Response to consultation on draft Guidelines on the limited network exclusion under PSD2
Go back
We note that Guideline 1.1 states that “Competent authorities should take into account that the specific payment instruments that can be used only in a limited way under Article 3(k) of PSD2 are payment instruments as defined in Article 4(14) of PSD2.”
Article 3(k) of PSD2 outlines the LNE, referring to “services based on specific payment instruments that can be used only in a limited way.”.
Article 14(4) defines ‘payment instrument’ as “a personalised device(s) and/or set of procedures agreed between the payment service user and the payment service provider and used in order to initiate a payment order”.
We understand that Guideline 1.1 is clarifying that the LNE applies to all ‘payment instruments’ as defined in Article 14(4) – please confirm.
GUIDELINE 1.3
We note that Guideline 1.3 provides:
“Competent authorities should not impose any restrictions on the means of transferring funds to the payment instrument, which can be done through execution of payment services and/or through the issuance of electronic money.”
We find the reference to “the issuance of electronic money” in this Guideline confusing with regards to limited network cards. If e-money is issued in respect of a card relying on the LNE, would this make the card e-money? We believe Guideline 1.3 would benefit from a clarification.
Guidelines 1.4
We note that Guideline 1.4 provides:
“Competent authorities should check when assessing the information provided by service providers, which provide services based on a payment instrument falling under the scope of Article 3(k) of PSD2 within their jurisdiction, whether these service providers apply technical and contractual restrictions limiting the use of the payment instrument.”
Besides a statement that a contract between the service provider and the user of the instrument should not be considered as a technical restriction, there is no further guidance on what the envisaged “technical and contractual restrictions” should look like. Given that “both technical and contractual restrictions in the use of the payment instrument should apply and that both of these restrictions should be proven to the respective competent authority” is a high evidential burden, we believe that guidance regarding the types of “technical and contractual restrictions” envisaged would be useful.
GUIDELINE 1.5
With regards to Guideline 1.5, we believe it would be useful if the EBA were to provide guidance on:
• the type of technical restriction which would be deemed suitable and effective in application at service/goods provider level;
• how detailed and granular these technical controls are expected to be; and
• the size or type of geographical location that would apply to the limited network exemption.
GUIDELINE 1.9
We note that Guideline 1.9 provides
“NCAs should not take into account the redeemability of the monetary value stored in the payment instrument in the assessment of whether the payment instrument falls under the scope of Article 3(k) of PSD2.”
We believe Guideline 1.9 would benefit from clarification – redeemability does not apply in respect of LNE products – it applies to e-money.
We note that Guideline 2.1 provides:
“When assessing whether the use of a specific payment instrument is limited within a limited network of service providers, competent authorities should take into account the following criteria in the assessment of the information provided with the notification under Article 37(2) of PSD2:
a) A direct contractual agreement for acceptance of payment transactions is concluded between the issuer of the payment instrument and each provider of goods and services operating within the limited network;
b) The envisaged maximum number of providers of goods and services operating within the limited network before submitting the notification under Article 37(2) of PSD2;
c) The envisaged specific geographical area for provision of goods and services before submitting the notification under Article 37(2) of PSD2; and
d) The service provider offers goods and services under a common brand that characterises the limited network and provides visual manifestation to the user of the payment instrument.”
We believe Guideline 2.1 would benefit from guidance on:
• whether a maximum number of providers of goods or services will be imposed and whether such a maximum will depend on the product or whether discretion will remain with the NCA (criteria (b)); and
• whether a maximum parameter in relation to the envisaged specific geographical area will be imposed (criteria (c)),
or whether discretion will remain with the NCA.
In addition, we believe further clarification would be helpful in respect of criteria (d), which could limit Limb ii of the LNE with regards to “instruments which can be used only to acquire a very limited range of goods or services”.
Guideline 2.2
We note that Guideline 2.2 provides:
“Complementary to the assessment under Guideline 2.1, and depending on the specific business model for provision of services and the size and specificity of the market within the respective Member State, competent authorities should take into account the following additional indicators:
a) The size of the geographical area for provision of goods and services;
b) The volume and value of payment transactions envisaged to be carried out with the payment instruments on annual basis;
c) The envisaged maximum amount to be credited to the payment instruments;
d) The envisaged maximum number of users of the payment instrument;
e) The categories of customers being targeted;
f) The risks which consumers may be exposed to; and
g) Whether the management of the network is centralised.”
