Presentations of Osborne Clarke's Paul Anning at Mobile Payments Law 2012 (15/16 November)

1. Mobile Payments Law
Lessons from around the World: Why are we behind some other
countries and what can we do to catch up?
November 15 & 16, 2012 - San Francisco, California

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Agenda
• Mobile Payments
• European regulatory regime
• Case Studies referencing Osborne Clarke’s experience in Mobile Payments:
1. Everything Everywhere’s partnering arrangements with Barclaycard (the UK’s first
commercial mobile contactless payment service)
2. Creation of a mobile commerce joint venture by UK mobile operators Everything
Everywhere, Telefonica and Vodafone
3. Creating the UK’s Mobile Payments Service

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Mobile Payments – Models (1)
Broad term covering different models:
•Mobility (GPS; incentives)
•Purchasing service ('add to bill')
•Access/authentication ('remote payments' - mobile banking;
money remittance)
•Mobile phone as a payment instrument ('contactless –
NFC: stickers, secure element provisioned)

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Mobile Payments – Models (2)
Choices for mobile payments providers as regards the
European payment services regulatory regime:
•Stay outside it completely (airtime; mobile wallet)
•Self-issuing ('prepaid')
•Work within exemptions ('limited network'; mobile device)
•Partner with a financial institution

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Mobile Payments – European regulatory regime:
Objectives
Regulated field
of payment
services
Enhanced
competition
Greater
efficiency
Consumer
protection
Digital economy

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Mobile Payments – European regulatory regime:
Objectives - Enhanced competition
• Specific, lighter prudential regimes introduced for:
– Payment Institutions (e.g. money remitters, non-bank acquirers)
– Electronic Money Institutions (for issuers of e-money),
with equal rights of access to payment systems
• Competition (anti-trust) authorities targeting restrictive business rules and
practices and problems of market access:
– MIFs (Multilateral Interchange Fees), HACR (Honour All Cards Rule) and co-
badging
– 'closed shop' (bank dominated) standards setting bodies
– banks as 'gateways' (providing access) to information on payment accounts

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Mobile Payments – European regulatory regime:
Objectives - Greater efficiency
• Shorter execution times - D+1 maximum execution time for electronic
payments within Europe, no deductions, no 'float' (on receiving leg) and
value dating prohibited (since 1 January 2012)
• Electronic invoicing – proposal expected Q2 2013 to make this the standard
invoicing mode for public procurement
• Harmonising technical standards – mandated for euro denominated credit
transfers and direct debits; mobile payments proposal expected Q2 2013

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Mobile Payments – European regulatory regime:
Objectives - Digital economy
• Technological neutrality of all European payment services legislation:
– All payment types
– All payment methods
– Electronic payments only (not cash or cheques)
• Mobile devices specifically contemplated
• Standardisation, leading to greater interoperability

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Mobile Payments – European regulatory regime:
Objectives - Consumer protection
• Disclosure of information enabled informed choice ('durable medium')
• (Re)allocation of rights and liabilities as between provider and user,
including:
– Liability for unauthorised use
– Refund rights
– Breakage (for e-money)
• Security
• Surcharging (and rebating)
• Switching

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Everything Everywhere’s partnering arrangements with
Barclaycard

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EE/BC Partnering arrangements: structure
Merchant acquirer Merchant
Jasper customer
Acquiring Agreement
Sale of goods
and/or services
Credit Card Ts&Cs
Card Scheme
Rules
Scheme
waivers for
Handset and
SIM
NFC
capability
TSM
(Handset) (SIM)
NFC enabled
Handset
Ts&Cs
(including
QuickTap
Ts&Cs)
Payment Account Ts&Cs
Partnering AgreementTSM
EMVCo
MSA
MSA

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EE/BC Partnering arrangements: roles of the key players
 Provision of NFC device,
SIM and network
 Management of MNO TSM
 Single point Customer Care
 Marketing & promotion
 NFC Payment application
 Management of Banking TSM
 End to end solution & testing
 Marketing & promotion
 Scheme certification
 EMVCo certification support
 Technical advice
 NFC SIM card
 NFC application
 Banking TSM for BarclayCard
 NFC Device
 Obtaining EMVCo certificate
 MNO TSM for Orange
Orange Multimedia Services

