Cross-border payment regulation (CBPR)
To comply with EU Cross Border Payment regulation (EU 2021/1230) and to enable improved end user experience, Enfuce provides a solution to disclose to the end user the exchange rates used for card payments. By disclosing the exchange rates and providing an independent benchmark, end users are offered transparency by easily and conveniently being able to access and compare the exchange rates that are applied to payments done with the card.
The legislation in short from an issuer's viewpoint
Central parts of the legislation from issuer viewpoint
Cross Border Payments Regulation (CBPR) / (Article 4) Currency conversion charges related to card-based transactions
§1 “payment service providers… shall express the total currency conversion charges as a percentage mark-up over the latest available euro foreign exchange reference rates issued by the European Central Bank (ECB). That mark-up shall be disclosed to the payer prior to the initiation of the payment transaction..
§2 Payment service providers shall also make the mark-ups referred to in paragraph 1 public in a comprehensible and easily accessible manner on a broadly available and easily accessible electronic platform.
§5 The payer’s payment service provider shall, for each payment card that was issued to the payer by the payer’s payment service provider and that is linked to the same account, send to the payer an electronic message with the information referred to in paragraph 1, without undue delay after the payer’s payment service provider receives a payment order for a cash withdrawal at an ATM or a payment at the point of sale that is denominated in any Union currency that is different from the currency of the payer’s account.
Notwithstanding the first subparagraph, such a message shall be sent once every month in which the payer’s payment service provider receives from the payer a payment order denominated in the same currency.
§6 The payment service provider shall agree with the payment service user on the broadly available and easily accessible electronic communication channel or channels through which the payment service provider will send the message referred to in paragraph 5.
The payment service provider shall offer payment service users the possibility of opting out of receiving the electronic messages referred to in paragraph 5.
The payment service provider and the payment service user may agree that paragraph 5 and this paragraph do not apply in whole or in part where the payment service user is not a consumer.
§7 The information referred to in this Article shall be provided free of charge and in a neutral and comprehensible manner.
Enfuce's solution and issuer responsibility
Enfuce provides a solution that will enable the disclosure of card exchange rate prior to the payment transaction, as well as the electronic message after the transactions. The issuers responsibility is:
- to make the exchange rate mark-ups (pre- and post transaction) easily accessible for the end user
- to provide means how the end user can opt out from receiving the post-transaction electronic messages
- to provide monthly messages
- to agree with corporate customers if this is not applied
The Enfuce solution is split into two APIs,
- Pre-transaction disclosure: API that allows the user to check the card exchange rate prior to a purchase being done
- Post-transaction disclosure: API that will inform the user about the card exchange rate applied to the purchase immediately after a purchase
Pre-transaction disclosure: Exchange rate API
With the Enfuce Exchange rate API, the issuer gets the current card exchange rate of the payment scheme and the equivalent exchange rate offered by European Central Bank (ECB) for comparison. Additionally the API offers the possibility to conveniently convert a specific amount.
For the payment scheme both options, rate (fxRateVisa/fxRateWithAdditionalFee) and amount (toAmountWithVisaRate/toAmountWithAdditionalFee), are available with and without the mark-up defined by the issuer. If the issuer has a 0% mark-up then the amounts and rates are the same.
For the benchmark, in this case the ECB, the API returns the rate (benchmarkFxRate) and the amount(toAmountWithBenchmarkRate). It should be noted that the ECB only provides benchmark rates for 32 currencies (Euro foreign exchange reference rates) which exceeds the regulation requirements but limits a global solution.
With this information, the issuer can access the relevant rates, as well as easily derive the difference in percentage between these as required by the regulation. The issuer is responsible for having this information easily accessible in an easily understandable manner for the end user. In practice this means that the end user should be able to access this information at any time to independently and transparently be able to compare the exchange rate on the card and ECB.
Post-transaction disclosure: Notification API
With the data in Enfuce Notification API, the issuer gets the current card exchange rate of the payment scheme in addition the potential mark-up added by Enfuce and the equivalent exchange rate offered by the European Central Bank (ECB) for comparison.
Enfuce will introduce a new field “ecbRate” to the Notification message for authorisations to support issuers to comply with the regulation. The updated API documentation is below. This field is available for all Enfuce customers that receive notification messages for authorisations.
In the TRANSACTION message of the Enfuce Notification API, dividing the settlementAmount + feeAmount with the transactionAmount and comparing the result with the ecbRate , will allow you to determine the difference in exchange rates.
Use case: Cross-border payment
| Use case step | Message | Explanation |
|---|---|---|
| Customer makes a purchase for 10.50 USD and decides to pay in local currency. | Issuer receives transaction message from Enfuce API:
“settlementAmount”: { “transactionAmount”: { |
Purchase is 10.50 USD (“transactionAmount”)The amount charged from the customer is 8.76 EUR (“settlementAmount”) + 0.18 EUR (“feeAmount”) = 8.94 EUR. This results in a card exchange rate (EUR/USD) of 0,85142. |
| Real-time notification sent to (your) Customer by the issuer | $10.50 (€8.94) spent at Restaurant Restaurant, City, Country Markup over ECB: 2.74% Exchange rate $1 = €0.85 |
The difference between the card exchange rate and benchmark rate is: 0,85142/0,82873 = 1,0273792 → 2,74% difference. The issuer will need to send a push notification/alert to the cardholder with the % mark-up over ECB. Alternatively, this can be included in any existing push notifications about the transaction. |
For the issuers that are in scope of the regulation (EU 2021/1230) , it is also mandatory to enable the end user to opt out from exchange rate notifications. The responsibility to implement this is on the issuer/app provider, and they should be able to limit if such notifications are sent to the end user or not. Enfuce will include the “ecbRate” in every message.
Minimum requirement for post-transaction disclosure
The regulation stipulates a minimum level of notifications that need to be sent to the end-user. According to guidelines issued by European Banking Federation “Whilst the electronic message needs only to be sent after the first ‘in-scope’ payment order made using the card (and not for every subsequent ‘in-scope’ payment order), it must also be sent once every month in which the issuing bank receives from the payer a payment order denominated in the same currency.” This means that at minimum, the end user needs to receive:
- One message per month for each currency pair (please see EBF guidance for more details)
- Example:
- Card in EUR
- Month: January
- 1st – 5th of January: 10 transactions in SEK → one notification after the first authorisation has to be sent informing the mark-up for the SEK<>EUR exchange rate
- 8th-9th of January: 5 transactions in USD → not in scope of regulation, no notifications needed
- 31st of January: 1 transactions in PLN → one notification after the authorisation has to be sent informing the mark-up for the PLN<>EUR exchange rate
- Card in EUR
- Example:
If the issuer sends notifications for each authorisation and includes the exchange rate mark-up in each of them, no separate messages informing solely about the exchange rate mark-up are needed to meet the regulation.