Opinion of the European Central Bank of 22 December 2021 on the provision of an electronic payment option to consumers (CON/2021/38)

OPINION OF THE EUROPEAN CENTRAL BANK of 22 December 2021 on the provision of an electronic payment option to consumers (CON/2021/38) Introduction and legal basis

On 22 November 2021 the European Central Bank (ECB) received a request from the Governor of the Nationale Bank van België/Banque Nationale de Belgique, on behalf of the Vice Prime Minister and Minister of Economy and Labour, for an opinion on a preliminary draft program-law introducing, inter alia, the obligation for undertakings to provide an electronic payment option for consumers (hereinafter the ‘draft law’). The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union and the second indent of Article 2(1) of Council Decision 98/415/EC , as the draft law relates to means of payment. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

1. Purpose of the draft law

1.1 The draft law provides that where a payment in euro is made in the simultaneous physical presence of a consumer and an undertaking, the undertaking must also make available to the consumer an electronic means of payment . As stated in the explanatory memorandum accompanying the draft law, the objective of the draft law is twofold. First, the requirement for undertakings to provide to consumers an electronic means of payment is designed to guarantee that the consumer always has the possibility of paying via an electronic means of payment. Second, the requirement falls within the plan to combat tax fraud . 1.2 The draft law defines ‘undertaking’ as any natural or legal person pursuing an economic purpose on a long-term basis, including its associations . This definition is not limited to companies in the strict sense, but captures any legal or natural person that engages in economic activities towards consumers. In that respect, any of the liberal professions and any person and association can be interpreted as an undertaking. Public institutions can also fall under the definition of an undertaking when they engage in activities outside the realm of providing public services . 1.3 The draft law defines ’electronic means of payment’ as any means of payment other than euro

banknotes and coins, supplied by a payment service provider . Luncheon vouchers, eco-vouchers and consumer vouchers, which are subject to a specific legal framework in the area of taxation and labour rights, are excluded from the definition of an electronic means of payment, as are cryptocurrencies . 1.4 According to the explanatory memorandum, undertakings are not authorised to refuse payments in cash, which will always have to be accepted as euro banknotes and coins are the only legal tender in the euro area. 1.5 The legislator understands that the mandatory provision of an electronic means of payment can bring extra costs for undertakings, especially for the smallest ones, as they carry out many low value transactions and less commonly use electronic means of payment. For that reason, the explanatory memorandum states that micro-companies and natural persons that meet the criteria for microcompanies will be entitled to a 120% tax deduction for the costs incurred or borne in order to provide consumers an electronic means of payment . ’Micro-companies’ are defined as small companies with legal personality which are not subsidiaries or parent companies and which do not exceed one of the following criteria on the balance sheet date for the last completed financial year: an annual average number of employees of 10; an annual turnover excluding value added tax of a maximum of EUR 700,000; or a balance sheet total of a maximum of EUR 350,000 .

2. General observations

Role of electronic payments and cash in society, and legal tender status of euro banknotes and coins 2.1 The ECB notes that the introduction of a mandatory requirement for undertakings to provide an electronic means of payment to consumers alongside cash will ensure that consumers have a choice when making payments at the premises of undertakings. Even though, as noted in the explanatory memorandum, Belgians make considerably fewer bank card or mobile payments as compared with consumers in other European countries, the changing reality is that electronic payment instruments are becoming increasingly common and important in everyday life. The ECB holds a positive view of further innovation and development in the field of electronic payment instruments and their continued spread in society . 2.2 Taking a common European approach for payments is important, particularly for Member States that have adopted the euro as their currency. The Single Euro Payments Area makes it possible for residents of euro area Member States to make payments in other euro area Member States as easily as they are accustomed to do in their home Member States. In this respect, electronic means of payment in the form of purely national card schemes or mobile payment solutions that are not available to non-permanent residents would be a step back.

