Response to consultation on draft Guidelines on the limited network exclusion under PSD2
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With respect to Guidelines 1.4 and 1.5 – we agree that the restrictions limiting the use of the payment instrument should not be on a contractual level only, they should also provide for specific technical restrictions. In our view, this would mean that the software implemented by a provider of goods or services should not allow the use of the specific payment instrument (e.g. card-based) at the premises of the provider for e.g. certain excluded goods, as opposed to a mere legal exclusion in the terms and conditions of the service provider.
However, if the technical restrictions as per the above paragraph are indeed implemented, we consider that a single card-based instrument should be able to accommodate simultaneously more than one payment instrument under Article 3(k) of PSD2. Currently, in our view, Guideline 1.6 provides for such possibility. Our understanding of Guideline 1.6 is that one and the same card issued by a service provider and granted to a client can be used both for (i) acquiring goods or services in the premises of the issuer or within a limited network of service providers (as defined and restricted by the issuer), and in the same time for (ii) acquiring a very limited range of goods of services within an unlimited (i.e. different than the network under (i)) network of service providers. Such clarification would indeed facilitate not only the business model of certain payment instrument issuers who benefit from both exclusions, but would also create a better user experience and will generally improve the customer satisfaction of the payment instrument users by avoiding the usage of, for instance, two cards from the same issuer.
Although Guideline 1.6 itself is straightforward, we find it contradictory to Guideline 1.11. The latter states that the exclusions based on Article 3(k) of PSD2 cannot be combined at a payment instrument level with another exclusion under Article 3(k) of PSD2 (as well as with any other exclusion under PSD2). It is not fully clear how two exclusions can be combined at a payment instrument level and how such combination is different than the combination under Guideline 1.6. The current drafting of Guideline 1.11 and the supporting reasoning do not set straightforward criteria or hypotheses in which this guideline would apply. The Consultation paper lack a clear example which would illustrate the application of Guideline 1.11. Therefore, our concern is that the ambiguous text of Guideline 1.11 would lead to confusions for the competent authorities when interpreting whether a specific payment instrument falls within the exclusions under Article 3(k) of PSD2, which, on its part, would lead again to lack of uniformity on the application of the exclusions at a EU level.
1) the number of providers of goods or services operating within the limited network of services – it should be noted that Article 3(k)(i) of PSD2 does not set limitations to the maximum number of providers of goods or services, nor it sets a requirement for the providers to operate under the same brand, or to be part of the same corporate group or a chain. Considering this, we are of the opinion that the competent authority should not have an option to set a maximum number of providers. What should be taken into account by the competent authorities, instead, is the network's ability to become limited subject to certain criteria. For instance, such criteria could be: (i) a limitation clause in the contract entered between the participants in the network, (ii) the limitation is inherent in the nature of the offered product, e.g. it is sold by a limited number of providers only, (iii) the acceptance of new members to the limited network is subject to consent of all existing participants, (iv) historical data about the network evidencing that since the establishment of the network it has not increased significantly (or not at all), and (v) regulatory considerations with respect to the expansion of the network, such as an increased risk related to concerted practices. In our view, such criteria are significantly more objective compared to the mere application of a mathematical limitation of the number of the participants in a network.
2) the provision of goods and services under a common brand – our understanding of this criterion is that the phrase "common brand" is used in the meaning that there should be a common brand for the payment instrument and not a common brand under which the participants in the limited network should operate. The current drafting of this criterion poses a risk of a misinterpretation by the competent authorities, namely that the limited network of provides should be part of the same corporate group or chain operating under the same commercial brand. Our interpretation, however, is that the payment instrument issued by a number of participants in a limited network may have a brand which is recognizable for the users of such payment instruments. A common brand would avoid confusions in the users that the payment instrument can be used without any limitation to the goods acquired or the commercial premises where it can be used. In addition, a common brand under which a payment instrument is used allows the issuers to build a reputation for such instruments and for themselves and to consider such reputation when assessing potential incompliance (including breach of PSD2 requirements).
