The Bank of Lithuania has prepared the principles of good practice for a new service in Lithuania — the payment initiation service — and invites potential providers of this service to voluntarily undertake to comply with high business and security standards.
The list of enterprises committed to these standards will be made publicly available on the Bank of Lithuania website.
‘It is important that payment initiation service providers would not only offer an alternative for bank services when executing payments in online shops but also willingly undertake to follow high security and customer data protection standards. The principles of good practice are an important step in this direction,’ said Marius Jurgilas, Member of the Board of the Bank of Lithuania.
The operation of the payment initiation service is often based on the following principle: instead of being directed from an online shop to a bank, as is usually the case now, a buyer will be directed to a payment initiation service provider. Hence, any online shop will be able to conclude only one contract with a payment initiation service provider instead of concluding several contracts with different banks.
According to M. Jurgilas, the emergence of the providers of the new service will increase competition, which in turn will reduce the fees for online shops and, most likely, their customers.
The principles of good practice for the payment initiation service establish that institutions, which have the right to provide payment services and the equity capital of which is no less than EUR 50,000, will be able to provide this service.
Having undertaken to follow the principles of good practice for the payment initiation service, providers of this service will have to present to customers information on the price and other features of the service, the ensuring of data security and other necessary information.
The principles of this intermediation service are defined in the EU Directive on Payment Services in the Internal Market, the requirements of which should come into force in January 2018. After the transposition of EU legislative provisions into national law, the providers of this service will be supervised by the Bank of Lithuania. During the transitional period, general civil law provisions will apply to the service in Lithuania.
The buyer will have to indicate to the service provider his one-off online banking credentials: one pair of passwords will be designated to login to online banking, while the other — to confirm a payment transaction generated. Using these credentials, the payment initiation service provider will log into the buyer’s payment account by creating a software bridge and originate a transaction designated to settle with the online shop. The online shop will be notified of the successful settlement, and the buyer will be directed back to the online shop to complete the purchase.
The Bank of Lithuania encourages payment service users to stay alert and not disclose credentials to intermediaries before making sure that this is safe. An attempt to get the credentials without a payment service user’s initiative or when this is not related to online shopping is a feature of fraud, which should be reported to the police.