Tuesday, May 15, 2007

PayPal plays with the big boys

My colleague Technollama and I have long subscribed to the view that PayPal does not really fit the model of an Electronic Money Issuer under Euro law , despite the fact that the UK and other EU countries have agreed to accredit it as such. PayPal itself has now taken the interesting step of declaring that it plans to move to Luxembourg and become a proper bank, for apparently commercial rather than legal reasons. This certainly demonstrates the growing mainstream strength of the mobile payments market. But what does it mean for other emergent digital payment forms? Not all will have the cash reserves of PayPal, necessary to achieve accreditation under existing EU banking capitalisation and risk rules. The EMI Directive probably still needs revisited if innovation is really to get going in this market.

Interestingly, the market now supports credit cards used as a contactless payment card (Visa's new payWave); the mobile phone used as an easy billing mechanism for micro-payments (prevalent in many EU countries, though not yet the UK); niche RFID pre-paid payment cards (eg Oyster Card for London tube) and now a major "bank" which uses agency techniques and existing credit institutions, rather than a stored value card, to provide mobile credit. What has never actually taken off is real omni-purpose stored value debit cards - "digital cash" - as predicted throughout the early 2000s , and which the EMI Directive was specifically tailored to regulate.

I still wonder when (if ever?) we will see the long awaited roll out of OysterCard as a multipurpose small payments contactless stored value card mechanism? And what form of regulation it will then opt for?

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