Two months after the implementation deadline for the EU CBPR2 (Cross-Border Payments or EU2019/518) regulations, Cambrist surveyed card issuers to assess compliance with the regulation. Our findings show that a majority of issuers, both traditional Banks and Fintechs, remain non-compliant with the regulations’ core FX transparency mandate. With the EU Commission due to provide an update on the regulation to the EU Parliament by April 2022, local market regulators are likely to begin their own assessments later this year, which will make CBPR2 compliance increasingly important for compliance and product teams.

CBPR2 Regulatory Requirements

The CBPR2 regulations are designed to improve the transparency of currency conversion costs across the Cards industry. From the 19th of April 2021, Bank & Fintech card issuers must:

Detail the FX mark-ups on relevant transaction currencies on a publicly available website, and
Send an electronic message to their cardholders detailing the full FX mark-ups (card scheme FX rate margins plus any optional issuer mark-ups) on qualifying transactions.

The FX mark-ups must calculate the total cross-border card fees as a percentage (%) comparison to the daily ECB reference exchange rate.

Compliance Survey

In June 2021 (two months after the regulatory deadline), Cambrist surveyed all card issuers within a mid-sized European market (as a sample for the broader EU) and found widespread non-compliance with the CBPR2 regulation across both traditional retail banks and fintech issuers. Our survey also found that several issuers which have launched compliance solutions, are presenting materially incorrect information, negating the intent of the regulation to provide improved transparency on currency conversion costs.

Key findings of our survey are as follows:

c40% of issuers are fully non-compliant. No electronic message is sent for a qualifying transaction and no FX mark-up is displayed in their online banking portals.
c37% of issuers are partially compliant. Online portals accurately present daily FX mark-ups as compared to ECB rates, however the individual transaction notifications are materially inaccurate or simply do not meet the CBPR2 guidelines (such as providing an “estimated” fee instead of a true FX mark-up cost notification).
23% of the card issuers are fully compliant.

These survey results highlight two key challenges for both Bank and Fintech issuers:

Awareness of the regulatory requirements is low amongst Fintech issuers and there is a need for support to ensure rapid compliance with these requirements before regulators impose financial penalties for non-compliance; and
The calculation of an accurate, transaction-specific FX mark-up in real-time is causing challenges for both Bank and Fintech issuers.

The low levels of compliance will be concerning to national regulators and will certainly draw the attention of the EU parliament and commission as a review of the regulation is prepared in advance of April 2022. As travel resumes post-pandemic, continued inaccuracies will further damage the brand of traditional banks with regards to Travel propositions, increasing the opportunity for Fintech and Neobank issuers to differentiate their brands and products.

About Cambrist

Cambrist is a leading supplier of technical solutions for the CBPR2 regulations. Our software is powering the compliance efforts of >100 card programmes, comprising more than 25 pricing strategies, with electronic messages distributed in 8 languages for both Bank and Fintech clients. Contact us if you would like to learn how Cambrist can support you.

Increasing FX Cost Transparency in Card Payments: How effective is CBPR2?