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New quality of payment services: The Verkhovna Rada adopted a modern law on payment services

New quality of payment services: The Verkhovna Rada adopted a modern law on payment services

The National Bank of Ukraine (NBU) welcomes the Ukrainian parliament’s decision to adopt in the second reading and as whole the Law of Ukraine On Payment Services (Draft Law No. 4364). Owing to 241 members of parliament voting in favor, Ukrainians will enjoy new quality of payment services.

The law aims to modernize and further develop the Ukrainian payment services market.

The provisions of the law promote innovation in the financial sector, establish rules for payment services provision in Ukraine and requirements for providers of these services, enhance security and effectiveness of providing these services, increase the number of payment services providers and streamline their operations, and change outdated approaches to legal regulation of the payment market.

Revising the payment services laws will adapt the Ukrainian legal framework to EU laws and create legal foundation for integrating the Ukrainian payment market with the European one. The new law is based on the effective requirements considering the EU regulations, including the Revised Payment Services Directive (PSD2) and the E-Money Directive (EMD). 

“The new law on payment services paves the way for further development of payment products, services and innovation. The opportunity for new participants to enter the market will promote healthy competition.  Customers will be able to receive new convenient services of better quality and at a lower price.  The open banking framework will be launched merging different payment services providers and technology platforms into one payment ecosystem. It will create a powerful incentive to modernize the existing payment solutions and boost further Fintech development,” said Oleksii Shaban, NBU Deputy Governor. 

The payment market is facing comprehensive transformation and changes, the key of them being the following: 

  • Nine types of payment services providers will be defined in the payment services market, including postal operators and, under certain conditions, even state authorities. New participants will emerge: electronic money institutions, branches of foreign payment institutions, account information service providers, payment institutions similar to nonbank financial institutions but with expanded list of payment services. 
  • Nine payment services will be introduced, whereof seven are financial payment services, and two – nonfinancial (payment initiation service and account information service). New market participants will be able to choose one payment service and focus on developing convenient instruments for this particular service.
  • Nonbank payment services providers (payment institutions, e-money institutions, postal operators and some other payment services providers) will be able to open payment accounts, issue payment cards and e-money (currently only banks can provide these services).
  • The new law is transforming the market and the nonbank financial institutions will not be required to participate in payment systems to transfer funds.   From now on, these institutions will be able to work independently in the payment market, which will simplify their operation.
  • The NBU will retain the right to establish interbank settlements and other types of payment systems for the execution of payment transactions. 
  • In addition, the central bank gained the right to issue “the digital currency of the National Bank of Ukraine”, as well as create a regulatory sandbox, a platform for testing innovative services, technologies and instruments, requiring the regulator to closely cooperate with startups and comprehend their needs.
  • Creating conditions for the implementation of the Open Banking in Ukraine. Payment services providers (in particular, banks) will be required to open up their APIs for other payment services providers and grant access to interfaces of banking services, share data with every market participant who provides payment services and has permission from the regulator. The NBU has started collaborating with Ukrainian payment market participants to define the uniform standards for open APIs – convenient, clear, and acceptable for everyone. The NBU expects the Open Banking to be launched in Ukraine in 2023.
  • Terms and conditions for providing payment services will become more transparent and customers will receive more information on them. Special attention will be paid to protecting payment services users from cyber threats. To minimize the cyber fraud, liability will be tightened for unlawful actions with payment instruments and access to bank and/or payment accounts, as well as requirements for security of payment transactions. Payment services providers will be required to use advanced authentication in defined cases.
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