*** * * * -t.· * * *** COMMISSION OF THE EUROPEAN COMMUNITIES 
Brussels, 09.07.1997 
COM(97) 353 final 
COMMUNICATION FROM THE COMMISSION 
to the European Parliament, the Council, 
the European Monetary Institute and the Economic and Social Committee 
BOOSTING CUSTOMERS' CONFIDENCE IN ELECTRONIC MEANS OF 
PAYMENT IN THE SINGLE MARKET 

INTRODUCTION 
Ten years after the Commission's first Communication1 on payment instruments of 
January 1987, the use of payment cards is well advanced. They account for a sizeable por1ion 
of the market of payment instruments. The use of cashless payment instruments2 has soared. 
For instance, the number of payments by card per inhabitant has increased from 7 in 1990 
(in the 12-EC Member States) to 14 in 1995, while their share as against the total number of 
payment transactions has grown from 9% in 1990 (EC-12) to 13.5% in 1995. 
Since the 1987 Communication, there has been a progressive introduction of new innovative 
payment methods: 
• "hank-account-access" products: instruments that provide for remote access to accounts 
held at financial institutions, typically banks. This category includes home-banking and 
phone-banking applications, as well as payment cards~ 
• "electronic-money" products: instruments on which electronic value is stored, whether as 
magnetic stripe or micro-circuit cards or computer memories (e-money or cyber-money 
products). 
By the end of the next decade, a significant share of retail commerce is expected on the 
Internet. The more that goods and services are offered by electronic means or at a distance, 
the more that competitive pressure will mount on providers to offer means of payment in an 
increasingly easy, safe and efficient way. 
SCOPE AND CONTENT 
The link between electronic commerce and new payment instruments is highlighted in the 
Communication on "A European Initiative in Electronic Commerce"3. Electronic commerce 
will not develop without sound, user-friendly, efficient, and secure electronic payment systems 
to the benefit of commercial service providers. The Communication also recognises that 
transparent and secure electronic payment mechanisms will facilitate the changeover to a 
single currency, in particular throughout the transitional period. 
2 --Europe could play an ace: the new payment cards": Communication to the Council. COM(86) 75..J of 
12 January 1987. 
Payment Systems in EC Member States, Committee of Governors of the Central Ban.ks of the 
Member States of the European Economic Community, September 1992. Blue Book on Payment systems 
in the European Union. European Monetary Institute, April 1996. Addendum to the Blue Book for l.995. 
Communication to the European Parliament the Council, the Economic and Social Committee and the 
Committee of the Regions. COM(97) 157 of 15 April 1997. 
2 
The Communication identifies four main areas where a substantial contribution by public 
authorities is called for as regards electronic payments: 
(i) They must define the supervisory framework appropriate .ftJr the issuance <?f electronic 
money so as to ensure the stability and soundness of issuers; 
Given that electronic money has the potential of being used for a wide range of goods 
and services, the Commission, the EMI and the Member States are currently considering 
the appropriate supervisory framework for the issuance of electronic money, with a view 
to ensuring the stability and soundness of issuers and, thereby ultimately safeguarding 
customers' interests. In the light of this discussion, the Commission intends to present by 
the end of 1997 (i.e. the target date for completion of the work) a proposal for a 
directive setting out requirements to apply to issuers of e-money products. 
(ii) They must provide guidance for isl11ers and users, on transparency, liability and 
redress procedures, in order to ensure the.full confidence qf users; 
To boost confidence in electronic payment instruments, customers need to rely on clear 
information, a fair apportionment_ of responsibilities and access to simple and effective 
means of redress. These aspects are the subject of the present Communication; they are 
dealt with more extensively in the following sections. 
(iii) They must clarify the application of the Community's competition rules so as to achieve 
an appropriate balance between interoperability and sound and vigorous competition 
in these markets; 
As is necessary to establish a true Single Market, electronic payment instruments call for 
"interoperability", i.e. payment instruments issued/accepted by a given institution (or in a 
given Member State) would gain in customer convenience and in market efficiency if 
they were usable as widely as possible. Compatibility between electronic payment 
systems, which is in the interest of both users and business, will mainly rely on 
agreements among operators. , Such agreements must be in conformity with the 
Community's competition rules. To provide guidance to all interested parties (financial 
institutions, retailers and customers), the Commission will in the course of 1998 issue a 
competition notice which will clarify the application of competition rules to electronic 
payment instruments. 
(iv) And they must tackle the risks of.fraudulent use and counterfeiting, by improving 
security. 
