GlossaryEnglish Cap5
GlossaryEnglish Cap5
GlossaryEnglish Cap5
ELECTRONIC
BANKING
SERVICES
D Objectives
After studying this chapter you should be able to understand:
5.1 Introduction into e banking services
5.2 Concepts definition regarding e-banking
5.2.1 Development of electronic money in the Euro area;
electronic money oversight, supervision and the Community
regulatory framework
5.2.2 Services of e banking in Romania
5.3 The legal framework in the e-services field
5.3.1 The EU s on-line Financial Services legal framework
5.3.2 The E regulating provisions in Romania
5.4 The risk management for e-banking activities and e-money
5.4.1 Risk identification and risks analysis
5.5 Advantages and disadvantages of Internet banking
following
characteristics
facilitated
the
The diversity of the solutions adopted by bank to solve these problems and
facilitate the communications is shown in the following table:
The offer
Lloyds
Bank of
Scotland
TSB
Automatic
answer
(human
voice)
through the
phone and
using a
recognition
tone
Automatic
answer
(human
voice)
through a
phone and a
special
terminal
Automatic
teletext
through the
phone
(keypad,
home
computer)
The access
to the
system
PIN using a
special card
Password and
account
Special PIN
number
and account
Password and number
special PIN
Costs
(besides
the phone
circuit)
Fixed tariffs
are
established
monthly
according to
its use
Fixed
monthly and
additional
tariffs
according to
its use
The type
Quarterly
subscription
of L2.50 for
each account
Nationwide
England
BS Royal
Bank of
Scotland
Automatic
answer
(human
voice)
through the
phone and
using a
recognition
tone
Password
Special PIN
Free
Source: Basno C., Dardac N.- Moneda. Credit. Banci, Ed. Didactic i
Pedagogica RA, Bucureti. 1999
The table shows that many banks use video equipment in order to give the
customer access to a larger range of services.
Technological characteristics
The Videotext system is based on video, a telecommunication procedure that
enables the visualisation of alphanumerical images on a screen.
The Videotext system is a video system with telephone transmission, hence
it is a videography where the transmission is done through a
telecommunication network (the phone line).
There are three entities that take part in this system: the user, the
transmission network and the service performer (that is a database and a
processor of information in the same time).
The user will be equipped with a terminal and a phone line. He will be
connected to the network through a phone call, after he was identified and
recognised (through the above-mentioned procedures).
The transmission network initially implies the phone contact through the
telephone and after the identification it enables the connection with the
performer through the video access point (WAP).
The functional characteristics of the Videotext System
The system has several functional characteristics that reveal its superior
qualities:
- It ensures the fast transmission of information;
- It allows a continuous updating of data;
- It has an unlimited stocking capacity, so all the specific elements may be
included in the database;
- It has a permanent availability. Hence, it may be accessed from different
places and without any time restrictions;
- The system presents a specific accessibility through:
- The use of a communication mean, a simplified language;
- The easy orientation in the system, within a tree structure;
- The multi-criteria access, that enables the information to be selected
based on more criteria and hence the use of the same information on
more objectives (a simple example is that the operations recorded in an
account may be structured as credit operations, debit operations, balances
at different dates, etc.)
- The system implies the interaction between two parts.
If not, the bank notifies the holder that the operation is not possible.
Usually, this operation is used for the treasury management of the holder.
He operates for the transfer of funds to special accounts: savings accounts,
term deposits, etc.
Payments regarding electronic bills
The user of the Videotext System establishes with the bank a regime of
automatic payments for the bills that have specific payment terms (usually
the monthly bills).
Based on these agreements, the payments are automatically made at the
established dates. The user has the right to cheque if the payments to be
made are right. When he thinks he is entitled he may cancel the payment by
addressing a special order to the bank, also by using the Videotext system.
The teleconsultancy
This denomination refers to the dialogue between the holder of the payment
card and the bank. It concerns the situation of the holder s account and is
done through the system.
The most frequent questions refer to:
- the balance of the account at the bank or the balance of the purchasing
power (the credit);
- the last operations recorded in the account;
- the interest amounts to be received or paid.
The request of a cheque card
The cheques are used on a large scale, sometimes in parallel with the credit
card. Th request for a new cheque card usually requires the holder to go to
the bank.
But the user of the Videotext system has the advantage to request this by
means of a Videotext message. The operation is quite simple. The bank will
honour the customer request and will mail him a new cheque card.
The local consultancy
The local consultancy is a very natural and sometimes useful service. It
consists of reading of the credit card memory.
