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The European Banking Authority (EBA) has released another batch of Q&A responses regarding the implementation of the revised Payment Services Directive (PSD2) and the Electronic Money Directive (EMD).
The EBA has ramped up its responses to Q&As recently, acknowledging in February this year that the Q&A platform has a backlog, while also stating that to speed up its responses, it will reject questions submitted prior to January 2020.
Following these latest published answers, the EBA has now cleared its backlog related to the EMD, although 31 PSD2 questions still remain.
EMD Q&As
Three EMD related queries were clarified by the EBA, addressing issues such as fees and product types. All were submitted in the final months of 2020.
The first question asks whether charging fees for issuing e-money is in compliance with Article 11 of the directive?
It is a common practice of electronic money institutions (EMIs) to add on fees upon issuing e-money, the submitter said, pointing out that these fees are called operational fees, for example.
According to Article 11, member states should ensure that EMIs issue e-money “at par value” on the receipt of funds. Meanwhile, the law does not impose a ban on any kind of charges related to the issuance of e-money.
“Compliance with the 'at par value' requirement will depend on the design of the individual contracts used in the respective business model,” the EBA said.
Another question asks what can be considered as a distribution of e-money.
“Some EMIs currently sell via physical points of sale non-reloadable vouchers, available at fixed face value that can only be used to top-up clients’ e-money accounts,” the person asking the question, which was submitted in October 2020, pointed out.
According to this business model, vouchers are distributed upon receipt of cash from clients and are not accepted in payment by any other person than the issuer. “Once used to top-up the e-money account, the correspondent value can be used to purchase goods and services at several partner-shops physical and online and, in certain cases, to withdraw cash from ATM.”
The question here suggests that an EMI using this method may claim that the pre-paid vouchers do not qualify as e-money given that they can only be used to load the e-money accounts, and therefore they do not meet the definition of e-money set forth in the directive.
Here, the EBA said that pre-paid vouchers are, in fact, e-money, and should be qualified as such.
The final of the EMD related questions, submitted by a law firm, asked the EBA whether obligations in the EMD mean that a legal person acting as an e-money distributor on behalf of an EMI may enter into a contract with another legal person (subcontractor) for the execution of, distribution and redeeming of electronic money, or whether an e-money distributor cannot use subcontractors to distribute e-money in the name of the EMI?
Here, the EBA said that this is acceptable. “Electronic money institutions should be allowed to distribute and redeem electronic money through natural or legal persons which act on their behalf.”
The requirement to “act on their behalf” means that the distribution and redemption of electronic money may only be provided by persons who are in a direct contractual relationship with the EMI, the regulator pointed out. Therefore, it should be stipulated in the respective contracts through appropriate clauses that the distributor “acts on behalf” of the EMI.
“A distributor can, however, involve other natural or legal persons for the distribution of electronic money provided that it is ensured that the electronic money institution still remains responsible for all persons involved in the distribution of the electronic money,” the EBA noted.
And sub-contracting should be clearly stated in any relevant contracts. This implies that the possibility of sub-contracting is already foreseen in the contracts between the actual distributor and the EMI.
PSD2 Q&As
Prior to this latest set of answers, the EBA had published its most recent set of replies related to PSD2 just last week.
These latest four further highlight the authority’s eagerness to clear its backlog, having come in such quick succession.
One question asked: “Is the name returned in an Account Information Service Provider (AISP) / Payment Initiation Service Provider (PISP) call expected to be that of the Payment Service User (PSU) who has initiated the transaction with the Third Party Provider (TPP), or of the actual account owner/holder?”
In particular, the submitter argued that this raises data protection concerns. “There are a number of scenarios where we need to be clear and from a GDPR perspective, sharing the correct data,” the question said.
In a corporate context, for example, when the account owner's name could be the corporate’s name, the PSU, in this case, may be an employee making a payment on behalf of the corporate.
And in the context of power of attorney (POA), when the account owner's name could be John Smith, but the PSU is a POA on the account with the name Jane Doe, there is a question about which should be used.
Account servicing payment service providers (ASPSPs) should treat payment orders transmitted through the services of a PISP and data requests transmitted through the services of an AISP without any discrimination, other than for objectively justifiable reasons, the EBA said in response.
“Where the person accessing the payment account is not the account owner but a person entitled to access the account on the latter’s behalf, ASPSPs should make available to AISPs the name of the person accessing the payment account,” the EBA answered, adding that this is provided that this information is part of the information from designated payment accounts and associated payment transactions made available to the PSU when directly accessing their account information.
Another question looked at fintech solutions that incorporate regulated services such as payments as an add on to their main business.
The submission argued that it is unclear whether access to a payment account is required if the account is not part of the institution’s service offering, but an added feature by an unregulated entity as part of the latter’s service offering, as it is unclear whether such an account constitutes a payment account.
Here, the EBA responded that information provided by the submitter is insufficient to determine whether the business model described includes the provision of a payment account that is accessible online, and which one of the involved providers is providing and maintaining such an account.
It did, however, point out that if the business model includes a payment account that is accessible online, access to the account should be granted by the service provider that is providing and maintaining the online accessible payment accounts for payers in accordance with PSD2 rules.
Money remittance
A question from France’s Autorité de Contrôle Prudentiel et de Résolution (ACPR) asked whether a payment institution that provides an acquiring payment service for its customers can provide this service without holding a payment account.
For example, when providing the acquisition of payment transactions to payees, some institutions commit themselves to a same-day transfer of all funds acquired on behalf of the payee back to the payee’s account held in a third-party PSP, which is usually a bank.
Against this background, according to the ACPR, some national competent authorities have considered that such payment institutions do not hold any payment account in the name of the payees.
Instead, they considered that the payment institution was offering acquisition of funds in a combination with money remittance services.
“In our view, the acquisition service can therefore not be assimilated to a money remittance service which is the only service, which is expressly exempted by PSD2 from holding payment accounts, even though under normal circumstances, the PI (payment institution) will not hold funds from the payees,” the ACPR suggested.
Here, the EBA said that the acquiring of payment transactions as set out in PSD2 does not automatically require the opening and maintaining of payment accounts with the payment institution itself.
Instead, this depends on the design of the respective acquiring model, such as the actual way of transferring the funds.
In another question submitted by a law firm, the EBA was asked about where an entity accepts payment on behalf of a payee, such as a debt collector and the debt due to the payee is extinguished upon receipt of payment by the debt collector, if it is correct to say that this does not constitute money remittance?
In addition, if there is no money remittance in this situation, can the same be said if the entity receives money into one account then pays these funds to a second account in its name before transferring the money to the relevant payee? If this is money remittance, the EBA was asked whether the commercial agency exemption be relied on where an entity receives monies but then transfers them to another account held by it before then transferring to the relevant payee?
Here, the EBA responded that the receipt and forwarding of funds qualify as a payment service according to PSD2, but depending on the design of the contractual agreements it could qualify, for instance, as money remittance or as another payment service such as the execution of payment transactions.
A payment service provider could be excluded from the scope of PSD2 if, as a commercial agent, it is authorised by the payee to negotiate or conclude the sale of goods or services and if it does not also act on behalf of the payer.
“It is the responsibility of the service provider offering payment services to ensure that it has the necessary authorisation under PSD2 granted by the national competent authority according to the actual design of the business model,” the EBA said, adding that the settlement of the payer's debt to the payee is not in itself a reason to exclude the service provider from the scope of PSD2.