Payment instruments must afford the necessary guarantees that they may not be used for 
or in association with illicit activities. As regards security from a technical viewpoint, it 
is important to reach solutions making electronic payment systems as safe as possible~ in 
particular, in developing appropriate encryption processes, electronic signatures and 
similar techniques, a task primarily falling on service providers. However, there is 
another facet to security, i.e. the possibi)ity of increasing it by appropriate legal 
instruments, notably those pertaining to the area of criminal law. Recognising the 
relevance of these concerns, the European Council in Amsterdam adopted an Action 
Plan against Organised Crime, in which it calls on the Council and the Commission to 
3 
examine and address, by the end of I 998, the issue of fraud and counterfeiting relating 
to all payment instruments, including electronic payment instruments. To honour this 
request, the Commission will assess the need for any initiative in this area. 
Finally, as a complement to the areas identified above, the Commission also intends to 
consider the possibility of modernising and up-dating the earlier 1987 Recommendation'\ with 
a view to establishing a clear framework for the relationship between acquirers and acceptors 
in respect of electronic payment instruments. 
The present Communication is therefore the first step in the context of a broader, integrated 
approach, the ultimate objective of which is to develop sound, user-friendly, efficient, and 
secure electronic payment systems to the benefit of all parties concerned. 
PROVIDING GUIDANCE FOR ISSUERS AND USERS 
The success of new payment instruments depends on customer acceptance and confidence. 
While confidence depends, first and foremost, on transparent conditions for the use of such 
instruments, obligations of issuers and users also need to be clearly and fairly apportioned5. 
The Commission Recommendation6 of 1988 laid down minimum standards which should 
govern the relationship between the issuer and the holder of a payment card or other payment 
device. A review of the 1988 Recommendation is now timely for 2 reasons. 
First, concerns have been expressed by interested parties about : 
• the extent of the parties' respective liabilities in the event of loss or theft of the payment 
instrument, and the question of burden of proof in case of disputes; 
• the need for more effective coverage of home (phone and computer) banking applications 
and pre-paid instruments~ and 
• more generally, the availability of comprehensive customer information on all payment 
instruments and on effective redress procedures. 
Secondly, a completely new generation of products (i.e. electronic money products) has been 
developed since the 1988 Recommendation was adopted. Given that electronic money is still 
at a relatively early stage of development, it is important to avoid burdensome administrative 
requirements being imposed lest they stifle its early growth. To this end, coverage under the 
up-dated Recommendation is extended only to instruments of the reloadable type which, 
because of their features namely the possible link to the customer's account, are those for 
which the need for customer protection is strongest. 
4 
5 
6 Commission Recommendation 87 /598/EEC of 8 December 1987 on a European Code of Conduct relating 
to electronic payment (relations between financial institutions. traders and service establishments. and 
consumers). OJ No L 365 of 24 December I 987. page 72. 
Commission Communication "Financial services: enhancing consumer confidence". COM(97) 109 final of 
26 June 1997 on the follow-up to the Green Paper of May 1996 on "Financial services: meetrng 
consumers' expectations··. 
Commission Recommendation 88/590/EEC of l 7 November l 988 concerning payment systems. and ;n 
particular the relationship bi.::&.wecn card-holder and card issuer. OJ No L 3 I 7 of 24 November 19v,:-.;_ 
page 55. 
4 
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The Commission has also decided that e-money products would be subject only to those 
provisions of most direct relevance (notably ex-ante transparency requirements, a limited 
number of requirements on liability, and provisions regarding redress procedures). However, 
issuers of e-money products can voluntarily decide to apply the provisions for remote access 
products, thus achieving an even greater level of customer protection. 
THE WAY FORWARD 
An updated version of the original 1988 Recommendation has been prepared in order to take 
into account the views expressed by the Commission's advisory committees and of the opinion 
of the European Monetary Institute. 
The new Recommendation, which is attached to the present Communication, modifies and 
completes the former Recommendation: 
• it contains comprehensive requirements for transparency, i.e. minimum information that 
needs to be provided to users in advance (contracts) and a-posteriori (statements); 
• it clarifies the parties' respective obligations and liabilities, which are intended to support 
the objective of greater transparency; and 
• it calls for the redress procedures, to address customer complaints related to the 
service/product concerned. 
With a deadline of 31 December 1998, the Commission calls on 
• issuers of electronic payment instruments to act in accordance with the provisions set 
out in the new Recommendation~ and 
• Member States to ensure that there are adequate and effective means for setting disputes 
between a issuer and users, in accordance with the recommendation. 
