EU ponders use of e-money on mobile phones


11 May 2004

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The European Commission has called for greater clarity on the future use of electronic money on mobile phones inside the EU and how mobile operators and banks will be able to comply with the E-Money Directive in terms of issuing electronic money and safeguarding consumers’ security and other risks. The Commission has also recommended that prepaid phone cards should fall under the same rules as electronic money.

Mobile phones are increasingly being used by consumers across Europe for downloading games and ringtones and the currency used to pay for these services are either the value of prepaid call credits or subsequent debits to the user’s bill.

Electronic money is defined in the E-Money Directive, published in 2000, as monetary value stored on a chip card (pre-paid card or ‘electronic purse’) or on a computer memory (network or software money) and which is accepted as a means of payment. Under the Directive, electronic money must be redeemable for cash at equal value and issuers of electronic money are required to implement safeguards against money laundering.

In implementing the Directive at national level, the authorities in some EU member states decided that in certain circumstances, by supplying pre-paid phone cards, mobile operators in practice issue electronic money and that therefore they should comply with existing EU rules concerning its issuance.

Because differing interpretations of EU rules would complicate the running of a free market, the Commission in 2003 carried out a preliminary analysis in order to move towards a common interpretation of the directive.

According to that analysis, when prepaid phone cards are used to obtain phone airtime provided by the company that supplied the card, they are not covered by the directive.

However, they are covered by the directive when the electronic value stored on them is used to purchase products and services other than traditional communications, offered by third parties (‘merchants’) rather than directly by the phone companies. These products and services include: voice mail messaging, ring tones, news, weather forecasts, videos, games, CDs, books, drinks, ticketing services etc.

EU internal market commissioner Frits Bolkestein said: “Mobile phones are now used to purchase a whole range of products and services going well beyond simple telephone calls. We have to make sure that EU rules are clear, proportionate and are applied consistently throughout the 25 Member States if we are to encourage investment in the electronic communication sector and the development of new and innovative services for consumers.”

By John Kennedy