To comply with the highest European standards and security conditions – Law on Amendments to the Law on Payment Transactions (“Law”) was adopted in the Parliament of Montenegro on 29 September 2022. Free movement of capital and full compliance with the Payment Services Directive 2 (“PSD2”) were main reasons for to adopt the law which will ensure that the offers for payment services in Montenegro are regulated in the same way as in EU member states.
PSD2 is a revised Payment Services Directive whose main aim is to encourage innovation, support increased competition and transparency across the European payments market. The directive does not significantly change the conditions for granting and maintaining authorization as a payment institution.
The biggest impact and main contribution of PSD2 on the banking and payments sector is the recognition of new entities – third-party payment service providers (“TPP”) and enables entirely new types of services. Banks should therefore open their IT system to such new entities by using Application Program Interfaces (“API”) when a customer initiates a transaction through them.
Therefore, the law introduces new payment services: payment initiation service and account information service. In countries that have already implemented PSD2, these payment service providers are mostly IT companies. By introducing such services, the provider is allowed to give the payer assurance that the payment has been initiated in order to get the payee to transfer the goods or deliver the service without unnecessary delays. Payers can also get a complete overview of their financial situation from all owned accounts. With the introduction of new payment services, the market for payment services is opened to new providers of these services – Payment Initiation Service Providers (“PISP”) and Account Information Service Providers (“AISP”).
The adopted law also provides an attractive option for business transactions which is the possibility to reserve cash on the payer’s payment account when the payer has given consent to the exact amount to be reserved.
The Act aims to provide higher security standards to protect the confidentiality and integrity of personalized security data of users of payment services that use strong consumer authentication (“SCA”). The law stipulates that the payment service provider is obliged to use reliable verification of the customer’s authenticity when the payer: (i) accesses his payment account with an online connection; (ii) initiates an electronic payment transaction, or (iii) performs any action at a distance that may pose a risk in the form of payment fraud or other forms of abuse.
Providers of payment services and electronic money institutions that, on the entry into force of the Act, have approval to provide payment services, respectively authorization for the issuance of electronic money issued in accordance with the Act on Payments transactions (“Official Gazette of Montenegro”, No. 62/13) is obliged to harmonize its actions and operations with the provisions of the Act and to inform the central bank, no later than six months from the date on which the Act comes into force. The law enters into force 12 months after it is published in the Official Gazette of Montenegro.