The Commission will monitor progress between its adoption and the end of 1998. It will also 
undertake a study of its implementation at the end of 1998. If the new Recommendation is not 
implemented satisfactorily, the Commission will propose a Directive in this domain. 
5 
COMMISSION RECOMMENDATION 
concerning transactions by electronic payment instruments 
and in particular the relationship between issuer and holder 
6 ANNEX 
COMMISSION RECOMMENDATION 
concerning transactions by electronic payment instruments 
and in particular the relationship between issuer and holder 
THE COMMISSION OF THE EUROPEAN COMMUNITIES, 
Having regard to the Treaty establishing the European Community, and m particular 
Article 155, second indent, thereof, 
(1) Whereas one of the main objectives of the Community is to ensure the full functioning 
of the internal market of which payment systems are essential parts; whereas 
transactions made by electronic payment instruments account for an increasing 
proportion of the volume and the value of domestic and cross-border payments; 
whereas, given the current context of rapid innovation and technological progress, 
this trend is expected to accelerate notably as a consequence of the wide array 
of innovative businesses, markets and trading communities engendered by 
Electronic Commerce; 
(2) Whereas it is important for individuals and businesses to be able to use electronic 
payment instruments throughout the Community; whereas this Recommendation 
seeks to follow up progress made towards the completion of the internal market, 
notably in the light of the liberalization of capital movements, and will also contribute 
to the implementation of Economic and Monetary Union; 
(3) Whereas this Recommendation covers transactions effected by electronic payment 
instruments; whereas, for the purposes of this Recommendation, these include 
instruments allowing for (remote) access to a customer's account, notably payment 
cards and phone-and home-banking applications; whereas transactions by means of a 
payment card shall cover electronic and non-electronic payment by means of a 
payment card, including processes for which a signature is required and a voucher is 
produced; whereas, for the purposes of this Recommendation, means of payment 
instruments also include reloadable electronic money instruments in the form of 
stored-value cards and electronic tokens stored on network computer memory; 
whereas reloadable electronic money instruments, because of their features, in 
particular the possible link to the holder's account, are those for which the need for 
customer protection is strongest; whereas, as far as electronic money instruments are 
concerned, coverage under this Recommendation is therefore limited to instruments of 
the reloadable type; 
( 4) Whereas this Recommendation is intended to contribute to the advent of the 
Information Society and, in particular, Electronic Commerce by promoting customer 
confidence in and retailer acceptance of these instruments; whereas, to this end, the 
Commission will also consider the possibility of modernizing and up-dating its 
Recommendation 87/598/EEC1, with a view to establishing a clear framework for the 
OJ No L 365, 24.12.1987, p. 72. 
(5) 
(6) 
(7) 
(8) 
(9) 
2 
3 
4 relationship between acquirers and acceptors in respect of electronic payment 
instruments; whereas, in line with those objectives, this Recommendation sets out 
minimum information requirements which should be contained in the terms and 
conditions applied to transactions made by electronic payment instruments. as Wl'II as 
the minimum obligations and liabilities of the parties concerned; whereas such terms 
and conditions should be set out in writing, including where appropriate by electronic 
means, and maintain a fair balance between the interests of the parties concerned; 
whereas, in compliance with Council Directive 93/13/EEC of 5 April 1993 on unfair 
terms in consumer contracts2, such terms and conditions should in particular be in an 
understandable and comprehensible form; 
Whereas, with a view to ensuring transparency, this Recommendatio sets out the 
minimum requirements needed to ensure an adequate level of customer information 
upon conclusion of a contract as well as subsequent to transactions effected by means 
of a payment instrument, including information on charges, exchange rate and inte~est 
rates; whereas, for the purpose of informing the holder of the manner of calculation of 
the interest rate, reference is to be made to Council Directive 87 /l 02/EEC of 
22 December 1986 for the approximation of the laws, regulations and administrative 
provisions of the Member States concerning consumer credit3, as amended by 
Directive 90/88/EEC4; 
Whereas this Recommendation sets out mm1mum requirements concerning the 
obligations and liabilities of the parties concerned; whereas information to a holder 
should include a clear statement of the extent of the customer's obligation as holder of 
an electronic payment instrument enabling him/her to make payments in favour of 
third persons, as well as to perform certain financial transactions for himselttherself; 
Whereas, to improve customers' access to redress, this Recommendation calls on 
Member States to ensure that there are adequate and effective means for the settlement 
of disputes between a holder and an issuer; whereas the Commission published on 
14 February 1996 a plan of action on consumer access to justice and the settlement of 
consumer disputes in the internal market; whereas that plan of action includes specific 
initiatives to promote out-of-court procedures; whereas objective criteria (Annex II) 
are suggested to ensure the reliability of those procedures and provision is made for 
the use of standardized claims forms (Annex III)~ 
Whereas this Recommendation seeks to ensure a high level of consumer protection in 
the field of electronic payment instruments; 
Whereas it is essential that transactions effected by means of electronic payment 
instruments should be the subject of records in order that transactions can be traced 
and errors can be rectified; whereas the burden of proof to show that a transaction was 
accurately recorded and entered into the accounts and was not affected by technical 
breakdown or other deficiency should lie upon the issuer; 
OJ No L 95, 21.4.1993, p. 29. 
