The growth in the use of payment services is also due to the growth of the most innovative digital payment systems, such as mobile payments, contactless payments, purchases via web platforms, etc.. Indeed, according to the report of the Observatory on Mobile Payment & Commerce of Polytechnic of Milan, in 2017 the estimated value of transactions being executed via innovative digital payments amounted to EUR 46 billion.
Payment services can be provided by payment institutions authorized by the Bank of Italy (Banca d’Italia). The authorization is subject to the conditions listed under Section 114-novies of the Italian Consolidated Banking Law (Legislative Decree no. 385 of September 1st 1993 as amended – Testo Unico Bancario – “TUB”) as specified by the regulatory provisions on payment institutions and electronic money institutions issued by the Bank of Italy. Among others, it is required that payment institutions are incorporated either as joint stock company (società per azioni), limited partnership by shares (società in accomandita per azioni), limited liability company (società a responsabilità limitata) or cooperative (società cooperativa) and that they have their registered offices in the Italian territory. Moreover, payment institutions are required to have a minimum initial capital equal to:
- EUR20,000 when the payment institution provides only money remittance services;
- EUR50,000 when the payment institution provides only services of execution of payment transactions where the consent of the payer to execute a payment transaction is given by means of any telecommunication, digital or IT device and the payment is made to the telecommunication, IT system or network operator, acting only as an intermediary between the payment service user and the supplier of the goods and services;
- EUR125,000 in case the payment institution provides one or more of the other payment services.
Payment institutions may provide a number of ancillary services without the need to obtain an ad hoc authorization, including: granting of credits related to the provided payment services, provision of related or operative services and management of payment systems. Entities normally performing other kind of business can provide payment services only if authorized by the Bank of Italy. In this case, they shall comply with some specific requirements, including the maintenance of a dedicated asset in relation to the provision of payment services and ancillary services.
In Italy, payment services are experiencing a constant growth in recent times. According to one of the latest studies regarding payment services conducted by the research center of the Polytechnic University of Milan, at the beginning of 2019 the main payment means in terms of volume are cash (EUR337 billion) and Point of Sale, (EUR220 billion). At the beginning of 2019, FinTech firms providing payment services are 36.
As to extraordinary transactions involving payment services providers, a remarkable and strategic IPO took place in 2019. Notably NEXI (formerly CartaSì), a leading payment institution owned by prominent local banking groups and international private equity funds, went public based on an IPO that is expected to reach an unprecedented value of EUR 7 billion.
The payment infrastructures sector is thriving as well. SIA, the biggest player by transaction volume – providing cutting edge services also to the Bank of Italy, is said to be in talks to take over Worldline, a leading French based payment system. That transaction might result in the most important payment infrastructure hub in the EU.
Payment institutions established in another EU Member State can provide payment services in Italy under the European passport regime by establishing a branch or also under the regime of the freedom to provide services in the EU. In this case, the legislation of the home country shall generally apply. In particular, the establishment of a first branch or the provision of services under the regime of the freedom to provide services in the EU must be preceded by a communication to the Bank of Italy submitted by the competent authority of the Member State where the payment institution is established.
The recently enacted rules implementing the EU Directive 2015/2366 on payment services (“PSD2”) and Regulation 751/2015 on interchange fees for card-based payment transactions (“IFR”), brought further innovation into the local legal landscape (see Legislative Decree no. 218 of December, 15th 2017 – “PSD2 Act”).
The PSD2 Act indeed introduced amongst other: rules on open banking, new payment services and relevant providers, and stronger means of customer authentication.
The PSD2 Act also sets out new rules on payment oversight, mainly related to regulatory reporting duties (e.g. sales and telephone firms are required to file with the Bank of Italy certain data on the payments executed).
The now locally implemented PSD2 not only represents a great occasion to expand the payment services market by fostering the entrance of new actors, but also gives regulatory room for further financial innovation while extending the supervisory powers of the Bank of Italy. The challenge for well-established operators as well as for FinTech startups would be to make the regulatory innovation key to growing. The local capital markets for payment services is also gaining momentum as the IPO by NEXI shows (see Section 1 above).