2.3 Cash continues to play a unique and important role in society, as certain groups, such as the elderly, immigrants, the disabled, socially vulnerable citizens and marginalised people, are less familiar with or even unable to use electronic means of payment. For these groups, cash is and continues to be an essential payment method to meet their daily needs. There are other legitimate reasons to pay in cash rather than with an electronic payment instrument. Cash is widely accepted, fast and facilitates control over the payer’s spending. Moreover, it is the only payment instrument that allows citizens to settle a transaction instantly and in central bank money. Lastly, cash has the advantage that it is not affected in the event of a disturbance in the electronic payment system and possesses therefore an important back-up function. 2.4 Belgium is a member of the euro area and as Union law regulates the legal tender status of euro banknotes and coins, the Union framework applicable to the legal tender status of euro banknotes and coins is directly applicable in Belgium. 2.5 Under the Treaty, the European System of Central Banks has the basic task of promoting the smooth operation of payment systems , and the ECB has the exclusive right to authorise the issue of euro banknotes within the Union . The euro banknotes issued by the ECB and the national central banks of the euro area are the only banknotes with legal tender status within the euro area . 2.6 The concept of ‘legal tender’ of a means of payment denominated in a currency unit has been considered by the Court of Justice of the European Union. In particular, the Court has clarified that ‘legal tender’ signifies that this specific means of payment cannot generally be refused in settlement of a debt, denominated in the same currency unit at its full face value, with the effect of discharging the debt. In clarifying the concept of ‘legal tender’ under Union law, the Court has taken into consideration Commission Recommendation 2010/191 of 22 March 2010 on the scope and effects of legal tender of euro banknotes and coins , which provides useful guidance for the interpretation of the relevant provisions of Union law. Point 1 of Recommendation 2010/191 states that, where a payment obligation exists, the legal tender of euro banknotes and coins should imply (a) mandatory acceptance of those banknotes and coins; (b) their acceptance at full face value; and (c) their power to discharge from payment obligations. According to the Court, this shows that the concept of ‘legal tender’ encompasses, inter alia, an obligation in principle to accept banknotes and coins denominated in euro for payment purposes . 2.7 Insofar as it allows Union legislature to lay down the measures necessary for the use of the euro as the single currency, the Court clarified that Article 133 of the Treaty empowers the Union legislature alone to specify the legal rules governing the status of legal tender accorded to banknotes and coins denominated in euro, insofar as that is necessary for the use of the euro as the single currency. Such exclusive competence precludes any competence on the part of the Member States in the matter,

unless they have been empowered by the Union to do so or for the implementation of Union acts . 2.8 However, the Court further clarified that the status of legal tender calls only for acceptance in principle of banknotes and coins denominated in euro as a means of payment, not for absolute acceptance. The Union’s exclusive competence in matters of monetary policy is without prejudice to the competence of the Member States whose currency is the euro to regulate the procedures for settling pecuniary obligations, which do not affect the principle that, as a general rule, it must be possible to discharge a payment obligation in cash . Preferential tax treatment for the costs of implementing the requirement to provide electronic means

of payment

2.9 The ECB acknowledges that the practical implementation of the draft law entails costs in relation to the acceptance of electronic payments and the use of services offered by commercial entities under market conditions. These costs include, but are not limited to, fees in relation to individual payment transactions consisting of a fixed fee and/or ad valorem percentage per transaction, fees for the purchase or rental of payment terminals, as well as periodic fees for payment service providers. These costs may have a more substantial impact on small undertakings. Assuming stable revenues, the increase in costs for payment acceptance would lead to a decrease of profitability. 2.10 However, it is noted that, according to the explanatory memorandum, every micro-company will be able to benefit from a 120% tax deduction in respect of its costs, including those micro-companies that provided an electronic means of payment to consumers before the coming into force of the draft law. 2.11 In this regard, while the draft law ensures that undertakings must not refuse payments in cash, the tax deduction for undertakings with respect to the cost of offering an electronic means of payment to consumers should not be designed in such a way as to give rise to an incentive for these undertakings to persuade consumers to favour electronic means of payment.

This opinion will be published on EUR-Lex.

Done at Frankfurt am Main, 22 December 2021.

[signed]

The President of the ECB

Christine LAGARDE