OJ No L 42, 12.2.1987, p. 48. 
OJ No L 61, 10.3.1990, p. 14. 
(10) Whereas, without prejudice to any rights of a holder under national law, payment 
instructions given by a holder in respect of transactions effected by means of an 
electronic payment instrument should be irrevocable, except if the amount was not 
determined when the order was given; 
( 11) Whereas rules need to be specified concerning the issuer's liability for non-execution 
or for defective execution of a holder's payment instructions and for transactions 
which have not been authorized by him/her, subject always to the holder's own 
obligations in the case of lost or stolen electronic payment instruments; 
( 12) Whereas the Commission will monitor the implementation of this Recommendation 
and, if it finds the implementation unsatisfactory, it intends to propose the appropriate 
binding legislation covering the issues dealt with in this Recommendation, 
HEREBY RECOMMENDS: 
SECTION I -Scope and definitions 
Article 1 -Scope 
1. This Recommendation applies to the following transactions: 
(a) transfers of funds, other than those ordered and executed by financial 
institutions, effected by means of an electronic payment instrument; 
(b) cash withdrawals by means of an electronic payment instrument and the loading 
( and unloading) of an electronic money instrument, at devices such as cash 
dispensing machines and automated teller machines and at the premises of the 
issuer or an institution who is under contract to accept the payment instrument. 
2. By way of derogation from paragraph 1, Article 4(1), Article 5(b), second and 
third indents, Article 6, Article 7(2)( c ), ( d) and ( e ), first indent, Article 8(1 ), (2) and (3) 
and Article 9(2) do not apply to transactions effected by means of an electronic money 
instrument. However, where the electronic money instrument is used to load ( and 
unload) value through remote access to the holder's account, this Recommendation is 
applicable in its entirety. 
3. This Recommendation does not apply to: 
(a) payments by cheques; 
(b) the guarantee function of certain cards in relation to payments by cheques. 
q 
Article 2 -Definitions 
For the purpose of this Recommendation, the following definitions apply: 
(a) 'Electronic payment instrument' means an instrument enabling its holder to effect 
transact1ons of the kind specified in Article 1 (l ). This covers both remote acces·s 
payment instruments and electronic money instruments; 
(b) 'Remote access payment instrument' means an instrument enabling a holder to access 
funds held on his/her account at an institution, whereby payment is allowed to be 
made to a payee and usually requiring a personal identification code and/or any otht::r 
similar proof of identity. This includes in particular payment cards (whether credit, 
debit deferred debit or charge cards) and phone-and home-banking applications; 
(c) 'Electronic money instrument' means a reloadable payment instrument other than a 
remote access payment instrument, whether a stored-value card or a computer 
memory, on which value units are stored electronically, enabling its holder to effect 
transactions of the kind specified in Article 1 (1 ); 
( d) 'Financial institution' means an institution as defined in Article 4(1) of 
Council Regulation (EC) No 3604/935; 
( e) 'Issuer' means a person who, in the course of his business, makes available to a:.i'lother 
person a payment instrument pursuant to a contract concluded with him/her; 
(f) 'Holder' means a person who, pursuant to a contract concluded between him/her and 
2. 
5 an issuer, holds a payment instrument. · · 
SECTION II -Transparency of conditions for transactions 
Article 3 -Minimum information contained in the terms and conditions 
governing the issuing and use of an electronic payment instrument 
Upon signature of the contract or in any event in good time prior to delivering an 
electronic payment instrument, the issuer communicates to the holder the contractual 
terms and conditions (hereinafter referred to as "the tem1s") governing the issue and 
use of that electronic payment instrument. The terms indicate the law applicable to 
the contract. 
The terms are set out in writing,, including where appropriate by electronic means, in 
easily understandable words and in a readily comprehensible form, and are available 
at least in the official language or languages of the Member State in which the 
electronic payment instrument is offered. 
