Name
Global FinTech Guide
Country _ Name
France
SectionTitle
Payment services
Body
FinTechs belonging to this category offer alternative payment services which are supposed to provide a faster and cheaper way for national, European, and international payments for private and business customers by using new technologies.

For example, payment service providers hereby offer solutions to easily integrate several payment services in online shops.

Some FinTechs furthermore provide real cash register systems and online-reservation solutions for restaurants and shops providing their own payment services or making use of the payment services of FinTechs described above.

Introduction

Attitude of the country towards modern payment services

In the wake of growing standardisation in regulation and reduced costs, payment related FinTechs have seen a significant growth in France in the last decade. Current statistics show that the sector is growing, especially after the adoption of the revised Payment Services Directive commonly designated 'PSD2'.

Indeed, the Autorité de contrôle prudentiel et de resolution ('ACPR'), being the competent authority for prudential supervision of credit institutions, payment services providers and insurance companies stated in its new panorama on new payment actors published in March 2022, that it had given 62 licenses for payment services institutions and electronic money institutions over the period of 2010-2021, half of them being licensed after 2018 (Electronic money institutions are entitled to offer payment services if they requested it to the ACPR). Thus, this number shows a real mania for new forms of the said services.

This growth was enhanced by a tech-friendly legal environment and an efficient use of technology in payment services, PSD2 pushing for the adoption of new actors on the market, in particular FinTechs, and expanded the regulation to new services that were not incorporated in the first Payment Services Directive ('PSD1').

On one hand, PSD2 created an obligation for payment services providers ('PSP') to implement a strong customer authentication ('SCA') after being optional under PSD1. The exchange of information was made easier under this compulsory authentication which helped many customers to shift from traditional PSPs towards new actors. This created a healthy competition between traditional actors and FinTechs, helping in boosting innovation and the quality of the said services.

On the other hand, PSD2 expanded its scope to new payment services providers which are the payment initiation service provider ('PISP') and the account information service provider ('AISP'). Both are subject to an alleviated regulation which adds to the tech-friendly aspect of PSD2.

It is also important to note that payment services listed in PSD2 have been transposed in article L.314-1 of the French Code monétaire et financier ('CMF') which covers:

  • Services enabling cash to be placed on a payment account as well as all the operations required for operating a payment account;
  • Services enabling cash withdrawals from a payment account as well as all the operations required for operating a payment account;
  • Execution of payment transactions, including transfers of funds on a payment account with the user's payment service provider or with another payment service provider:
  • Execution of direct debits, including one-off direct debits;
  • Execution of payment transactions through a payment card or a similar device;
  • Execution of credit transfers, including standing orders.
  • Execution of payment transactions where the funds are covered by a credit line for a payment service user:
  • Execution of direct debits, including one-off direct debits;
  • Execution of payment transactions through a payment card or a similar device;
  • Execution of credit transfers, including standing orders.
  • Money remittance.
  • Payment initiation services.
  • Account information services.


However, it should be emphasised that some services are specifically excluded from the scope of the payment services in accordance with article L.314-1 III of the CMF.

  • Payment transactions based on any of the following documents drawn on the payment service provider with a view to placing funds at the disposal of the payee:
    1. paper-based vouchers.
    2. paper-based traveller's cheques.
    3. paper-based postal money orders as defined by the Universal Postal Union.
  • Payment transactions related to securities asset servicing, including dividends, income or other distributions, or redemption or sale, carried out within a payment or securities settlement system between settlement agents, central counterparties, clearing houses and/or central banks and other participants of the system, and payment services providers or by investment firms, credit institutions, collective investment undertakings or asset management companies providing investment services and any other entities allowed to have the custody of financial instruments.
  • Payment transactions from the payer to the payee through a commercial agent authorised via an agreement to negotiate or conclude the sale or purchase of goods or services on behalf of only the payer or only the payee.
  • Payment transactions and related services between a parent undertaking and its subsidiary or between subsidiaries of the same parent undertaking, without any intermediary intervention by a payment service provider other than an undertaking belonging to the same group.
  • Cash withdrawal services offered by means of ATM by providers, acting on behalf of one or more card issuers, which are not a party to the framework contract with the customer withdrawing money from a payment account.
  • Services where cash is provided by the payee to the payer as part of a payment transaction following an explicit request by the payment service user just before the execution of the payment transaction through a payment for the purchase of goods or services.
  • Services provided by technical service providers, which support the provision of payment services, without them entering at any time into possession of the funds to be transferred, including processing and storage of data, trust and privacy protection services, data and entity authentication, information technology and communication network provision, provision and maintenance of terminals and devices used for payment services, with the exclusion of payment initiation services and account information services.


