for quality legal services will continue to grow, in the face of increasing legislation and a generally more litigious society. Wherever you look, from commercial to employment to family, the ways in which we interact are becoming more complex, with an associated need for sound legal advice to help both consumers and businesses.
 

The LSA has now come into force. This means many well-known names, such as Tesco, Sainsbury's and ASDA, can start offering legal services. Do you think many consumers would buy their legal aid online if that would be the best offer?
Peter Fleming and Steve Arundale: There are two questions here: how much would you trust a new entrant and how much would you trust a new way of purchasing legal services?

The answer to both may be the same. Many purchasers may trust the new provider's brand and make regular online purchases, yet are still likely to be cautious in making high-value and complex personal or family decisions via a highly impersonal route to the market. Such consumers are unlikely to be early adopters, having greater confidence in the more traditional, consultative face-to-face approach. However, 'Generation Y' (those born from the late 1970s to late 1990s) purchasers are less likely to be inhibited in this way and more willing to try new providers and new routes to market.

There are two other issues for high street lawyers who charge out on a universal hourly rate for their services to consider here. First, consumers willing to pay the rate for good quality professional advice will be far less willing to pay the same for form-filling and other administrative work. Once again therefore, a blended approach combining online and face-to-face is likely to be more cost-effective and competitive in giving the consumer what they want.

In addition, the new generation of consumers is now much more sophisticated and better-informed as a result of the internet (though this doesn't necessarily make them better buyers). This puts more pressure on the lawyer, as value depends on providing rather more specialist input and advice than the client could find out on Google.
 

What impact will the LSA have on your clients and your business activities?
Peter Fleming and Steve Arundale: In a more liberalised and competitive market, law firms need to concentrate as much on running the business as providing legal advice. Issues such as getting the right business model, profitability and developing a forward-looking strategy are all about the business and nothing to do with the law.  

Do you think it is possible to make a proper analysis of a legal case if information is only provided over the internet? 

Steve Arundale

Peter Fleming and Steve Arundale: To a large degree this is already happening. In a standard conveyancing transaction, for example, 99% of the process is automated and can be completed in just 12 minutes, with a short period of review by an approved person. 

Some other areas have a large process element which can be automated, yet in most cases there will continue be a small but essential degree of specialist personal involvement where there is some complexity to be managed. This will be due to the inherent nature of the legal issue to be resolved therefore rather than the desire of the client.
 

By allowing non-lawyers to own law firms, the LSA exposes high street firms to competition from all-comers, especially those with well-established brands, superior media exposure, and existing retail muscle. What should existing law firms do to keep up - or to keep ahead of this new competition? What do your clients say about this and what would you say to newcomers?
Peter Fleming and Steve Arundale: Research has shown that, though 90% of firms recognise that the market will change over the next five years, only 30% have yet done anything to address or respond to this. If they are to survive - let alone thrive - in the face of large newcomers with strong branded presence, an existing high street infrastructure and well-researched offerings, law firms can no longer afford to sit on their hands: standing still is not an option.

There will be opportunities for newcomers into what might be described as the 'traditional' high street legal service provision. These are most likely to be in niche areas, where the provider can evidence a strong specialist expertise and quality service for which clients are prepared to pay a premium. To succeed, they will need to be commercially aware and adopt a more aggressive marketing strategy.
 

Many in the industry expect 'e-lawyering' to become the new standard. Many solicitors, for example, offer their services online when buying a home. Surveys have confirmed this view. What can you say about this?
Peter Fleming and Steve Arundale: 'E-lawyering' is already starting to become established as the de facto standard in dealing with many legal issues. This has a clear parallel with the medical profession that is embracing technology to deal with the administrative side of patient relationships, as this is both cheaper and what the public wants. Today, patients can book GP appointments online, confirm them via text message and also get repeat prescriptions via the web. The only thing that requires face-to-face intervention with the doctor is the diagnosis of the patient's ailment - the equivalent of the value-added expertise required in providing legal advice to unravel a complex legal problem.
 

Is there anything else you would like to address, say, add, share?
Peter Fleming and Steve Arundale: Law firms have traditionally been good at recognising and learning from what the best legal practices are doing. Now is the time to look beyond the immediate competition and see what world class looks like in other sectors. This is especially pressing in the area of customer service provision, as newcomers enter the legal services market post-LSA. It is also time to take a step back from the business, review costs and efficiencies and take a fresh look at what they do best in the context of the changing market. In other words, take time away from working in the business to work on the business.

Many thanks.

Michiel Willems © 2012 CP Publishing Ltd. London, UK. Pictures: Whiteoaks PR.

Practical considerations

On 5 January, Deloitte published a study that claimed that the number of people who bet on unregulated websites will increase if the UK Government goes ahead with its planned regulation of offshore operators. 