OJ No L 332, 31.12.1993, p. 4. 
lO 
3. The terms include at least: 
(a) a description of the electronic payment instrument, including where 
appropriate the technical requirements with respect to the holder's 
communication equipment authorized for use, and the way in which it can be 
used5 including the finan~ial limits applied, if any; 
(b) a description of the holder's and issuer's respective obligations and liabilities; 
they include a description of the reasonable steps that the holder must take to ' 
keep safe the electronic payment instrument and the means (such as a personal 
identification number or other code) which enable it to be used; 
( c) where applicable, the normal period vvithin which the holder's accom1t 'Will be 
debited or credited, including the value date, or, where the holder has no 
account with the issuer, the normal period within which he/she will be 
invoiced; 
(d) the nature of any charges payable by the holder. In particular, this includes, 
where applicable, details of the following charges: 
the amount of any initial and annual fees, 
any commission fees and charges payable by the holder to the issuer for 
particular types of transactions, 
any interest rate, including the manner of its calculation, which may 
be applied; 
• ( e) the period of time during which a given transaction can be cont~sted by the 
holder and an indication of the redress and complaints procedures available to 
the holder and the method of gaining access to them. 
4. If the electronic payment instrument is usable for transactions abroad (outside the 
country of issuing/affiliation), the following information is also communicated to 
the holder: 
(a) an indication of the amount of any fees and charges levied for foreign currency 
transactions, including where appropriate the rates, · 
(b) the reference exchange rate used for converting foreign currency transactions, 
including the relevant date for determining such a rate. 
Article 4 -Information subsequent to a transaction 
1. The issuer supplies the holder with information relating to the transactions effected by 
means of a . electronic payment instrument. This information, set out in writing, 
including where appropriate by electronic means, and in a readily comprehensible 
form~ includes at least: 
/( 
(a) a reference enabling the holder to identify the transaction, including, where 
appropriate, the information relating to the acceptor at/with which the 
transaction took place; 
(b) the amount of the transaction debited to the holder in billing currency and, 
where applicable, the amount in foreign currency; 
( c) the amount of any fees and charges applied for particular types of transactions. 
The issuer also provides the holder with the exchange rate used for converting foreign 
currency transactions. 
2. The issuer of an electronic money instrument provides the holder with the possibility 
of verifying the last five transactions executed with the instrument and the outstanding 
value stored thereon. 
SECTION III -Obligations and liabilities of the parties to a contract 
Article 5 -Obligations of the holder 
The holder: 
(a) uses the electronic payment instrument in accordance with the terms governing the 
issuing and use of a payment instrument; in particular, the holder takes all reasonable 
steps to keep safe the electronic payment instrument and the means (such as a personal 
identification number or other code) which enable it to be used; 
(b) notifies the issuer ( or the entity specified by the latter) without delay after becoming 
aware of: 
the loss or theft of the electronic payment instrument or of the means which 
enable it to be used, 
the recording on his/her account of any unauthorized transaction, 
any error or other irregularity in the maintaining of that account by the issuer; 
(c) does not record his personal identification number or other code in any easily 
recognizable form, in particular on the electronic payment instrument or on any item 
which he/she keeps or carries with the electronic payment instrument; 
( d) does not countermand an order which he/she has given by means of his/her electronic 
payment instrument, except if the amount was not determined when the order 
was given. 
/L 
Article 6 -Liabilities of the holder 
I. Up to the time of notification, the holder bears the loss sustained in nmscqtK·ncc tl!" 
the loss or theft of the electronic payment instrument up to a limit, which may not 
exceed ECU 150, except where he/she acted with extreme negligence, in 
contravention of relevant provisions under Article 5(a), (b) or (c), or fraudulently, in 
which case such a limit does not apply. 
2. As soon as the holder has notified the issuer (or the entity specified by the latter) as 
required by Article 5(b ), except where he/she acted fraudulently, he/she is not 
thereafter liable for the loss arising in consequence of the loss or theft of his/her 
electronic payment instrument. 
3. By derogation from paragraphs 1 and 2, the holder is not liable if the payment 
instrument has been used, without physical presentation or electronic identification 
( of the instrument itself). The use of a confidential code or any other similar proof of 
identity is not, by itself, sufficient to entail the holder's liability. 
Article 7 -Obligations of the issuer 
1. The issuer may alter the terms, provided that sufficient notice of the change is given 
individually to the holder to enable him/her to withdraw if he/she so chooses. A period 
of not less than one month is specified after which time the holder is deemed to have 
accepted the terms if he/she has not withdrawn. 