It would be useful to understand whether parameters will be set around the indicators at (a) – (g) above or whether these matters will be left to the discretion of NCAs. In respect of the latter, a lack of parameters could result in a wide range of discretion and uncertainty into the regulatory analysis.
We note that Guideline 3.1 provides:
“Competent authorities should take into account that instruments allowing the holder to acquire goods or services only in the premises of the issuer can only be used in physical premises and cannot be used in online stores.”
We believe that Guideline 3.1 is contrary to Guideline 2.3, which provides that “Competent authorities should take into account that limited network of service providers can consist of physical stores only, online stores only or a combination of physical and online stores.”
We note that Guideline 4.1 provides:
“Competent authorities should take into account that in order for the use of a specific payment instrument to be considered as limited for acquiring a very limited range of goods or services under Article 3(k)(ii) of PSD2, a direct functional connection between the goods and/or the services that can be acquired with the payment instrument should exist.”
We believe Guideline 4.1 would benefit from a clarification regarding the term “direct functional connection”, in particular whether the relevant goods/services must do the same thing essentially.
GUIDELINE 4.2
We note that Guideline 4.2 provides:
“When assessing the functional connection between the goods and/or services, competent authorities should take into account that a leading good or service is established. Competent authorities should check whether the service provider has identified the leading good or service and the ancillary goods and/or services and has described the functional connection between them in the notification under Article 37(2) of PSD2.”
We believe Guideline 4.2 would benefit from clarification regarding the level of granularity NCAs would rely on to assess this categorisation and some guidelines around what is meant by leading and ancillary good(s) and service(s).
GUIDELINE 4.3
We note that Guideline 4.3 provides:
“Competent authorities should take into account that a functional connection can exist between physical and digital goods and/or services.”
We believe Guideline 4.3 appears contrary to Guideline 3.1, which provides that “competent authorities should take into account that instruments allowing the holder to acquire goods or services only in the premises of the issuer can only be used in physical premises and cannot be used in online stores.” It would also be useful to understand what is meant by “functional connection”.
GUIDELINE 4.4
We note that Guideline 4.4 provides:
“Complementary to the assessment under Guideline 4.1 and 4.2 and depending on the specific business model for provision of services and the size and specificity of the market within the respective Member State, competent authority should take into account the following additional indicators:
a) The volume and value of payment transactions envisaged to be carried out with the payment instruments on annual basis;
b) The envisaged maximum amount to be credited to the payment instruments;
c) The envisaged maximum number of users of the payment instrument;
d) The categories of customers being targeted;
e) The risks which consumers may be exposed to; and
f) Whether the management of the network is centralised.”
It would be useful to understand whether parameters will be set around the indicators at (a) – (f) above or whether these matters will be left to the discretion of NCAs. In respect of the latter, a lack of parameters could result in a wide range of discretion and uncertainty into the regulatory analysis.
We note that Guideline 5.2 provides:
“Competent authorities should ensure that in the cases where authorised payment service providers or electronic money issuers provide also services under Article 3(k) of PSD2, the regulated entities distinguish the regulated payment services/electronic money from the services excluded under Article 3(k) of PSD2 in a clear and easily recognisable way, including through the use of different brands.”
It would be useful to understand whether an umbrella brand could be relied on in respect of regulated and unregulated products, in circumstances where it is made clear that the unregulated products are not regulated and provided sub-brands are clearly delineated.
GUIDELINE 5.3
We note that Guideline 5.3 provides:
“Competent authorities should ensure that payment service providers and electronic money issuers inform the user of the specific payment instrument in a simple and clear way that the provided services are not regulated and supervised, and that users do not benefit from the protection for payment service users under PSD2.”
We believe Guideline 5.3 would benefit from a clarification around whether provision of this information in product terms and conditions would suffice.