The Report, which Deloitte had carried out for (and which was paid by) betting giant William Hill, concluded that if the UK changes its remote licensing regime (by taxing betting operators on the basis of where bets are placed), online gamblers are likely to turn to unregulated, untaxed markets. 'Placing a 10% 'point of consumption' (POC) tax rate on remote gambling could result in up to 27% of online consumer bets being placed in unregulated markets unless effective enforcement measures are found that restrict the growth of that market', the Report read. It also claimed that if the POC tax level is set at 15% (the current tax rate for UK-based online operators), 'as many as 40% of punters could turn to unregulated markets'. Finally, the Report warned, this could result in 'the UK online betting market getting smaller because it would likely lead to smaller companies exiting the market and others cutting back on their marketing expenditure'. 

Although the Report was commissioned by William Hill and its final conclusions clearly expose a political agenda, the study does highlight some reasonable issues. Under the current Gambling Act 2005, non-UK based businesses have to be licensed in so-called 'white-listed' jurisdictions in order to offer online gambling services to UK customers. 'White listed' jurisdictions are licensing regimes recognised by the Gambling Commission.

However, since John Penrose, the Minister responsible for gambling activities in the UK, announced in July 2011 his plans to introduce a licensing regime for offshore operators, and Justine Greening, Economic Secretary to the Treasury, proclaimed she would introduce a POC tax on remote gambling transactions, they have not made any mention of how they were planning to keep unlicensed offshore operators out of the British market. However, if the current UK Government does give the green light for such a new offshore licensing regime, one that includes a POC tax, it will undoubtedly encourage UK players to try their luck on unlicensed websites. Therefore, it is about time Penrose and Greening addressed some important practical issues. Both Ministers have, so far, not spoken of any enforcement mechanisms in order to limit the ability of non-licensed offshore operators to target the British market. Other countries, such as France and Spain, have introduced effective enforcement measures, such as website blocking, prohibiting banks processing certain offshore payments, bringing criminal charges against directors of unlicensed operators and banning advertising activities. None of these measures have even been mentioned by British lawmakers.

If the UK government wants to make a serious attempt to regulate offshore players, they should start thinking about the practical considerations. Those challenges should not be taken too lightly. The extent to which a grey market emerges depends on the effectiveness of the enforcement regime. And, so far, we have not seen any proposals that deal with these issues.

Michiel Willems © 2012 CP Publishing Ltd. London, UK. Picture: gamblingkingz.com

 

Japan to meet international mobile phone standards

NTT Docomo, Japan's largest telecom operator, has announced the formation of a consortium of telecoms and banks that will coordinate the adoption of international standards for near field communication (NFC) technologies in the Japanese market. 

Alongside the domestic mobile carriers Softbank Mobile and KDDI, NTT released a statement which describes how the new conglomerate aims 'to work with mobile industry groups in Japan, including service suppliers and handset manufacturers, to incorporate compatibility...[with overseas]...standards in the Japanese mobile ecosystem.' 

in Tokyo

Mobile operators in Japan, which is ­ the world's second largest economy, have been offering mobile payment and other related phone services for years, but they use non-NFC standards, so-called Osaifu-Keitai technology. NFC technology, however, incorporates a variety of existing ISO standards. Therefore, the newly formed consortium aims to ensure compatibility with so-called Type A and B mobile standards, which are mostly being used in Europe, Australia, Africa and the USA.

Industry experts expect Japan will benefit from the NFC technology since it will create international acceptance of Japanese mobile phones and should encourage cross-border mobile payments. Following NTT, Softbank and KDDI's move, Japan Airlines announced on 2 February it will introduce NFC-based boarding passes for all its Japanese and international passengers in August. 

Michiel Willems © 2012 Cecile Park Publishing Ltd. London, UK. Top picture: Guardian.co.uk.
 

Nigeria kicks off its 'cashless Lagos' project

The Central Bank of Nigeria (CBN) has kicked off its much-talked about Cashless Lagos project, introducing limits on how much paper money can be withdrawn and imposing deposit restrictions in a bid to encourage the use of electronic and mobile payments. 

"[Cashless Lagos] is to leverage and augment a seamless cashless regime convenient for all classes, and to reduce corruption, increase foreign investors' confidence and to sustain a capital base", said Ben Ndedde, Partner at law firm Justice Forte in Lagos.

In a statement, the Central Bank of Nigeria said "it wants to drive development and modernization of our payment system in line with Nigeria's vision of being amongst the top 20 economies by the year 2020".

Ndedde thinks this should be possible: "Nigeria is very well exposed to internet services." However, he does foresee a number of issues: "Illiteracy levels are still quite high and fraudsters on the internet may pose a hacking threat by intercepting and wiring funds, as is the case globally. We are also saddled with incompetent security agencies incapable of tracking fraudulent transfers." 

Published in the January issue of EFPLP © 2012 CP Publishing Ltd, London, UK.