The expenses ordered according to their succession, the suppliers etc. will
appear on the screen and they may be retained. This ensures the
clarifications asked by the holder.
The offer of e-banking services of the well known types- m-banking, ITV
and PC based on Internet - will permit the bank, in the first place to attract
sophisticated clients, that are using many platforms for effecting
transactions, managing, in the same time to access a larger base of potential
customers.
ITV-Banking represents a channel that implies small costs; in the same
time, data confidentiality during transactions effected using the
infrastructure of cable TV is reduced.
M-Banking offers the clients the possibility to effect transactions
everywhere in the world and at any time; the size of the phone terminal, as
well as the fact that the mobile phone is a personal object gives maximum
confidentiality assurance to this e-banking service.
M-banking services2 will attract an increasing number of active users on the
near future and the volume of the transactions for m-banking users will be
bigger than the volume of transactions through ITV and even through PCbased e-banking.
Nowadays, the PC-based Internet Banking users represent the most
important category of e-banking users, the situation will change; a bank
should develop strategies for new banking services offered on a different
platform, by adding a new presentation form in a shorter period of time and
at small costs.
5.2 Conceptsdefinition regarding e-banking
The Banking Supervision Committee from Basle defines the e-banking
activity as the retail banking services and products distribution of different
values through electronic channels.
(ii)
BANK
INDIVIDUAL
CLIENT
INSTITUTIONA
L CLIENT
generally requires fewer data exchanges and there is usually no need for any
online authorisation of electronic money transactions.
The development of electronic money will depend on the decisions made by
customers and merchants as to whether or not to use electronic money as a
payment instrument.
From the point of view of the merchant, it is useful to distinguish between
the fixed costs and the marginal costs of using payment instruments at a
particular point of sale. In the case of electronic money, fixed costs include
the costs associated with the purchase and maintenance of electronic money
cards and software or dedicated merchant terminals. By contrast, the
marginal costs are those relating to the processing of a single transaction,
including in particular the costs incurred for telecommunications. To the
extent that electronic money systems need to rely on new technologies or
new standards, which may remain relatively expensive in the early stages of
their development, fixed costs are likely to be relatively high, at least during
an initial phase. However, the marginal costs of using electronic money may
be lower than those of using alternative payment instruments.
Electronic money and monetary policy
The impact of electronic money on the monetary policy has been a widely
debated issue since the developments in technology made the widespread
use of electronic money a feasible scenario. The primary objective of the
monetary policy is to maintain price stability. With regard to this objective,
the development of electronic money raises three different issues:
First, there is need to safeguard the role of money as the unit of account
for economic transactions. Society reaps substantial benefits from using
a single well-defined and stable unit of account, for conducting
transactions, irrespective of the issuer or the form in which money is
issued.
(ii)
electronic money schemes must supply the central bank with whatever
information may be required for the purpose of monetary policy;
ii)
ii)
iii)
iv)
Initial capital and ongoing own funds requirements - the initial capital
and minimum ongoing capital requirements for ELMIs is Euro
1,000,000, while capital requirements are also set on an ongoing basis.
v)
10
Source: www.europa.eu.int.
11
12
The author of the project of law regarding the electronic signature is Varujan V.
Pambuccian, the president of the IT Commission from the Romanian Parliament.
Source: www.pambuccian.ro/RlegSign.htm
It is much stronger than the hand written form one (and given this reason it
can have its juridical regime). It is clear that the law on the electronic
signature is at the basis of any regulation referring to an electronic data
needing juridical regime.
The regulating institution should be a recently created one, namely, the
Information and Communication National Agency, having the role of
regulating the certification and e-commerce service providers. The Agency
is under the control of the Romanian Government.
The project of regarding e-commerce
The project of law13 regarding the e-commerce states the juridical aspects
related to business to business operations (with the typical application:
virtual factory) and to those of business to customer type.
The law form proposed by the Romanian Information Communication
National Agency collects all the common regulations from the existent
legislation. The challenged questions are those related to taxes that could be
perceived on e-commerce.
The only way in which these activities can be taxed is the one proposed by
the law project, would be the establishment of an Internet Police
Department having the duty of monitoring every transaction in the network.
For the on-line documents transacted the aspects related to the hour and the
place of the signing of the document and the ways of proving that the
addressed really got the document, these, together with the electronic
signature.
The law defines the electronic exchange of data as a data electronic transfer
from one system to another using a stated standard for information structure.