GUIDELINE 5.4
We note that Guideline 5.4 provides:
“In the cases where during the assessment of the notification referred to in Article 37(2) of PSD2, the competent authority arrives at the view that
a) the distinction between the regulated payment services and/or electronic money and the services excluded under Article 3(k) of PSD2 is not sufficiently clear or appropriate, including the transparency of the communication with the users of the specific instrument set out in Guidelines 5.2 and 5.3, and/or
b) the services excluded under Article 3(k) of PSD2 are likely to impair either the financial soundness of the payment service provider/electronic money issuer, or the ability of the competent authority to monitor the compliance with all obligations laid down by PSD2 and EMD2,
the competent authority should take supervisory actions accordingly.”
We believe that any supervisory action should be proceeded by a dialogue between the regulated firm and the NCA.
We note that Guideline 6.1 provides:
“Competent authorities should take into account that the notification under Article 37(2) of PSD2 should be submitted by the service provider providing excluded goods and/or services under Article 3(k)(i) and (ii) of PSD2 in different Member States to the competent authority in each jurisdiction where the goods and/or services are provided and where the thresholds set out in Article 37(2) of PSD2 are breached in the particular jurisdiction.”
We wonder whether the term “exceeded” may be more appropriate in the context than “breached”.
We note that Guideline 7.1 provides:
“Competent authorities should not require the instruments falling in the scope of Article 3(k)(iii) of PSD2 to fulfil the requirements of Guidelines 2 and 4 that apply to the limited network of service providers and the limited range of goods and services.”
We consider it would be useful to explain the rationale and legal basis for instruments falling in the scope of Article 3(k)(iii) of PSD2 not being required to fulfil the requirements of Guidelines 2 and 4 that apply to the limited network of service providers and the limited range of goods and services.
Q1. Do you have comments on Guideline 1 on the specific payment instruments under Article 3(k) of PSD2?
GUIDELINE 1.1We note that Guideline 1.1 states that “Competent authorities should take into account that the specific payment instruments that can be used only in a limited way under Article 3(k) of PSD2 are payment instruments as defined in Article 4(14) of PSD2.”
Article 3(k) of PSD2 outlines the LNE, referring to “services based on specific payment instruments that can be used only in a limited way.”.
Article 14(4) defines ‘payment instrument’ as “a personalised device(s) and/or set of procedures agreed between the payment service user and the payment service provider and used in order to initiate a payment order”.
We understand that Guideline 1.1 is clarifying that the LNE applies to all ‘payment instruments’ as defined in Article 14(4) – please confirm.
GUIDELINE 1.3
We note that Guideline 1.3 provides:
“Competent authorities should not impose any restrictions on the means of transferring funds to the payment instrument, which can be done through execution of payment services and/or through the issuance of electronic money.”
We find the reference to “the issuance of electronic money” in this Guideline confusing with regards to limited network cards. If e-money is issued in respect of a card relying on the LNE, would this make the card e-money? We believe Guideline 1.3 would benefit from a clarification.
Guidelines 1.4
We note that Guideline 1.4 provides:
“Competent authorities should check when assessing the information provided by service providers, which provide services based on a payment instrument falling under the scope of Article 3(k) of PSD2 within their jurisdiction, whether these service providers apply technical and contractual restrictions limiting the use of the payment instrument.”
Besides a statement that a contract between the service provider and the user of the instrument should not be considered as a technical restriction, there is no further guidance on what the envisaged “technical and contractual restrictions” should look like. Given that “both technical and contractual restrictions in the use of the payment instrument should apply and that both of these restrictions should be proven to the respective competent authority” is a high evidential burden, we believe that guidance regarding the types of “technical and contractual restrictions” envisaged would be useful.
GUIDELINE 1.5
With regards to Guideline 1.5, we believe it would be useful if the EBA were to provide guidance on:
• the type of technical restriction which would be deemed suitable and effective in application at service/goods provider level;
• how detailed and granular these technical controls are expected to be; and
• the size or type of geographical location that would apply to the limited network exemption.
GUIDELINE 1.9
We note that Guideline 1.9 provides
“NCAs should not take into account the redeemability of the monetary value stored in the payment instrument in the assessment of whether the payment instrument falls under the scope of Article 3(k) of PSD2.”
