Improving consumer confidence in payment services

The European Commission has published a report on the actions undertaken on prevention of payment fraud between 2004 and 2007 following an Action Plan on this matter.

This report shows that the security of means of payment and payment systems is a necessary condition for improving consumer confidence and trust in new payment services. From a regulatory point of view, the security of means of payment has been addressed in recent legislation, namely in Payment Services Directive, and also the third Money Laundering Directive by means of the "know your customer" obligations. The development of the Single Euro Payments Area (SEPA) by industry will provide an opportunity to build on the legislative framework to increase both security and trust.

Even if it affects a minority of users, fraud undermines general confidence in payments systems. A study conducted for the Commission in 2007 shows that user trust in certain authentication methods for cashless payments could be improved. Maintaining or enhancing user confidence does not necessarily require new legislation but rather the commitment of the parties involved to achieve this goal. Increasing public awareness and education is crucial in this context. This study was part of an Action Plan implemented by the Commission over the 2004-2007 period concerning payment fraud prevention. This action plan included other initiatives, such specialised conferences, with a view to raising awareness about this threat.

Further to the Action Plan measures, recently adopted European legislation in the financial services area contains provisions which directly or indirectly address the prevention of payment fraud and contributes to the creation of a more robust legal environment at EU level in this area:

  • The directive on the prevention of money laundering (2005) requires the implementation of a sound "know your customer" policy by financial institutions, and
  • The new Payment Services Directive (2007) contains specific rules aimed at reducing the risks and consequences of unauthorised payment transactions.