In the sense of the same law, the informational system is a system used for
generating, transmitting, receiving, stocking or any other similar processing.
The information used under the form of an electronic message, is considered
valid of producing juridical effects, regarding the conditions provided by
law.
13
14
people s trust in the bank s ability to fulfil its critical functions in order to
continue its activity. Reputation risk is important not only for a single bank,
but also for the entire banking system.
Legal risk appears by violation or non-observance of laws, rules,
regulations or prescribed practices, or when the legal rights and obligations
of the participating parties to a transaction are not correctly established.
Banks engaged in e banking and e-money activities can confront juridical
risks referring to the release of information regarding clients and protection
of banking secrecy.
Other risks. Traditional banking risks like credit risk, liquidity
risk, interest rate risk and market risk are risks that can appear also in the
electronic banking activity. Credit risk represents the risk that appears due
to a partial payment of a credit obligation, at the established term or in any
other established moment after that. Banks that perform e-banking activities
can extend credit by untraditional channels and extend their market beyond
traditional geographical boundaries. Inadequate procedures, by which
debtors credibility asking credit through electronic channels is determined,
can influence credit risks for the respective banks. Liquidity risk represents
the risk that appears due to banks incapacity to fulfil its obligations at
maturity term. Interest rates risk refers to the bank financial situation
exposure to undesired movements of interest rates. Market risk is the risk of
registered losses in the positions from inside the balance sheet, as well as in
those from outside, losses that appear due to price movements on the
market, including the exchange rates.
Examples of risks:
Credit Risk
Lack of payment of the debtors that have solicited credits through electronic
channels.
Lack of payment from e-money issuers.
Liquidity Risk
Payment incapacity of an e-money issuer
Interest Rate Risk
Sudden changes of the interest rates of the instruments in which an e-money
issuer invests
Market Risk
Foreign Exchange risks coming from the acceptance of foreign coins as a
payment for e-money.
Country Risk
Transfer risk coming from a Foreign Service provider or foreign participants
to an electronic banking project.
Management risk. A process of risks administration that includes
the three basic elements of risk: evaluation, exposure control risk and
monitoring the risks will help banks and supervisors to fulfil these
objectives. It is essential that banks have a transparent risk administration.
And when there are identified new risks in these activities, the Board of
Administration and the executive management must be informed.
For successfully maximising, the bank of the future will have to develop the
essential competencies related to distribution or product specialisation. An
institution can not be successful in both directions. A core competence is
essential when directly affecting the competitive advantage of that particular
institution in a market field. Core competitive advantages goal is to create a
bigger differentiation and assign the best resources for it.
E-Business and, in the first place e-commerce became a well-known and
generally accepted phenomenon. The evolution from a few innovative firms
(especially from B2C type of commerce) to commerce on a large scale (of
B2B type) was rapid. The motivation would be the accelerated transactions,
reduced costs and an interaction with the client through personalised
solutions. E-business is no longer a tendency, it is an important changes
generator in the value added.
Vital to this field is the field of electronic banking, which is vital for on-line
transactions.
Ian Greenspan, president of Federal Reserve Board, a key decision maker in
the economic policies establishment, states15 that the prolonged economic
increase and recession stop in the United States of America have at their
basis the increase in productivity due to information technology and ebusiness. The phenomenon became global and had implications in the
entire world.
It is said that the necessary step for entering the 3rd millennium should be
on-line banking16for all the transactions effected in Romania. The new
payment way could revitalise the existent payment mechanism.
The financial services will be on-line or will not be at all. This is the
opinion of the most important players in the financial service field. In
Romania, the Internet represents one of the solutions for making the
financial services field more competitive.
The traditional solutions will not be able to satisfy the modern clients
demands. No matter how many working points will be opened, the client
will always be at a certain distance from that; no matter for how many hours
the offices will be opened, the client will always work later than the closing
15
16
hour. It is sure that a service to which a client can have access 24 hours out
of 24 a day, will be closer to the clients wishes. From the banks point of
view many branches opened represent high costs with the buildings,
employees salaries. On the other hand, E-Banking implies investing in
technology, applications that will provide the support for the development
of such activities, assuring the security of transactions, well functioning.
A short overview of the requirements and advantages will include:
In Romania, the analysis of the financial-banking market lead to the
following statements:
the technological endowment is old and isolated;
the economic climate needs a serious investment;
the legislative context continues to be rigid, but steps have been
made the projects of law regarding the e domain are waiting for
the approval of the Romanian Parliament;
major banks offering e-banking services proved to be successfully in
Romania.
