FAST FIVE: Wirecard Scandal Means Digital Payments Rules Must Be Updated Now
Little wonder technology and payment-processing companies and banks are all vying to grab a share of the large and fast-growing market for digital payments.
It may not matter that a new payments company can get started with initial capital of just €50,000 and some insurance, but it does matter if additional oversight and systemic requirements do not kick in as the business becomes more important. Some jurisdictions are leading the way.
Since the crisis, regulators have started forcing banks and clearinghouses to write living wills to govern how they could be wound down in a crisis.
The EU's second payments directive has created an unlevel playing field where banks are obliged to give customer data to unregulated businesses. Moreover, the liability when things go wrong can often rebound to the banks. Ana Botín, group chief executive of Santander, is right to argue that PSD2 should be amended to treat everyone involved in this activity the same way. Digital payments innovation brings huge benefits to customers and businesses.
As a result, an even larger proportion of payments is likely to take place outside the tightly regulated perimeter of financial services.