However, any significant change to the actual interest rate is not subject to the 
provisions of the first subparagraph and comes into effect upon the date specified in 
the publication of such a change. In this event, and without prejudice to the right of 
the holder to withdraw from the contract, the issuer informs the holder individually 
thereof as soon as possible. 
2. The issuer: 
(a) does not disclose' the holder's personal identification number or other code, 
except to the holder; 
(b) does not dispatch an unsolicited electronic payment instrument, except where 
it is a replacement for an electronic payment instrument already held by the 
holder; 
( c) keeps for a suffic~ent period of time, internal records to enable the transactions 
referred to in Article 1 (I) to be traced and errors to be rectified; 
( d) ensures that appropriate means are available to enable the holder to make the 
notification required under Article 5(b ). Where notification is made by 
telephone, the issuer ( or the entity specified by the latter) provides the holder 
with the means of proof that he/she has made such a notification; 
/3 
(e) proves, in any dispute with the holder concerning a transaction referred to in 
Article I (I), and without prejudice to any proof to the contrary that may be 
produced by the holder, that the transaction: 
was accurately recorded and entered into accounts, 
was not affected by technical breakdown or other deficiency. 
Article 8 -Liabilities of the issuer 
I. The issuer is liable, subject to Article 5, Article 6 and Article 7(2)(a) and (e): 
(a) for the non-execution or defective execution of the holder's transactions 
referred to in Article I (I), even if a transaction is initiated at devices/terminals 
or through equipment which are not under the issuer's direct or exclusive 
control, provided that the transaction is not initiated at devices/terminals or 
through equipment unauthorized for use by the issuer; 
(b) for transactions not authorized by the holder, as well as for any error or 
irregularity attributable to the issuer in the maintaining of the holder's account. 
2. Without prejudice to paragraph 3, the amount of the liability indicated in paragraph I 
consists of: 
(a) the amount of the unexecuted or defectively executed transaction and, if any, 
interest thereon; 
(b) the sum required to restore the holder to the position he/she was in before the 
unauthorized transaction took place. 
3. Any further financial consequences, and, in particular, those concerning the extent of 
the damage for which compensation is to be paid, are borne by the issuer in 
accordance with the law applicable to the contract concluded between the issuer and 
the holder. 
4. The issuer is liable to the holder of an electronic money instrument for the lost amount 
of value stored on the instrument and for the defective execution of the holder's 
transactions, where the loss or defective execution is attributable to a malfunction of 
the instrument, of the device/terminal or any other equipment authorized for use, 
provided that the malfunction was not caused by the holder knowingly or in breach of 
Article 3(3)(a). 
SECTION IV -Notification, settlement of disputes and final provision 
Article 9 -Notification 
1. The issuer ( or the entity specified by him) provides means whereby a holder may at 
any time of day or night notify the loss or theft of his/her electronic payment 
instrument. 
2. The issuer (or the entity specified by him), upon receipt of notification, is under 
the obligation, even if the holder acted with extreme negligence or fraudulently, to 
take all reasonable action open to him to stop any further use of the electronic 
payment instrument. 
Article 10 -Settlement of disputes 
Member States are invited to ensure that there are adequate and effective means for the 
settlement of disputes between a holder and an issuer. 
Article 11 -Final provision 
Member States are invited to take the measures necessary to ensure that the issuers of 
electronic payment instruments conduct their activities in accordance with Articles 1 to 9 by 
not later than 31 December 1998. 
Done at Brussels, For the Commission 
Mario MONTI 
Member of the Commission 
BUSINESS IMPACT ASSESSMENT 
Commission Recommendation concerning transactions effected by electronic payment 
instruments (in particular the relationship between the issuer and holder) 
l.a. Taking account of the principle of subsidiarity, why is Community action necessary 
and what are its main aims? 
In order to reap the full benefits of the single market and Economic and Monetary Union 
and to encourage the development of Electronic Commerce, it is of paramount 
importance for individuals and businesses to be able to make payments as rapidly, reliably 
and cheaply within the Community. The present Recommendation modernises and 
updates the former Recommendation of 198812. Its purpose is first of all to lay down the 
minimum requirements needed to ensure an adequate level of customer information. 
Firstly, this covers information on the contractual terms and conditions for making 
transactions by means of an electronic payment instrument, which will enable them to 
make a better informed choice and ultimately contribute to increase competition in this 
domain. Information also needs to be given in respect of transactions after they have been 
made. Secondly, to support the objective of transparency, a clear apportionment of the 
parties' respective obligations and liabilities is called for. Therefore, the present 
Recommendation also sets out such minimum standards in this respect, as are deemed 
necessary in view of the above-mentioned fundamental objective. Finally, with a view to 
facilitating customers' access to simplified means of redress, the Recommendation calls on 
Member States to ensure that there are adequate and effective means for the settlement of 
disputes between issuer and customer. 
l.b. Are there likely to be any wider benefits and disadvantages from the 
Recommendation? 