For the establishment of electronic banking service platforms, the basic
requests are:
the rapid access, a simple connection to a variety of channels,
respecting the security business rules;
assure secure and rapid transactions;
the programming of the electronic applications must be simple;
to contain efficient administration utility programs;
Clients Benefits:
mobility;
comfort and cost savings;
24 hours per day, every day accessibility;
security that meets the very highest European standards;
people can focus their attention on achieving their every day
objectives;
time saved;
account management.
In Romania, the electronic payments could be a factor of revitalisation of
the monetary field. But there are still many things to be done.
Although the electronic payments are more efficient and cheaper than a
paper- based payment system, there are certain facts related to the
environment that are not favourable to the passing to the digital economy:
It appears that, even if steps have been made in order to gradually
adopt the electronic system, even if e-business continues to develop in
Romania and the IT market is increasing, Romania in not entirely
ready to accept the new era of digital economy; this is due to the fiscal
evasion manifested on the market, to the economic agents that are not
acting disciplinary, to the existence of a financial blockage, on one
hand. On the other hand, our monetary unit is not convertible and the
legislation is restrictive in the sense that it imposes a partial foreign
exchange control of the capital transactions, with implications over
the Romanian balance of payments.
In Romania, the infrastructure is not corresponding for the
development of e-business; the legislative framework has many gaps.
Recently, the Law of electronic signature was promulgated and this
represents a clear step toward e era of digital transactions; other
projects of law with the aim of regulating the electronic domain are in
a project phase: the law of e-commerce, the law regarding the
payment effecting through Internet, the law on the software parks, the
laws regarding e-banking and e-finance, the regulations regarding the
encryption.
The electronic payments are still in an incipient phase; in order for an
efficient electronic payment to be made, institutions like the National
Bank of Romania and other public institutions adopt electronic
systems, offer in-time and modern services. The clearing system
should be automatically be designed and effected.
The Romanian system, as a whole, is reticent to changes.
The electronic system does not benefit of trust.
In Romania there is no encouragement from authorities to use the
electronic system, there is no project sustaining the electronic system.
Romanians mentality, the conservatory regime is present also in the
field of electronic transactions.
5.5 Advantages and disadvantages of Internet banking
Cynics would say banking is being driven towards the Internet by fear and
greed: fear because everyone is afraid of being left behind and greed
remember that they have no divine right to rule the financial transactions
industry and can no longer afford to be complacent. Luckily, the U.S.
government denied Microsoft the opportunity to acquire Intuit due to
antitrust and monopoly restrictions; however, financial institutions should
still continue to take notice, as the spectre of Bill Gates still looms
ominously over the financial services industry.
Internet banking isnt just restricted to the countrys largest financial
institutions. Some of the more regional players, such as credit unions, are
also making their mark. The smaller size of these institutions has allowed
them to out-manoeuvre some of their larger competitors. One effect of the
trend towards Internet banking is to level the playing field so that even
smaller financial institutions can offer the type of sophisticated service
customers would normally expect only from a large bank. The increased
competition can benefit both the financial institution and the consumer. The
financial institutions will benefit from the drive to utilise the best
technology available (increased efficiencies, lower incremental transaction
costs). The consumer benefits from greater choices and lower costs. In
addition, Internet banking can be especially appealing to financial
institutions whose "members" are not located near branches (again
benefiting both the institution and consumer). In addition to providing
existing customers with access to banking services, Web sites operated by
financial institutions may also be used to solicit new customers.
For the user, the advantages are more obvious. The ability to pay bills
electronically, check balances, transfer money and do other banking tasks
from the office or a home P.C, saves time and increases efficiency. It also
simplifies account tracking and record-keeping.
Disadvantages
Security issues have always plagued the Internet. Although the Internet will
never be completely secure, the fact is that current fears are in many ways
irrational, fuelled by horror stories rather than fact. Recent advances in
security technology have lead to "more" secure systems. An example is the
development of SET by Microsoft and Visa. Another example is the
development of CSEPS and CSETS by Clay Pigeon Technologies. Perhaps
it is an indication of the power of the message provided by the media that
we worry about internet security but continue to use other insecure
Low cost. Internet banking operate at an expense much lower than a branch.
Banks can be able to provide services at lower prices.
The possible negative factors may include:
Lack of person-to -person interaction. Since all transactions are executed
via computers, Internet banking is impersonal.
Computer overload. If the system goes down at the same time when you
want to do banking, you may have to fall back on traditional banking
methods.