Legal affairs

Obligations and requirements to provide payment services or ancillary services described above

First and foremost, it is required from PSPs to categorise their services in accordance with article L.314-1 of the CMF. If the PSP happens to offer one of the services mentioned above, a license is required from the ACPR.

Following through, the PSP should satisfy certain obligations listed in articles L.522-6 to L.522-8 of the CMF in order to be licensed:

  • To have a fixed amount of share capital which is comprised between € 20,000 and € 150,000 depending on the payment services requested by the PSP;
  • To have internal controls and procedure guaranteeing a healthy management of the company;
  • To have competent and honourable executives;
  • To have shareholders of high quality;
  • To have both headquarters and central administration on the French territory.
PISPs and AISPs need to satisfy all of the conditions above in addition to the subscription of a civil liability insurance.

However, some exemptions may apply, and the license will not be required for services based on instruments that can be used to acquire goods or services only in the premises used by the issuer or under a commercial agreement with the issuer either within a limited network of service providers or for a limited range of goods or services. In such a case, a formal exemption request should be filed with the competent services of the ACPR in accordance with the provisions of article L.521-3 of the CMF.

Additional comments regarding the legal situation for payment services or what FinTech’s must be aware of in this business area

A payment processor is a company that manages the credit card transaction process, acting as a kind of mediator between the bank and the merchant. Put simply, the payment processor communicates information from a customer's card to the merchant's bank and the customer's bank. Assuming there are enough funds, the transaction goes through. Those actors are, however, exempted from requesting a license in accordance with article L.314-1 III of the CMF.

It should be noted that payment services regime in Europe is currently subject to a global change as a new Payment Services Directive (“ PSD 3 ”) and a new payment service regulation (“PSR ”) are currently under adoption process with the EU institutions (PSR being intended to apply directly within EU member states, including France, without national transposition needed). The purpose of PSD 3 and PSR is, inter alia, the following:

  • Ensure a better security of transfers and payment data;
  • Ensure a better transparence of fees by allowing customers to get clear, transparent and accessible information about all charges prior to a payment transaction e.g. currency conversions charges;
  • Ensure a better access to cash especially in remote or rural areas by allowing retail shops to provide cash independently from a purchase (up to €100) and being exempted from the rules;
  • Include new players on payment services sector (which would allow customers to pay for online shopping without a credit card) among regulated entities in order to improve their liability, security and data protection.
PSD 3 should be implemented within French law at least 18-months following its entry into force (the latter occurring the twentieth day following its publication in the Official Journal of the European Union).

The main points of PSR should apply from 21-months after the date of its entry into force (the latter occurring the twentieth day following its publication in the Official Journal of the European Union).

Economic conditions

Market size for payment services and biggest payment service providers

Payment cards continue to be the most used payment means by French people as it represents more than half of the transactions in volume (60% in 2022) for a total amount of € 746 billion in 2022 (Observatoire de la sécurité des moyens de paiement, 2023 Annual Report). Use of oldest payment means continues to decrease (e.g. payments by checks which decrease by 8% in comparison to 2021) and use of new payment means continue to increase (e.g. instant credit transfers which increase by 85% in comparison to 2021 and 6% of payments by payment card are done with mobile phone wallet).

Additional comments regarding the economic situation for payment services or what FinTech’s must be aware of in this business area

L'Autorité de la Concurrence (the French antitrust authority) published an opinion on 29 April 2021, where it was confirmed that both FinTech and BigTech are seen as growing competitors on the field and might absorb the market shares of more traditional actors. It is stated that their flexibility and their innovation is giving them an advantage on the market. Indeed, most FinTechs have reduced fixed costs in regard to inter-banking infrastructure and/or physical agencies.

FinTechs tend to also have better data processing infrastructures which fare better than their traditional counterparts.

Hence, both celerity and reduced costs make FinTechs more attractive on the field of payment services. In addition, they tend to offer simpler customer related procedures and simpler solutions.

However, the strong competition from the newcomers tends to push banks and other traditional PSPs to internalise the solutions provided by FinTechs, such as cloud computing, in order to sustain their dominant status on the market.

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