The process of implementing these transparency, responsibility and redress standards is 
expected to require issuers to review·their systems for effecting transactions and therefore 
to bring about greater efficiencies. These factors are likely to contribute to a progressive 
and significant improvement in the quality of services offered as well as a reduction in 
their cost, thus contributing to the development of trade, particularly with respect to 
lower-value and lower-margin intra-EU economic activity. 
The likely increase in the use of electronic means of payment may have an impact on the 
structure and operations of the labour market both within the payment systems industry 
and the segment of SMEs, although further analysis will be needed to fully assess these 
changes. Already at this stage, it would seem apparent that new employment potential will 
principally be in information-based, high-value services. Training and education for these 
new skills will be needed. 
12 Commission Recommendation 88/590/EEC of 17 November 1988 concerning payment systems and in 
particular the relationship between card holder and card issuer, OJ No L :: · r ?4.; · ~ 988. 
15 •, o,s 
2. Who will be affected by the Recommendation? 
Which sector of business? What are the size classes and what is the total 
employment? 
The Recommendation will be applicable to banks and any other institutions which supply 
electronic payment means to the public by way of business. In practice, the majority of 
these will be banks and near-banks, although other service providers including retailers 
may participate. Very few such institutions are in the lower size-classes. · 
Are there any significant features of the business sector, e.g. dominance by a limited 
number of large firms? 
The sector may still gain from further technical interoperability, which will encourage a 
further integration of payment systems at European level. 
Are there implications for very small businesses, the craft sector or the self­
employed? 
Very small businesses are very unlikely to be offering, on a generalised basis, electronic 
payment services to the public. However, as beneficiaries of the-Recommendation, i.e. as 
users of such services, they will benefit from the Recommendation. These remarks apply 
equally to the craft sector and the self-employed. 
Are there particular geographical areas in the Community where these businesses 
are located? 
No. 
3. What will businesses have to do to comply with the Recommendation? 
What will be the compliance costs? 
Compliance costs will mainly relate to the production, or up-grading as appropriate, of 
information material describing the conditions applicable to transactions by means of 
electronic payment instruments ( description of the service offered and of the parties' main 
obligations and liabilities, indication of the cost elements, specific warnings with regard to 
certain means of payment, reference to redress procedures available to users). Issuers will 
also need to review the quality of the systems to ensure that the quality of the services 
they publicise is effectively matched by the actual quality of service. 
The cost of this will probably be partially or even wholly offset by the marketing benefits 
likely to result, as institutions learn to build a competitive advantage on the qualitative 
standards of the services they provide, as a way of attracting new or specialised 
customers. 
Are there other administrative procedures or forms to complete? 
No. 
Are licenses or marketing authorisations required? 
No. 
16 
Will fees be charged? 
No. 
4. What economic effects, costs and benefits is the Recommendation likely to have? 
On employment? 
The Recommendation as such is not likely to have a significant impact on employment. 
The likely increase in the use of electronic means of payment may have an impact on the 
structure and operations of the labour market both within the payment systems industry 
and the segment of SMEs, although further analysis will be needed to fully assess these 
changes. Already at this stage, it would seem apparent that new employment potential will 
principally be in information-based, high-value services. Training and education for these 
new skills will be needed. 
On investment and the creation or start up of new businesses? 
The investment effect will no doubt be positive, as institutions may be expected to take 
the opportunity to upgrade their services. 
On the competitive position of businesses, both in the Community and 
third countries' markets? 
The efficiency gains and reductions in costs for business within the Community will be 
extremely positive. There will be no direct effect on third country business, although 
positive spill-over effects may be anticipated. 
On public authorities for implementation? 
Beyond the purely regulatory/administrative costs of ensuring compliance, implementation 
costs may be negligible depending on the present situation in the Member State 
concerned. 
Are there other indirect effects? 
Not other than already stated in paras. I and 2. 
What are the costs and benefits of the Recommendation? 
• costs: the cost of compliance for issuers is expected to have no exorbitant effect on 
the publicity budget, since compliance will mainly involve the production, or up­
grading as appropriate, of contractual material. As to the necessary review of 
systems, the scope for cost elimination is expected to outweigh the investment costs 
that such a review might determine to be necessary. 