Growing pains. Some Internet banking services are coming to market
before they are ready. Stories have surfaced about not working PIN numbers
or incompatible modems.
Service limits. You can not deposit online and you can not withdraw cash
from a PC. ("The ABCs of Banking Online", Black Enterprise. 26(8): 45-46.
1996 March).
Disadvantages of Internet banking compared to other systems
What are Internet Backings weaknesses compared to other alternative
delivery systems? A discussion of the weaknesses follows:
New developing technology - Internet Banking is the latest form of
technology for banks. Internet Banking is a developing technology
supporting self-service delivery channel. It is extremely customer driven
and responsive to the customers needs. Developing technologies such as
Internet Banking, though, run the risk of getting too far of ahead of the
banks; therefore, the banking industry will not be able to sell to the
customer. In reverse, the banking industry can get too far ahead of
technology, and banks will be able to deliver to the customer.
Unknown strategy- the dilemma of the "nervous banker" refers to the
banking industrys wait and sees approach. Banks are now struggling to
play catch-up. Banks have missed chances to strengthen customer
relationships by not taking full advantage of the Internets interactive
capabilities. They have viewed the Internet as a means of providing static
consumer sales at $14.9 billion for 1998. The IDC forecast for 1999 is $31
billion. Other IDC predictions are $50.7 billion for 2000, $78 billion for
2001, $116.5 billion for 2002, and $177.7 billion for 2003. (See figure
below).
17
- Internet - http://www.usic.org/papers/stateoftheinternet99.htm
Progress test
1.
2.
3.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
ANNEX No 1
Extract from the European Parliament and European Council
Directive 2000/31, concerning data confidentiality
Directive 2000/31/EC of the European Parliament and of the Council of
June 2000 on concern legal aspects of information society services, in
particular electronic commerce, in the Internal Market. (Directive on
electronic commerce)/ quotation regarding the confidentiality of data and
the definition of the information societies as stated by the Community Law.
(15) The confidentiality of communications is guaranteed by Article 5
Directive 97/66/EC; in accordance with that Directive, Member States
must prohibit any kind of interception or surveillance of such
communications by others than the senders and receivers, except when
legally authorised.
(17) The definition of information society services already exists in
Community law in Directive 98/34/EC of the European Parliament and of
the Council of 22 June 1998 laying down a procedure for the provision of
information in the field of technical standards and regulations and of rules
on information society services (21) and in Directive 98/84/EC of the
European Parliament and of the Council of 20 November 1998 on the legal
protection of services based on, or consisting of, conditional access(22);
this definition covers any service normally provided for remuneration, at a
distance, by means of electronic equipment for the processing (including
digital compression) and storage of data, and at the individual request of a
recipient of a service; those services referred to in the indicative list in
Annex V to Directive 98/34/EC which do not imply data processing and
storage are not covered by this definition.
(18) Information society services span a wide range of economic activities
which take place on-line; these activities can, in particular, consist of
selling goods on-line; activities such as the delivery of goods as such or
the provision of services off-line are not covered; information society
services are not solely restricted to services giving rise to on-line
contracting but also, in so far as they represent an economic activity,
extend to services which are not remunerated by those who receive them,
such as those offering on-line information or commercial communications,
or those providing tools allowing for search, access and retrieval of data;
ANNEX No 2
Extract from the European Directive concerning electronic signature
Directory 1999/93/EC of the European Parliament and of the European
Council of 13 December on Community for electronic signatures gives the
definitions for the notions operating with when speaking about this subject
as follows:
Article 2
Definitions
For the purpose of this Directive:
1. "electronic signature" means data in electronic form which are attached to
or logically associated with other electronic data and which serve as a
method of authentication;
2. "advanced electronic signature" means an electronic signature, which
meets the following requirements:
(a) it is uniquely linked to the signatory;
(b) it is capable of identifying the signatory;
(c) it is created using means that the signatory can maintain under his
sole control; and (d) it is linked to the data to which it relates in such
a manner that any subsequent change of the data is detectable;
3. "signatory" means a person who holds a signature-creation device and
acts either on his own behalf or on behalf of the natural or legal person or
entity he represents;
4. "signature-creation data" means unique data, such as codes or private
cryptographic keys, which are used by the signatory to create an
electronic signature;
5. "signature-creation device" means configured software or hardware used
to implement the signature-creation data;
ANNEX No 3
Article 2
Definitions
For the purpose of this recommendation, the following definitions apply:
(a)electronic payment instrument` means an instrument enabling its holder
to effect transactions of the kind specified in Article 1 (1). This covers both
remote access payment instruments and electronic money instruments;
(b) remote access payment instrument` means an instrument enabling a
holder to access funds held on his/her account at an institution, whereby
payment is allowed to be made to a payee and usually requiring a personal
identification code and/or any other similar proof of identity. This includes
in particular payment cards (whether credit, debit, deferred debit or charge
cards) and phone- and home-banking applications; (c)electronic money
instrument` means a reloadable payment instrument other than a remote
access payment instrument, whether a stored-value card or a computer
memory, on which value units are stored electronically, enabling its holder
to effect transactions of the kind specified in Article 1 (1); (d) financial
institution` means an institution as defined in Article 4(1) of Council
Regulation (EC) No 3604/93 (5); (e) issuer` means a person who, in the
course of his business, makes available to another person a payment
instrument pursuant to a contract concluded with him/her; (f)holder` means
a person who, pursuant to a contract concluded between him/her and an
issuer, holds a payment instrument.
