What does New Payment Methods mean?
Developments in the field of new payment methods (NPM) are proceeding at a rapid pace. There are new online payment services that elaborate on existing systems, new payment service providers, and the emergence of cryptocurrencies in particular. A number of factors affect the development and availability of new payment methods. For each transaction, for example, the risk perceived by the buyer and seller (and the limitation thereof) plays an important role in the selection process. A transaction consists of an agreement, payment and delivery. To define the concept of risk in greater detail, Innopay uses the expression ‘transaction context’, which refers to the complex of situational circumstances within which a transaction takes place. The transaction context consists of four generic factors, namely:
- timing (order of payment and delivery);
- location (online, physical, distance);
- relation (anonymous, known, trusted);
- product (product characteristics).
Apart from risk (management), the ease of use and the cost also play a role in the choice of a particular payment method . More and more companies and providers of payment methods are seeking to improve the buying experience for consumers. More is also being invested in customer loyalty. The (technological) developments in relation to e-commerce, m-commerce and the internet of things (IOT) have a big effect on the situational circumstances in which transactions take place.
There does not appear to be any clear definition of NPM available. Most of the literature draws a distinction between traditional payment methods and new payment systems which make (prepaid) payments possible by internet and mobile phone. Innopay, a consultancy which investigates developments in the field of payment, refers to direct debit collection, bank transfers, giro collection forms, cash on delivery and card on delivery as traditional methods. One distinguishing feature of these payment methods is that they all involve an unconditional payment. Once the payment is made it cannot, in principle, be reversed.
The AMLC applies the following definition of NPM: “All payment systems which are not considered to be traditional.”.
The Financial Action Task Force (FATF) draws a distinction between new payment methods that extend the traditional electronic payment methods, and new payment methods that are not linked to the traditional payment methods on offer. Prepaid cards, internet banking and mobile payments linked to a bank account are seen by the FATF as extensions of the traditional payment methods on offer. The physical electronic wallet, also referred to as a stored value card (SVC), online and mobile payments which are not directly linked to a bank account and (the trade in) digital precious metals are regarded by the FATF as new payment methods not linked to traditional ones . One area of special attention in NPM is virtual currencies; the European Central Bank draws a distinction between three forms of virtual currency:
- Closed virtual currency systems, whereby the currency is totally disconnected from the real economy.
- One-way systems, whereby the virtual currency cannot be converted back to the original currency once it has been purchased.
- Two-way systems, whereby the virtual currency can be converted back to normal currency after it has been purchased .
In 1996-1997 the FATF investigated for the first time the emergence and risks of NPM, at a time when people still talked about electronic money (e-money). At the time of the report the internet was still in the emergent phase, so that the risks appeared to be theoretical . Ten years later the second FATF report about NPM appeared. This showed that in the meantime, practice had caught up with theory . In 2010 a further report was published by the FATF which concluded that the worldwide use of new payment methods had enormously increased, as had the misuse thereof for money laundering purposes. In 2013, 2014 and 2015 the FATF also published reports about NPM: one report about the risks of virtual currency in relation to money laundering and financing terrorism (2014) and two reports and/or guidelines about how countries should deal with the risks in relation to prepaid cards, mobile payments, online payment systems (2013) and virtual currency (2015).
Criminals can misuse NPM in various ways. With respect to money laundering a number of variants are conceivable:
- ‘Hiding’ money and concealing its criminal origins.
- Moving money; underground banking.
- (Shielded) payment for goods and/or services.
- As a component of complex money laundering constructions.
 Boer, R., Hensen, C. & Scepnic, A. (2010). Online betalen 2010. Innopay.
Network of all devices connected to the internet
 Innopay (2007). Betalen 2007: Betalen op internet and mobiele telefoon. Innopay.
FATF: Financial Action Task Force (2006). Report on New Payment Methods
 European Central Bank (2012). Virtual Currencies. Frankfurt am Main: European Central Bank.
 FATF: Financial Action Task Force on Money Laundering (1997). 1996-1997 Report on Money Laundering Typologies. Paris: Financial Action Task Force.
 FATF: Financial Action Task Force (2006). Report on New Payment Methods. Paris: Financial Action Task Force.
 FATF: Financial Action Task Force (2010). Money Laundering Using New Payment Methods. Paris: Financial Action Task Force.
 FATF: Financial Action Task Force (2014). Virtual Currencies Key Definitions and Potential AML/CFT Risks. Paris: Financial Action Task Force. FATF: Financial Action Task Force (2013). Guidance for a risk-based approach. Prepaid cards, mobile payments and internet-based payment systems. Paris: Financial Action Task Force.
 FATF: Financial Action Task Force (2015). Guidance for a risk-based approach. Virtual currencies. Paris: Financial Action Task Force.