Changes to regulatory framework on the pricing model for the Danish Dankort scheme
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Providers of certain Danish payment instruments – currently only the Danish Dankort scheme operated by Nets - have for several years been subject to pricing regulations limiting such providers to only charge payees an annual subscription fee covering the provider's costs of operating the payment system. This regulatory framework is currently being revised with the aim of allowing such operators to charge payees based on other pricing models.
On 22 June, the Danish Financial Supervisory Authority (Danish FSA) published a new bill introducing various amendments and clarifications to the Danish Payments Act, the Danish AML Act and various other Danish Acts (New Bill) for consultation. Particularly relevant for the Dankort scheme is the suggested changes to Article 123 of the Danish Payments Act. Under the current Article 123(4) of the Danish Payments Act, the Danish Minister for Industry, Business and Financial Affairs (Minister) may lay down regulations limiting providers of certain payment instruments to only charge payees an annual subscription fee covering the provider's costs of operating the payment system. Further, Article 123(5) of the Danish Payments Act allows the Minister to lay down detailed rules for the calculation of the annual subscription fee.
In the New Bill, Article 123 of the Danish Payments Act is suggested revised, expanding the scope by allowing operators to use other pricing models than the current annual subscription fee-based model. The revised wording of Article 123(4) of the Danish Payments Act reads: “The Minister for Industry, Business and Financial Affairs may lay down further regulation on the pricing models that providers of certain types of payment instruments may apply towards payees covering the provider's costs for the operation of the payment system”. Likewise the use of the terminology “subscription model” suggested, changed in Articles 123(3) and 123(5) of the Danish Payments Act to allow the use of other pricing models.
The Minister has, under Article 123 of the Danish Payments Act, issued executive order on calculation of annual subscription fee no. 878 of 12 June 2020 (Subscription Scheme Order). The Subscription Order sets out the framework for the calculation of the annual subscription fee. The Subscription Scheme Order only applies to (i) physical payment transactions using a chip-based payment instrument as set out in Article 7(18) of the Danish Payments Act combined with the payer's signature or personal, secret code or other form of identification and (ii) national payment card schemes, the use of which comprises a substantial part of the total number of transactions in Denmark. In other words, the Subscription Scheme Order only applies to Dankort branded transactions and not e.g. to Visa or Mastercard transactions.
Article 3 of the Subscription Scheme Order sets out that payees shall pay an annual subscription fee to cover the costs for the operation of the payment system. The Danish Competition and Consumer Authority (DCCA) is responsible for conducting a cost study every second year on the costs of operating a payments system on which the capped annual total subscription fee shall be based. The annual subscription fee is based on the payee’s annual number of transaction and according to the remarks to the New Bill a pricing model based e.g. on percentage per transaction is not allowed within the scope of the current Danish Payments Act and Subscription Scheme Order.
The rationale behind the suggested amendments is to allow the Dankort to compete with other payment service providers that are not limited by a predefined pricing model. Especially for small merchants, an annulation subscription models may not be attractive, which makes it difficult for the Dankort to compete with other payment solutions offering percentage payments. Likewise, according to statements in the Danish press from the Minister, the revision has been proposed in the light of the Dankort losing market shares to other payment solutions in the most recent years, making flexible pricing necessary for the Dankort to compete in the future.
If the revised Article 123 is adapted, the aim is for the Minister to revise the Subscription Scheme Order allowing providers to charge payees (i) on subscription basis or (ii) by a certain percentage based on the value of the transaction. The suggested amendments to the Danish Payments Act do not change the principle that the fees for the payment system may not exceed the costs of operating the payment system.
The deadline for responding to the consultation is 3 August 2020.
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