LEGAL UPDATE: PARLIAMENT OF ALBANIA APPROVES LAW ON PAYMENT SERVICES

On 30 April 2020, the Parliament of Albania approved the Law on Payment Services drafted by the Bank of Albania and proposed by the Ministry of Finance and Economy. The adoption of the law marks a significant progress in the country's EU integration process, by approximating the local legislation with the Second Payment Service Directive of European Parliament and Council of EU (PSD 2) and the integration with the Single Euro Payment Area. Also, this law meets a series of objectives provided in the action plan of the National Strategy for the Small Value Payment Market and the commitments of the Bank of Albania in the National Strategy for the Diaspora.

The law encourages the usage of innovative digital tools and regulation of current payment services and practices. The main milestones of the law are guaranteeing core values to consumers and increasing security and transparency on payment services.

In this context, the law aims to:

• ensure impartiality and proportionality in the licensing and regulation of payment service providers;
• enable innovative business models on payment services;
• strengthen the regulatory supervisory framework of Bank of Albania on payment services;
• create a framework for consumer protection, including effective supervisory and dispute resolution mechanisms.

The law provides rules for:

1. establishment, licensing, organization, activity and supervision of payment institutions;
2. transparency on conditions and requests for information on payment services; and
3. the relevant rights and obligations of payment service providers and users related to the payment services.

The main novelties of law and the expected impact include the followings:

The promotion of competition and innovation in payment services. The law is expected to have a direct impact on boosting competition and innovation in the field of small value payments, promoting efficiency and reduction of the costs of such services.

The establishment of two new payment institutions:

• Institutions for payment initiation services. These institutions shall help customers to make online payments and immediately inform the merchant on a payment initiation, i.e. facilitating e-commerce. This service will be also provided to customers who do not hold a debit or credit card but have an accessible online account.
• Institutions for account information services. These institutions shall allow customers to consolidate their current accounts and categorize their expenses (food, energy, rent, etc.), helping them with family budgeting. That will make banks more open in providing customers’ accounts information to third parties.

The balances on the provision of payment services between banks and non-bank financial institutions.

Under the new law, non-bank financial institutions can open payment accounts and issue e-payment instruments. The law provides mechanisms which aim to eliminate any adverse practice implemented by the banks, for competition purposes, including:

• The right of payment institutions to open an account with a bank and the provision of relevant services. In case such service is not provided, the bank must report the reasons in writing to the Bank of Albania. This provision aims to eliminate potential abusive practices of the banks.
• The right of payment institutions to participate in payment systems (directly, when these systems are not of systemic importance and indirectly, through a bank, when the systems are of systemic importance).

Consumer protection. The law requires the establishment of special units within the payment institutions, responsible for addressing the protection of payment service users (similar to those of consumer credit), as well as a special unit in Bank of Albania responsible for alternative resolution of disputes. Such provisions will increase transparency in the services provided in the market and will create a consolidated framework for consumer protection.

The expansion of banking services across the country. The law aims to expand the presence of services provided by banks throughout territory, including rural areas, through the presentation and regulation of the model of banks which provide payment services through agents and not only branches.

The information provided in this newsletter is general in nature and does not constitute legal advice. CR PARTNERS SHPK cannot assume any liability in respect thereof. Before entering in commercial transactions, professional legal advice should be sought.