17 
• benefits: Taking account of the most important present and prospective elements 
(gradual completion of the Internal Market programme, move towards full EMU, 
advent of the Information Society and development of Electronic Commerce), gross 
benefits in terms of enhanced customer confidence, wider choice and lower costs for 
electronic transactions are estimated to be significant. 
• balance: overwhelmingly positive on the benefit side. 
5. Impact on SMEs. Does the Recommendation contain measures to take account of 
the specific effect on SMEs -if not, why not? Are reduced or different requirements 
appropriate? 
Yes. In general, the Recommendation has been elaborated with a view to developing the 
use of modem electronic payment instruments, as a further incentive to trade to the direct 
advantage of SMEs. 
Consultation 
6. · Indicate at what stage the consultations were undertaken and the date of 
publication of the prior notification of an intent to introduce (up-date) legislation? 
The Commission has, over many years, promoted the fullest consultation of all interested 
parties and earliest disclosure of its line of policy in this area. This has materialised in the 
following steps: 
Green Paper13 ( consultation paper) of ~eptember 1990, calling for comments from all 
interested parties; annexed to the Green Paper was a decision to set up two 
consultative groups;· 
setting up of two pennanent consultative groups on payment systems in March 1991, 
with intensive frequency of meetings throughout 1991 and early 1992, leading to 
reports to the Commission (in February 1992) published in March 1992; 
Commission working document of March 199214, based on the detailed reports of 
these consultative groups, announcing the Commission's proposed policy, including 
intent to introduce legislation if voluntary compliance was not forth-coming; 
Communication15 to the European Parliament, the Council of the European Union, 
the European Monetary Institute and the Economic and Social Committee of 
November 1994, laying down a further programme of work in the area of payment 
systems; 
13 Discussion paper on "Making payments in the Internal Market", COM(90) 447. 
14 "Transparency and performance of cross-border payments"; SEC(93) 1968 of 14 December 1993. 
15 COM(94) 436 final of 18 November 1994: "EU funds transfers, transparency, performance and stability", 
18 
recogrusmg the relevance of "customer relations" in the widest sense, the 
Green Paper of May 199616, as well as the subsequent communication17 on a follow­
up action plan announcing the Commission's intentions to promote confidence in 
electronic payments~ 
Commission Communication18 to the European Parliament, the Council of the 
European Union, the Economic and Social Committee and the Committee of the 
Regions of April 1997, announcing measures to favour sound, user-friendly, efficient 
and secure electronic payment systems, as a condition for encouraging the 
development of electronic commerce. 
List of organisations which have been consulted about the Recommendation and set 
out in detail their main views, including their concerns and objections to the final 
proposal. Why is it not possible or desirable to accede their concerns? 
European credit sector associations : they generally welcome the work that has 
intervened in clarifying and modernising the 1988 Recommendation (many of their 
detailed technical commentaries have been acceded to and are taken into account in the 
current Recommendation), while lamenting the crowding of initiatives in the run-up to the 
. third stage of EMU. 
Government experts : Preliminary drafts of the Recommendation have been significantly 
amended to take account to the fullest extent possible of the views of the EMI. 
SMEs : strongly in favour of the principles, preferring self-regulation provided that its 
effects could have been measured in the short term. 
Consumer organisations : support to Commission's initiative, although would have 
preferred a binding legislative instrument. 
Were the SME Business Organisations consulted? Ifnot, why not? 
Yes, see immediately above. 
Monitoring and Review 
7. Explain how the effects and compliance costs of the Recommendation will be 
monitored and reviewed. How will complaints be dealt with? 
With a deadline of 31 December 1998, the Commission calls on 
• issuers of electronic payment instruments to act in accordance with the provisions 
set out in the new Recommendation; and 
• Member States to ensure that there are adequate and effective means for setting 
disputes between a issuer and users, in accordance with the recommendation. 
16 COM(96) 209 final of 22 May 1996: "Financial services: meeting consumers' expectations". 
17 COM(97) 309 final of 26 June 1997: .. Financial services: enhancing consumer confidence ... 
18 COM(97) 157 final of 15 April 1997: "A European Initiative in Electronic Commerce". 
19 
The Commission will monitor progress between its adoption and the end of 1998. It will also 
undertake a study of its implementation at the end of 1998. If the new Recommendation is not 
implemented satisfactorily, the Commission will propose a Directive in this domain. 
20 

ISSN 0254-14 7 5 
COM(97) 353 final 
D·OCUMENTS 
EN 06 09 10 
Catalogue number CB-C0-97-358-EN-C 
Office for Official Publications of the European Communities 
L-2985 Luxembourg 
21 ISBN 92-78-22686-6