We believe Guideline 1.9 would benefit from clarification – redeemability does not apply in respect of LNE products – it applies to e-money.
Q2. Do you have comments on Guideline 2 on the limited network of service providers under Article 3(k)(i) of PSD2?
GUIDELINE 2.1We note that Guideline 2.1 provides:
“When assessing whether the use of a specific payment instrument is limited within a limited network of service providers, competent authorities should take into account the following criteria in the assessment of the information provided with the notification under Article 37(2) of PSD2:
a) A direct contractual agreement for acceptance of payment transactions is concluded between the issuer of the payment instrument and each provider of goods and services operating within the limited network;
b) The envisaged maximum number of providers of goods and services operating within the limited network before submitting the notification under Article 37(2) of PSD2;
c) The envisaged specific geographical area for provision of goods and services before submitting the notification under Article 37(2) of PSD2; and
d) The service provider offers goods and services under a common brand that characterises the limited network and provides visual manifestation to the user of the payment instrument.”
We believe Guideline 2.1 would benefit from guidance on:
• whether a maximum number of providers of goods or services will be imposed and whether such a maximum will depend on the product or whether discretion will remain with the NCA (criteria (b)); and
• whether a maximum parameter in relation to the envisaged specific geographical area will be imposed (criteria (c)),
or whether discretion will remain with the NCA.
In addition, we believe further clarification would be helpful in respect of criteria (d), which could limit Limb ii of the LNE with regards to “instruments which can be used only to acquire a very limited range of goods or services”.
Guideline 2.2
We note that Guideline 2.2 provides:
“Complementary to the assessment under Guideline 2.1, and depending on the specific business model for provision of services and the size and specificity of the market within the respective Member State, competent authorities should take into account the following additional indicators:
a) The size of the geographical area for provision of goods and services;
b) The volume and value of payment transactions envisaged to be carried out with the payment instruments on annual basis;
c) The envisaged maximum amount to be credited to the payment instruments;
d) The envisaged maximum number of users of the payment instrument;
e) The categories of customers being targeted;
f) The risks which consumers may be exposed to; and
g) Whether the management of the network is centralised.”
It would be useful to understand whether parameters will be set around the indicators at (a) – (g) above or whether these matters will be left to the discretion of NCAs. In respect of the latter, a lack of parameters could result in a wide range of discretion and uncertainty into the regulatory analysis.
Q3. Do you have comments on Guideline 3 on the instruments used within the premises of the issuer under Article 3(k)(i) of PSD2?
GUIDELINE 3.1We note that Guideline 3.1 provides:
“Competent authorities should take into account that instruments allowing the holder to acquire goods or services only in the premises of the issuer can only be used in physical premises and cannot be used in online stores.”
We believe that Guideline 3.1 is contrary to Guideline 2.3, which provides that “Competent authorities should take into account that limited network of service providers can consist of physical stores only, online stores only or a combination of physical and online stores.”
Q4. Do you have comments on Guideline 4 on the limited range of goods or services under Article 3(k)(ii) of PSD2?
GUIDELINE 4.1We note that Guideline 4.1 provides:
“Competent authorities should take into account that in order for the use of a specific payment instrument to be considered as limited for acquiring a very limited range of goods or services under Article 3(k)(ii) of PSD2, a direct functional connection between the goods and/or the services that can be acquired with the payment instrument should exist.”
We believe Guideline 4.1 would benefit from a clarification regarding the term “direct functional connection”, in particular whether the relevant goods/services must do the same thing essentially.
GUIDELINE 4.2
We note that Guideline 4.2 provides:
“When assessing the functional connection between the goods and/or services, competent authorities should take into account that a leading good or service is established. Competent authorities should check whether the service provider has identified the leading good or service and the ancillary goods and/or services and has described the functional connection between them in the notification under Article 37(2) of PSD2.”
We believe Guideline 4.2 would benefit from clarification regarding the level of granularity NCAs would rely on to assess this categorisation and some guidelines around what is meant by leading and ancillary good(s) and service(s).
GUIDELINE 4.3
We note that Guideline 4.3 provides:
“Competent authorities should take into account that a functional connection can exist between physical and digital goods and/or services.”
