OREANDA-NEWS. February 08, 2016. A new service — payment initiation service, the provision of which has begun in Lithuania, will create an alternative for customers in executing payments for goods acquired in online shops in Lithuania. To encourage possible providers of this service to comply with high business and security standards, the Bank of Lithuania will prepare the Principles of the Best Practice for the Payment Initiation Service that the providers of this service would undertake to follow on a volunteer basis. The Bank of Lithuania will publish a list of such businesses.

‘With the new service in place, any electronic shop, instead of concluding several contracts with different banks, will be able to conclude one contract with a payment initiation service provider. The emergence of such providers will increase competition among banks, which will reduce the fees for e-shops and, likely, their customers,’ said Marius Jurgilas, Member of the Board of the Bank of Lithuania.

The payment initiation service mostly works on the following principle: a buyer is routed from the e-shop to a payment initiation service provider and not to a bank, as it is now.  

The buyer discloses to the service provider his one-off online banking login codes: one pair of passwords is designated to login to online banking, another one to confirm a payment transaction originated. With the help of these codes, the payment initiation service provider, by creating a software bridge, logs in to the buyer’s payment account and originates a transaction designated to settle with the e-shop. The e-shop is notified of successful settlement, while the buyer is routed back to the e-shop to finish the purchase.

The principles of such an intermediation service are defined in the EU Directive on Payment Services in the Internal Market. The requirements laid down in the Directive will come into force from 13 January 2018, while during the transition period, in Lithuania the service will be subject to general civil law provisions.

The Principles of the Best Practice for the Payment Initiation Service will establish that institutions, the equity capital of which is not less than EUR 50,000, will be able to provide this service. Moreover, payment initiation service providers will have to provide to customers information on the price and other features of the service, ensuring of data protection, etc.

The Bank of Lithuania will publish on its website the list of payment initiation service providers committed to follow the principles of the best practice on a unilateral and voluntary basis.

‘It is important that, before EU legal provisions are transposed into national law, market participants themselves set high standards for the provision of this service and the provisions of future regulation could be the starting point. The principles of the best practice are a step in this direction and we invite all market participants to follow them. Market participants, where appropriate, may set even higher operational standards,’ noted M. Jurgilas.

The Bank of Lithuania also warns users of payment services to stay alert and to not disclose login credentials to intermediaries without making sure in advance that this is safe. An attempt to find out login credentials not at a payment service user’s initiative or when this is not related to online shopping is a feature of fraud, and should be reported to the police.