The National Bank of Serbia (“NBS”) has prepared a Draft Amendments to the Law on Payment Services (“Draft”) and invited experts and other interested parties to submit their suggestions and comments as part of a public consultation by 27 June 2024.
Over the past decade, the NBS has advocated for continuous improvement and digitalization of the payment services market in Serbia, implementing various norms and optimizing payment infrastructure. The adoption of the Law on Payment Services (“Law”) in 2014, followed by amendments in 2018, largely aligned the payment services sector with European Union (“EU”) regulations. By adopting the latest proposed amendments in the Draft and issuing accompanying subordinate regulations for their implementation, the operations in the payment services sector would be fully harmonized with EU regulations.
The objective of the Draft amendments is to encourage the use of advanced technologies in the payment services market, while ensuring greater competition and transparency among service providers. Additionally, these changes aim to enhance user protection and security in conducting innovative payment transactions.
The Draft places special emphasis on enhancing the security of e-payments and implementing measures to protect the confidentiality and integrity of personalized security elements of payment service users, thereby ensuring safe validation and reducing the risk of fraud.
The benefits for the payment services sector from adopting the Draft include:
- Enhanced user security;
- Increased service offerings and provider competitiveness;
- Lower service costs;
- Significant room for innovation in the payment services sector.
Open Banking
Adopting the Draft would also establish Open Banking in the Republic of Serbia. Open Banking allows access and control over users’ financial accounts and enables instant and cashless payments through applications that connect the accounts of business banks and other payment institutions of payers and payees. Open Banking is set to become the primary source of innovation that has the potential to completely transform the banking sector.
Under the proposed concept of Open Banking in the Draft, two new types of services are introduced:
- Payment from users’ e-accounts:
This option enables payments directly from users’ payment accounts without the use of payment cards, facilitating cashless payments on user internet sales points.
- Unified overview of users’ account information:
These applications provide users with a comprehensive overview of balances and payments from all their bank accounts. Such access to information allows users to share it with other financial service providers to obtain additional financial products and/or services, without the outdated process of obtaining account statements from banks as in the current practice.
Membership in SEPA
The Single Euro Payment Area (“SEPA”) is an EU project introduced after the adoption of the euro as the single currency, aiming to facilitate more efficient and cost-effective international payment transfers among users. This payment method is ensured through unified rules and practices applied by all banks and other payment service providers in the EU, including EU members not using the euro, as well as certain non-EU countries (Switzerland, Norway, United Kingdom, and Iceland).
In preparation for Serbia’s accession to SEPA, the NBS has drafted a Draft Decision on specific rules for executing credit transfers and direct debits in euros (“Draft Decision”). The Draft Decision establishes business, technical, and other requirements for conducting credit transfers and direct debits in euros. Alongside adopting the Draft Decision for SEPA membership, regulatory alignment will be necessary in areas (beyond payment services), including anti-money laundering, banking operations, competition protection, and personal data protection.
SEPA membership aims to reduce costs for individuals making electronic and instant payments internationally. Normative and infrastructural alignment is required for payments to be executed within seconds, thereby reducing costs for all participants in e-payment processes.
Conclusion
Open Banking and SEPA membership have the potential to significantly enhance competitiveness, lower service costs, and the speed of e-payments in the Republic of Serbia, as well as improve user experience in the advanced banking sector. They offer the potential for instant payments in foreign currencies on an international level without additional conversion costs.
However, there are potential risks for users, as data sharing will occur on a broader scale compared to traditional banking. Time and practice will determine whether the regulatory framework, if adopted, will successfully mitigate all potential harms to payment service users when moving away from standard business operations solely within the traditional banking sector.
This article is for informational purposes only and does not constitute legal advice. For further information, please feel free to contact us.
By Predrag Pavlicic, Senior Associate, PR Legal