SECTION II TRANSPARENCY OF CONDITIONS
FOR TRANSACTIONS
Article 3
Minimum information contained in the terms and conditions governing the
issuing and use of an electronic payment instrument
1. Upon signature of the contract or in any event in good time prior to
delivering an electronic payment instrument, the issuer communicates to
the holder the contractual terms and conditions (hereinafter referred to as
the terms`) governing the issue and use of that electronic payment
instrument. The terms indicate the law applicable to the contract.
2. The terms are set out in writing, including where appropriate by
electronic means, in easily understandable words and in a readily
comprehensive form, and are available at least in the official language or
languages of the Member State in which the electronic payment
instrument is offered.
provides the holder with the exchange rate used for converting foreign
currency transactions. 2. The issuer of an electronic money instrument
provides the holder with the possibility of verifying the last five transactions
executed with the instrument and the outstanding value stored thereon.
SECTION III OBLIGATIONS AND LIABILITIES OF THE PARTIES
TO A CONTRACT
Article 5 Obligations of the holder
The holder: (a) uses the electronic payment instrument in accordance with
the terms governing the issuing and use of a payment instrument; in
particular, the holder takes all reasonable steps to keep safe the electronic
payment instrument and the means (such as a personal identification number
or other code) which enable it to be used; (b) notifies the issuer (or the
entity specified by the latter) without delay after becoming aware of: -the
loss or theft of the electronic payment instrument or of the means which
enable it to be used, -the recording on his/her account of any unauthorised
transaction, -any error or other irregularity in the maintaining of that
account by the issuer; (c)does not record his personal identification number
or other code in any easily recognisable form, in particular on the electronic
payment instrument or on any item which he/she keeps or carries with the
electronic payment instrument; (d)does not countermand an order which
he/she has given by means of his/her electronic payment instrument, except
if the amount was not determined when the order was given.
Article 6 Liabilities of the holder
1. Up to the time of notification, the holder bears the loss sustained in
consequence of the loss or theft of the electronic payment instrument up
to a limit, which may not exceed ECU 150, except where he/she acted
with extreme negligence, in contravention of relevant provisions under
Article 5 (a), (b) or (c), or fraudulently, in which case such a limit does
not apply.
2. As soon as the holder has notified the issuer (or the entity specified by the
latter) as required by Article 5 (b), except where he/she acted
fraudulently, he/she is not thereafter liable for the loss arising in
consequence of the loss or theft of his/her electronic payment
instrument.3. By derogation from paragraphs 1 and 2, the holder is not
liable if the payment instrument has been used, without physical
issuer; (b) for transactions not authorised by the holder, as well as for any
error or irregularity attributable to the issuer in the maintaining of the
holder's account.
2. Without prejudice to paragraph 3, the amount of the liability indicated in
paragraph 1 consists of: (a) the amount of the unexcited or defectively
executed transaction and, if any, interest thereon; (b) the sum required to
restore the holder to the position he/she was in before the unauthorised
transaction took place.
3. Any further financial consequences, and, in particular, those concerning
the extent of the damage for which compensation is to be paid, are borne
by the issuer in accordance with the law applicable to the contract
concluded between the issuer and the holder.
4. The issuer is liable to the holder of an electronic money instrument for
the lost amount of value stored on the instrument and for the defective
execution of the holder's transactions, where the loss or defective
execution is attributable to a malfunction of the instrument, of the
device/terminal or any other equipment authorised for use, provided that
the malfunction was not caused by the holder knowingly or in breach of
Article 3 (3) (a).