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EE/BC Partnering arrangements: Key features
• A cast of many
• An ‘open marriage’
• Brand hierarchies
• Customer ownership
• Technology challenges
• Different regulatory regimes and sensitivities:
– FS and Telecoms (eg security; lost and stolen; etc)
– Data protection views
– VAT

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Project Oscar
• JV being created by 3 of the UK's largest MNOs:
– Everything Everywhere, Telefonica UK and Vodafone UK
• M-commerce solution integrating:
– mobile advertising
– data analytics
– mobile payment applications supply ('mobile wallets')
• Single platform and contact for advertisers, marketing partners, retailers and
banks
• In-depth EC competition authority's investigation undertaken during 2012 –
clearance given

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Project Oscar

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UK’s Mobile Payments Service
• Developed by the UK's Payments Council
• A ubiquitous mobile phone initiated P2P money transfer system
• Uses mobile phone number as a proxy (central database)
• Payments routes via existing near real time systems (Faster Payments and
LINK)
• MNO and handset independent
• Simple customer registration
• Allows interoperability and competitive service offerings
• Available before end of 2012

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Mobile Payments - Key issues
• What will drive consumer habits? Will consumer usage lead commercial
adoption?
• How can all the relevant stakeholders in these network industries combine?
Is partnering the only way forward?
• What will make the economics viable? How will the winners monetise the
opportunity? Who will win the ‘wallet war’?
• Is there sufficient standardisation?
• Is NFC sufficiently robust?
• Is data analytics the key service?
• What can the regulators do to encourage competition and innovation?

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Further reading
• Payment Services Directive
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32007L0064:EN:NOT
• Electronic Money Directive
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32000L0046:EN:NOT
• European Commission’s Green Paper: Towards an integrated European
market for card, internet and mobile payments
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:52011DC0941:EN:NOT
• ECB's Recommendations for the Security of Internet Payments
http://www.ecb.int/pub/pdf/other/recommendationsforthesecurityofinternetpaymentsen.pdf
• Single Market Act II
http://ec.europa.eu/internal_market/smact/docs/single-market-act2_en.pdf
• European Payments Council’s White Paper: Mobile Payments
http://www.europeanpaymentscouncil.eu/knowledge_bank_detail.cfm?documents_id=564

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Contact details
Paul Anning is head of European law
firm, Osborne Clarke's Financial
Institutions Group and a specialist
financial services lawyer. Paul has
market leading experience and
expertise in the payments industry
where he has guided clients through
new product development, regulatory
change and transformational projects,
such as the creation of the UK's
Payments Council (which sets the
strategy for UK payments), the merger
creating VocaLink (the UK’s largest
payments processor), the UK's first
NFC enabled stored value mobile
payment solution (QuickTap) and the
acquisition of one of Europe's leading
prepaid card issuers.
Paul is well versed in the complexities
of the payments industry's network
arrangements. He also has a deep
knowledge of legal and regulatory
developments affecting the payments
industry, including key European
developments such as SEPA, PSD and
the 2EMD.
Paul and the Osborne Clarke Payments
team act for a range of clients from
infrastructure providers and traditional
credit institutions and GTS businesses
through to electronic money issuers and
corporates and retailers (including on
corporate card and co-branded
arrangements). Their Payments
practice is recognized externally as top-
tier ranking, with commentary such as -
"Osborne Clarke is one of the leading
practices working in the payments
services sphere" and in July 2012 an
award for "TMT Team of the Year 2012"
at The Lawyer Awards for their work on
Everything Everywhere and
Barclaycard's QuickTap product.
Paul Anning
Partner and head of Financial Institutions Group
T+44 (0) 20 7105 7446
paul.anning@osborneclarke.com
"A fabulous, full-
service firm stuffed
with bright and
efficient people"
Chambers UK
"Osborne Clarke is one of the leading practices
working in the payments services sphere"
Chambers UK