We believe Guideline 4.3 appears contrary to Guideline 3.1, which provides that “competent authorities should take into account that instruments allowing the holder to acquire goods or services only in the premises of the issuer can only be used in physical premises and cannot be used in online stores.” It would also be useful to understand what is meant by “functional connection”.
GUIDELINE 4.4
We note that Guideline 4.4 provides:
“Complementary to the assessment under Guideline 4.1 and 4.2 and depending on the specific business model for provision of services and the size and specificity of the market within the respective Member State, competent authority should take into account the following additional indicators:
a) The volume and value of payment transactions envisaged to be carried out with the payment instruments on annual basis;
b) The envisaged maximum amount to be credited to the payment instruments;
c) The envisaged maximum number of users of the payment instrument;
d) The categories of customers being targeted;
e) The risks which consumers may be exposed to; and
f) Whether the management of the network is centralised.”
It would be useful to understand whether parameters will be set around the indicators at (a) – (f) above or whether these matters will be left to the discretion of NCAs. In respect of the latter, a lack of parameters could result in a wide range of discretion and uncertainty into the regulatory analysis.
Q5. Do you have comments on Guideline 5 on the provision of services under Article 3(k) of PSD2 by regulated entities?
GUIDELINE 5.2We note that Guideline 5.2 provides:
“Competent authorities should ensure that in the cases where authorised payment service providers or electronic money issuers provide also services under Article 3(k) of PSD2, the regulated entities distinguish the regulated payment services/electronic money from the services excluded under Article 3(k) of PSD2 in a clear and easily recognisable way, including through the use of different brands.”
It would be useful to understand whether an umbrella brand could be relied on in respect of regulated and unregulated products, in circumstances where it is made clear that the unregulated products are not regulated and provided sub-brands are clearly delineated.
GUIDELINE 5.3
We note that Guideline 5.3 provides:
“Competent authorities should ensure that payment service providers and electronic money issuers inform the user of the specific payment instrument in a simple and clear way that the provided services are not regulated and supervised, and that users do not benefit from the protection for payment service users under PSD2.”
We believe Guideline 5.3 would benefit from a clarification around whether provision of this information in product terms and conditions would suffice.
GUIDELINE 5.4
We note that Guideline 5.4 provides:
“In the cases where during the assessment of the notification referred to in Article 37(2) of PSD2, the competent authority arrives at the view that
a) the distinction between the regulated payment services and/or electronic money and the services excluded under Article 3(k) of PSD2 is not sufficiently clear or appropriate, including the transparency of the communication with the users of the specific instrument set out in Guidelines 5.2 and 5.3, and/or
b) the services excluded under Article 3(k) of PSD2 are likely to impair either the financial soundness of the payment service provider/electronic money issuer, or the ability of the competent authority to monitor the compliance with all obligations laid down by PSD2 and EMD2,
the competent authority should take supervisory actions accordingly.”
We believe that any supervisory action should be proceeded by a dialogue between the regulated firm and the NCA.
Q6. Do you have comments on Guideline 6 on the notifications under Article 37(2) of PSD2?
GUIDELINE 6.1We note that Guideline 6.1 provides:
“Competent authorities should take into account that the notification under Article 37(2) of PSD2 should be submitted by the service provider providing excluded goods and/or services under Article 3(k)(i) and (ii) of PSD2 in different Member States to the competent authority in each jurisdiction where the goods and/or services are provided and where the thresholds set out in Article 37(2) of PSD2 are breached in the particular jurisdiction.”
We wonder whether the term “exceeded” may be more appropriate in the context than “breached”.
Q7. Do you have comments on Guideline 7 on the limited network under Article 3(k)(iii) of PSD2?
GUIDELINE 7.1We note that Guideline 7.1 provides:
“Competent authorities should not require the instruments falling in the scope of Article 3(k)(iii) of PSD2 to fulfil the requirements of Guidelines 2 and 4 that apply to the limited network of service providers and the limited range of goods and services.”
We consider it would be useful to explain the rationale and legal basis for instruments falling in the scope of Article 3(k)(iii) of PSD2 not being required to fulfil the requirements of Guidelines 2 and 4 that apply to the limited network of service providers and the limited range of goods and services.