authority that can enhance the efficiency and competitiveness of the system in the sepa process is the adoption of “ open ” fee structures. the aim is to give merchants ample room for choice in negotiating acceptance fees differentiated by instrument ( for example, prepaid card or credit card ) and circuit ( for instance, pagobancomat and maestro ), thereby undoing the widespread practice of blending the rates on transactions with different cards even under competing schemes. this is an approach that has found a counterpart at national level in the action of the bank of italy and the antitrust authority to open up the market to the new “ multi - bank ” technologies that allow transactions carried out at a pos to be transmitted for settlement to a selection of banks rather than to a single reference bank, in order to enable merchants to negotiate fees on a competitive basis. security the other key feature for the adequacy of card circuits within the sepa context is security, i. e. a scheme ’ s capacity to reduce the risks of fraudulent or illicit use of payment instruments. as i noted earlier, the overall incidence of fraud is declining thanks to the changes connected with the migration to sepa. the ratio of fraudulent to total transactions carried out with debit, credit or prepaid cards now stands at 0. 05 per cent in italy, in line with the international standards and down from the peak of 0. 07 per cent in 2006. the improvement is surely due to faster replacement of cards that only have a magnetic stripe with cards equipped with an emv chip, in compliance with the common standard for sepa and for the international card circuits. a factor contributing to this result has been the action of the bank of italy in its oversight function to encourage circuit operators to adopt technologically more secure devices as swiftly as possible, consistent with the expectations of sepa, accompanied by the application of mechanisms aimed at shifting the pecuniary liability for losses caused by fraud to the operators that are non - compliant with the new security standards. among payment cards, prepaid cards have lower rates of fraud ( 0. 02 per cent ), which has evidently favoured their popularity. renewed threats are being posed especially for online transactions : cases of phishing and hacking to acquire sensitive personal data for the illegal use of payment instruments are on the rise. strengthening users ’ confidence requires preventive action, with recourse to new technologies and to incentive mechanisms ( such as “ liability shift ” clauses ) that have produced good results in the

ministers and publication in the gazzetta ufficiale. the first set of rules laid down in the directive concerns the rights and obligations of the parties to payment transactions ( title ii ). by harmonizing the rules, these provisions remove the obstacles to uniform use of sepa schemes everywhere in the european union. these are rules that affect the ways in which payment services are actually provided, the structure of transactions, and the responsibilities of the various parties. they are designed to guarantee the highest possible level of security and protection for users of payment services and to foster efficiency and innovation. the psd will have a powerful impact on payment cards, owing in part to specific provisions of italy ’ s transposition decree, which characterize its content with respect to the general provisions of the directive. some of these national “ qualifications ” are distinguished by the objective of enhancing guarantees for users, in order to strengthen confidence in advanced, non - cash instruments. for instance, the decree recognizes the need to adapt some of the psd ’ s general clauses ( as in the case of compatibility of cost - sharing with interchange fees ) and offers incentives for the use of the most secure, technologically advanced instruments. from this standpoint, one noteworthy feature is the possibility for the merchant to offer discounts to customers who use only the electronic payment instruments covered by the decree. further, in order to promote the use of more efficient and reliable instruments, the bank of italy can authorize merchants to make it more costly for customers to use the less efficient instruments, in derogation to the general “ no surcharge rule ” that the circuits impose on merchants to prevent discrimination against their cards. in any case, the aim of promoting the most advanced forms of payment is not exclusive to the psd but runs throughout recent community regulations. the electronic money directive, whose transposition is scheduled for the end of april 2011, represents in some respects an extension of the psd. it modifies the concept of e - money to embrace all the different possible forms ( card - based and server - based ) and allows future electronic money institutions to do business under a regime analogous to that covering payment institutions under the psd, as regards both the types of activities they can engage in and the possibility of combining payment and commercial services. this could produce a fully competitive market situation, propitious to the rapid technological advance of the competitive frontier, with direct benefits for the quality of services. another feature of the overall reform of european payment regulations