With the continued growth of regulation of the prepaid industry in the US by the CFPB how does it compare to Europe and your English speaking colleagues in the UK?
The European Payments regulatory challenges are typically the speed by which new regulation is created and then adopted across the EU. Whilst we watch how fast the US seems to be able to bring in new regulation, the EU continues to draft Regulations by committee with all countries in the EU at the table and three separate houses (Parliament, Council and Commission) to each agree on the wording of a directive before giving each country a further two years to draft their own legislation to implement it.
We are all eagerly awaiting the first reactions to come out of the EU on the 3rd Electronic Money Directive which effectively is the regulation that applies to prepaid products across the EU. The initial consultation proposed is now over a year late and still no date given for it to come out. The EU is working from the 2nd Electronic Money Direction 2009 which came into force across the EU in 2011/12 but which was first proposed in 2007. As such it is already at least 6 years out of date and probably closer to 10 years behind in that same time period if you apply Moore’s law of processor size, doubling each year to development of products in prepaid the industry will have moved forward between 26 – 210 or 128 – 1024 times (!) whilst the regulation has remained stagnant.
Now, even though this is an exaggeration, the market clearly develops at a pace and new players with innovative ways to de-clutter and remove friction from the payments industry appear daily. I am always surprised and amazed at the variety of new prepaid products that come across my desk. Many of them could not have existed without the giant steps made advancing the technology in the payments space. Most do not fit the regulatory regime and have to be de-constructed and reconstructed like a Michelin restaurant’s dish to work. Is this a good thing? It takes a very advanced regulator to take on this type of interpretation. Considering the law is so far behind the technology it is not surprising that the UK with its good access to the Regulators and their determination to follow new Fintech developments (Project Innovate is a good example of this) has become the hub of financial innovation in the EU.
Robert Courtneidge will be chairing the PrePaid Expo taking place on Tuesday 22nd March in New Orleans as part of the All Payments Expo.