It is mid-2020, which means that the cost of this year’s financial supervision has been announced. Looking at payment institutions, there are some notable changes to report. For instance, the supervisory costs that DNB passes on to payment institutions are increasing significantly. This is partly due to an expensive move and a post-calculation over 2019. The costs of AFM supervision decrease somewhat.
Background
Throughout 2019, there was considerable uncertainty about how to deal with the new payment service providers that have entered the market as a result of PSD2: payment initiation service providers (PISPs, service 7) and account information service providers (AISPs, service 8). Projective Group has now successfully completed six licence applications for these new services and investigated it.
Funding financial supervision
Since 2015, financial institutions have had to bear the costs of financial supervision themselves. Costs are passed on according to ability to pay and are a percentage of commission income. For traditional payment service providers (service 1 to 6), commission income is relatively easy to determine: it includes the transaction fees charged by the payment service provider.
PSD2
For the new entrants, commission income is more difficult to determine. AISPs in particular, including a number of accounting software vendors, use a subscription model of sometimes tens of euros per month. In this subscription model, in particular, people pay for the software. Retrieving account information – previously via bank links, now via PSD2 APIs – is usually not charged separately. Nor do transaction fees apply to AISPs. In 2019, the question for DNB was therefore how commission income for such parties should be interpreted.
Commission income
Briefly explained, commission income includes the fees, whether or not incidentally received or yet to be received from third parties, on account of the payment services in the broadest sense of the word, which are subject to licensing. Explanations from DNB at the time, led to the statement that this would also include subscription income. Potentially, this would represent a huge cost for AISPs.
Fortunately, DNB’s explanation of the Financial Supervision Funding Regulations 2020 leads to a different, more reasonable conclusion. Indeed, DNB reports, there are parties that pay only the basic amount (read: i.e. no variable increase based on commission income). Partly for this reason, the basic amount of EUR 2,000 does increase to EUR 5,000.
Cost of prudential supervision by DNB dependent on fee income
Cost of conduct supervision by AFM dependent on fee income
Calculation example
The calculation example below shows the difference between a traditional payment institution (PSP) with EUR 4,000,000 in commission income (PI) and AISP:
These figures show that the costs for PSPs are rising sharply, while the costs for AISPs are comparatively limited. It will be interesting to see how this ratio and absolute costs will evolve in the coming years.