Cross-border payments in the EU and currency conversion charges: the revised Cross-Border Regulation

Just under two decades ago, the European Parliament issued a Regulation on cross-border payments geared towards facilitating cross-border trade within the Union by ensuring that cross-border payment charges across Member States are the same regardless of participation in the euro area, though unfortunately, this Regulation excluded non-euro area Member States [1]. For the non-euro Member States, domestic payments in euro are very costly allowing for payment service providers (PSPs) to price a transaction differently where a currency conversion is involved. This undoubtedly creates obstacles to the full integration of businesses and citizens in non-euro area Member States affecting their competitiveness which is at the heart of the European Single Market.

The CBPR2 seeks to address this situation as it introduces the full transparency of currency conversion charges and sets standard requirements for payments at the point of sale (POS) or at ATM machines, as well as credit transfers. This, guides consumers to compare the cost of different conversion options and make an equitable and informed choice[2]. One of the most important changes brought about by the CBPR2 is that charges levied by PSP’s for cross-border payments denominated in euros will have to be the same as those for “national payments of the same value in the national currency of the Member State” in which the PSP is located (which may either be euros or another currency). For example, a consumer from Poland buying cheese from a merchant in France would be offered the ability to pay in Złoty rather than in euro (Złoty being the currency in which the consumer’s card account is based) and the charges for the euro payment must be levied by the PSP for “corresponding national payments of the same value in the national currency of the Member State in which the payment service provider of the payment service user is located”. This extends the concept of having equal charges to the non-eurozone[3].

Furthermore, the European Commission conceded to the rather disturbing fact that payment service users very often paid highly significant charges for currency conversion charges without being aware of the said charges or the cost of such conversion. As may be assumed the CBRP2 has given rise to lengthy debates with one of the propositions being that of imposing a requirement on PSP’s to display their competing currency conversion rate in real time on the POS/ATM screen, though this idea was not embraced.

The CBPR2 as it stands today requires that, prior to the initiation of any card-based transaction that involves a currency conversion at either an ATM or POS[4], the PSP’s must disclose the following information to the payment service user/payee[5]:

(a) the total currency conversion, including:

  • the charges for the currency conversion service as well as the exchange rate used (this information is to be provided pursuant to Article 59(2) of PSD2),
  • the percentage mark-up over the most recent euro foreign exchange rate issued by the ECB (new obligations under CBPR2),
  • the amount to be paid in (i) the currency used by the payee and (ii) in the currency of the payer’s PSP’s account (new obligation under CBPR2),
  • the possibility of paying in the currency used by the payee and having the currency conversion subsequently performed by the payers’ PSP, and
  • the payee’s right to refuse the currency conversion service and pay in the currency used by the payee instead (new obligations under CBPR2).

Card issuers will have to disclose the cost of their currency conversion service that the payee would incur should it opt for currency conversion post payment. The information is to be transmitted via the card issuers’ Terms & Conditions, as well as through electronic messages immediately after a bank received a payment order denominated in another EU currency. This electronic message should be sent once a month in the case of recurrent payments in said EU currency[6].

Also by virtue of the CBPR2, prior to the initiation of a credit transfer initiated online directly (via a website or mobile app), PSP’s must provide the payment service user with (i) the estimated charges for the currency conversion and (ii) the estimated total of the credit transfer in the currency of the payer’s account, (including transaction fees and any currency conversion charges) and the estimated amount to be transferred to the payment service user in the currency used by the said user.

The CBPR2 provisions on currency conversion became applicable on the 19 April 2020, though the European Commission has issued a statement noting that although PSP’s and parties providing currency conversion at a POS or ATM “had sufficient time to adjust their IT infrastructures and customer-facing interfaces to comply with the CBPR2” (the industry would be required to make changes to both their contractual terms as well as IT systems in order to ensure compliance within the required deadlines), the European Commission favoured flexible enforcement by National Competent Authorities in order to preserve “the stability and continuity of online banking interfaces under the present circumstances” in view of the extraordinary circumstances relating to COVID-19.

CBPR2 will lead to important discussions on its interpretation (for example the regulation lacks crucial definitions of the terms ‘point of sale’, ‘card-based transactions’ etc) and application which may possibly lead to different supervisory practices. Post-COVID, the industry, and industry players hope for official confirmation of the definitions used in the CBPR2 as with certainty, the legislative application becomes uniform and challenging.


[1] Bulgaria, Croatia, Czech Republic, Denmark, Hungary, Poland, Romania, and Sweden.

[2] According to Recital 10 of the Regulation, this is achieved by providing currency conversion charges information in PSP terms and conditions of their framework contract, make the information public on broadly available and easily accessible platforms, in customer websites, and mobile apps in an easily understandable and accessible manner.

[3] The following conditions must also be met: (a) the payment transaction (as defined substantially in PSD2) must be in euro (b) the payment transaction must be cross-border within the EU and (c) the transaction must be electronically processed.

[4] And parties providing currency conversion services at an ATM or at the POS.

[5] The information has to be disclosed on a durable medium following the initiation of the payment transaction.

[6] The requirements for card-issues will apply from 19 April 2021.