Everyone has been talking about “Lex Apple Pay” ever since the Finance Committee provided its recommendation to include a new Section 58a in the German Payment Services Supervision Act (Zahlungsdiensteaufsichtsgesetz – ZAG) which grants a right of access to technical infrastructure services, just one day before the vote on the amendment of the German Anti-Money Laundering Act (GwG). Apple is said to have been very critical and tried to prevent it whereas others viewed it as a great moment for Parliament. A great moment for Parliament would mean that a good law has been passed. So let’s take a closer look at whether the law is indeed good or not.
Who or what is a system operator offering technical infrastructure services?
In the newly included Section 58a ZAG, companies providing technical infrastructure services regarding the provision of payment services or the operation of e-money business are defined as system operators. But what exactly are technical infrastructure services?
According to Parliament’s explanatory memorandum, technical infrastructure services refer to Internet-based services on (mobile) devices that can be used for the provision of payment services as well as the operation of e-money business. Operating systems and NFC interfaces are explicitly mentioned. On the face of it, this very much sounds as if only mobile phone providers were affected. However, the list is not intended to be exhaustive and the law itself only refers to technical infrastructure services without restricting them any further.
For BaFin, the term “technical infrastructure services” refers to technical service providers within the meaning of Section 2 para. 1 no. 9 ZAG. This includes the processing and storage of data, trust and privacy services for the protection of privacy, message and entity authentication, the provision of information technology (IT) and communication networks as well as the provision and maintenance of devices and facilities used for payment services.
So, let’s assume that the system operators referred to in Section 58a ZAG, which offer technical infrastructure services, are to be treated the same way as technical service providers which benefit from the exemption contained in Section 2 para. 1 No. 9 ZAG, this would then include, for example, technical network operators, terminal manufacturers as well as data centres and telecommunications providers. And probably also all those service providers who in turn offer IT services in connection with payment services.
However, it should also be noted that the law itself makes it clear that a person can only be either a technical service provider or a payment initiation service or account information service. According to Parliament’s explanatory memorandum, this differentiation does not apply to providers of technical infrastructure services within the meaning of Section 58a ZAG, as they may also be payment service providers (explanatory memorandum p. 54).
It therefore appears that the definition of a system operator is not entirely identical to that of a technical service provider, whereas both provide technical services for the provision of payment services.
In light of this, it is therefore both interesting and problematic at the same time that a payment service provider who does not just use its technical infrastructure itself but also makes it available to others, is then obliged to offer it to anyone upon request, provided security and integrity are ensured.
System operators ≠ payment system
System operators must also be distinguished from payment systems as Section 57 ZAG already contains rules regarding access to the technical infrastructure of payment systems.
In accordance with the definition contained in Section 1 para. 11 ZAG, a payment system is a system for the transfer of funds on the basis of formal and standardised rules and uniform regulations for the processing, clearing or settlement of payment transactions. These include, for example, TARGET2, Eurosystem’s clearing system. It can also be argued that credit card organisations (VISA/MasterCard) are also covered by this.
A provider of technical infrastructure services cannot therefore be a payment system, as otherwise there would be no room for the new Section 58a ZAG.
No interfaces for KID and ZAG
According to Parliament’s explanatory memorandum, interfaces for access to payment accounts do not constitute technical infrastructure services either. This actually already becomes clear when taking a systematic approach to the law as access to payment accounts is already governed by Section 56 ZAG.
A term tailored to the area of payment transactions
Parliament’s explanatory memorandum specifically states that the term is tailored to the area of payment transactions. This conversely means that technical infrastructure services which only target banking transactions (e.g. credit business, guarantee business, financial commission business) are not included. This is somewhat of a surprise because the amendment is justified by reference to financial innovation. This type of innovation can not only be found in payment transactions but particularly also in the banking sector. One obvious example would be the issue of block-chain-based securities.
Technical infrastructure services have something to do with (mobile) devices, but are also connected to other things, presumably to all the technical services already mentioned in Section 2 para. 1 No. 9 ZAG. They do not constitute interfaces for payment accounts and they are not considered the infrastructure of a payment system, but they can also be a payment service themselves.
Does that make it clear?
Who could this be? – Thinking outside the Apple Box.
In addition to the aforementioned technical services, such as terminal operators and technical network operators, the term “system operators” could also include all car manufacturers that offer the possibility to make in-car payments via the cockpit. In this case, the car or its operating system would be considered a technical infrastructure service required for the provision of a payment service. This would mean that car manufacturers would have to open their interfaces of their operating systems so that payment service providers could use them to provide their services in the car. The mobile device in this case would be the car.
It is also conceivable that banks’ head offices (e.g. the Bank-Verlag) could fall within the scope, since the IT services offered by them are also required for the provision of payment services and would therefore be within the scope of technical infrastructure services.
Additionally, any payment institution or bank that enters into a payment co-operation, as part of which it makes its technical infrastructure (e.g. a card platform) available to other payment service providers, will in future no longer be able to freely select its contractual partners.
A payment card with a chip that includes an operating system could also be regarded as a technical infrastructure service. This is due to the fact that it cannot make a difference whether the device is a mobile phone or a card. Would this mean, for example, that the girocard interfaces need to be opened? Or could banks and savings banks rely on the argument that this concerns the infrastructure of a payment system, meaning Section 58a ZAG rather than Section 57 ZAG is applicable?
And what about platforms such as Amazon? Does not every platform constitute a technical infrastructure service? This is at least a possible argument as they offer infrastructure to other payment service providers with which they can provide their payment services. Does this then mean that Amazon has to open this platform to payment service providers other than Amazon Pay so that they can offer their payment methods on there?
Is an app also considered a technical infrastructure service? If a mobile banking app is only used for payment processing, one could at least argue that this does not constitute a technical infrastructure service. However, if the app also offers other functions, e.g. related to invoicing or age verification, it could then be argued that the app constitutes a technical infrastructure service. Does this mean that WeChat could demand that savings banks open their interfaces to the savings banks app for it?
This wasn’t the intention. Was it?
This may well be the case, since Parliament’s explanatory memorandum makes it clear that the focus was really on large digital companies (i.e. Apple, Facebook, Google). However, this is not specified in Section 58a ZAG and its wording is so open to interpretation that the result is that many companies could be considered to be system operators.
It will therefore be very interesting to see how Section 58a ZAG will be interpreted in future, what will qualify as a technical infrastructure service and how the scope of application will then specifically be distinguished from Section 57 ZAG. Then it will also become clear as to whether or not this really was a great moment for Parliament. The law that was passed will either turn out to have been well drafted or it may be seen as a mistake, because a legislative mishap was approved without too much thought being given to it.
Additionally, it should be noted that the European legislator has already regulated access to the infrastructure of payment systems and payment accounts which therefore begs the question whether the German legislator does not exceed its remit with regard to a fully-harmonised directive by providing further rules on rights of access.
In any case, Section 58a ZAG will have an impact on the German market, since anyone offering technical services will carefully consider whether they would also like to do so in Germany, where they are legally required to conclude a contract with anyone who requests it. And many German companies will have to ask themselves whether or not they fall under its scope and if they now have to open their technology to the world.
Cover picture: Copyright © Adobe Stock /antpkr