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The European Banking Authority (EBA) has published its final guidelines on the limited network exclusion under the revised Payment Services Directive (PSD2), and stakeholders have just over three months to become compliant.
The guidelines set out how national competent authorities should assess whether a network of service providers or a range of goods and services qualify as "limited" and are, therefore, not subject to the directive.
For example, payment instruments that might benefit from this exclusion include store cards, fuel cards, public transport cards and meal vouchers.
The new guidance follows a public consultation process that was carried out between July and October last year. Now, the final guidelines will apply as of June 1 this year for most payments providers.
However, there will be an additional three-month transitional period for issuers that already benefit from the exclusion so that they are able to submit a new notification to their national regulator.
What’s changed?
The proposed guidelines aim to clarify what qualifies as “limited” for a limited network exclusion (LNE), the provision of exempted services, the use of payments institutions within limited networks and the submission of notifications to authorities.
In the guidelines, the EBA has chosen four details as suitable for defining a limited network or service provider. These four are:
- Geographical area.
- Restrictions on the use of payment institutions within an LNE to limit the growth of the networks, such as caps on the number of providers or goods and services offered.
- Whether a contractual agreement exists between the issuer and the merchants for the acceptance of the excluded instrument.
- Whether a common brand is used that characterises the limited network.
Responses to the consultation have also been effective in triggering some changes to the guidelines.
For example, in the EBA's consultation, one respondent sought feedback on whether the issuer must be a third party that is independent of the seller of goods and services, or whether the issuer and acceptor can be the same actor.
Here, the EBA has concluded that the issuer itself may also be a provider of goods and/or services or an acceptor in the limited network.
The limited network exclusion, meanwhile, should include transactions accepted by the issuer itself when the transaction is carried out within that network.
The EBA has used the guidelines as a way to address what it brands “significant inconsistencies” on how this exclusion has in the past been applied across the EU, shoring up harmonisation in the trading bloc.
“The different transposition and application across member states lead to regulatory arbitrage and legal uncertainty and may ultimately result in impaired consumer protection and competitive distortions,” the EBA says in the guidelines.
One amendment to the guidelines, for example, seeks to instigate a more level playing field between the different methods of payment. “While the EBA has not come across specific business models that involve payment instruments other than those based on payment cards, the EBA agrees that a level playing field should be ensured between the various players on the market.”
“The EBA has, therefore, amended the Guideline to reflect that by adding the reference to ‘or other’ to ‘means of payment’.”
The guidelines introduce provisions and, where relevant, criteria and indicators, aimed at ensuring that payment instruments that can benefit from the exclusion are used in a limited way, therefore reducing potential risks that may arise for the users of such instruments.
Following the responses received during the public consultation, the EBA has also made clear certain aspects in relation to the assessment criteria and indicators, including their mandatory nature.
The functional connection between goods and services should be based on a specific category of goods and services with a common purpose, rather than a leading good or service, as originally proposed in the consultation paper, the EBA further clarified.
To address potential concerns on circumvention of the requirements of PSD2 and to increase transparency for consumers who may not be aware that they do not benefit from the protection PSD2 provides to regulated services, the guidelines also provide clarity on the provision of excluded services by regulated firms.
Finally, to ensure transparency on the provision of excluded services, the guidelines also articulate the calculation of the payment transaction value thresholds, the submission of the related notifications to national competent authorities and the information to be covered in the description of the excluded activity on the national and EBA registers.