With respect to Guidelines 4.1 and 4.2 – we agree that a direct functional connection between the goods and/or services should exist. Our concern, however, is that local competent authorities may struggle in identifying the range of such goods / services. Payment instruments benefiting from the exclusion under Article 3(k)(ii) of PSD2 can be issued for numerous commercial sectors and range of goods/services. Hence, it is not excluded that a local competent authority may omit to take into consideration certain goods/services as having a functional connection with another leading good/service. Hence, we believe that the competent authorities should be involved in active communication and cooperation with the issuers of such payment instrument, so that they will be able to identify all range of ancillary goods/services which may be acquired via the payment instrument. For instance, in the area of sale of petroleum products, ancillary goods and services should be not only goods/services which serve for maintenance of vehicles, such as spare parts, vignettes, toll fees, etc., but also all goods/services which are customary for a petrol station (e.g. coffee, sandwiches, snacks, other drinks, etc.).
With respect to Guideline 4.4 – we do not agree that the number of users of the payment instruments should be one of the criteria when assessing whether a payment instrument falls within the exclusion under Article 3(k)(ii) of PSD2. Certain commercial sectors, such as the retail of petroleum products, have basically an uncountable number of users, as these could potentially be all drivers in the EU. Further, the exclusion under Article 3(k)(ii) of PSD2 does not deal with the limitation of providers/users, but only with the limitation of goods/services which may be acquired via such payment instrument. Hence, we do not consider this criterion applicable or viable for the assessment of a competent authority.
Q1. Do you have comments on Guideline 1 on the specific payment instruments under Article 3(k) of PSD2?
We generally agree with draft Guidelines 1 as proposed in the Consultation paper.With respect to Guidelines 1.4 and 1.5 – we agree that the restrictions limiting the use of the payment instrument should not be on a contractual level only, they should also provide for specific technical restrictions. In our view, this would mean that the software implemented by a provider of goods or services should not allow the use of the specific payment instrument (e.g. card-based) at the premises of the provider for e.g. certain excluded goods, as opposed to a mere legal exclusion in the terms and conditions of the service provider.
However, if the technical restrictions as per the above paragraph are indeed implemented, we consider that a single card-based instrument should be able to accommodate simultaneously more than one payment instrument under Article 3(k) of PSD2. Currently, in our view, Guideline 1.6 provides for such possibility. Our understanding of Guideline 1.6 is that one and the same card issued by a service provider and granted to a client can be used both for (i) acquiring goods or services in the premises of the issuer or within a limited network of service providers (as defined and restricted by the issuer), and in the same time for (ii) acquiring a very limited range of goods of services within an unlimited (i.e. different than the network under (i)) network of service providers. Such clarification would indeed facilitate not only the business model of certain payment instrument issuers who benefit from both exclusions, but would also create a better user experience and will generally improve the customer satisfaction of the payment instrument users by avoiding the usage of, for instance, two cards from the same issuer.
Although Guideline 1.6 itself is straightforward, we find it contradictory to Guideline 1.11. The latter states that the exclusions based on Article 3(k) of PSD2 cannot be combined at a payment instrument level with another exclusion under Article 3(k) of PSD2 (as well as with any other exclusion under PSD2). It is not fully clear how two exclusions can be combined at a payment instrument level and how such combination is different than the combination under Guideline 1.6. The current drafting of Guideline 1.11 and the supporting reasoning do not set straightforward criteria or hypotheses in which this guideline would apply. The Consultation paper lack a clear example which would illustrate the application of Guideline 1.11. Therefore, our concern is that the ambiguous text of Guideline 1.11 would lead to confusions for the competent authorities when interpreting whether a specific payment instrument falls within the exclusions under Article 3(k) of PSD2, which, on its part, would lead again to lack of uniformity on the application of the exclusions at a EU level.
Q2. Do you have comments on Guideline 2 on the limited network of service providers under Article 3(k)(i) of PSD2?
With respect to Guidelines 2.1 and 2.2 – in our view, the most important criteria for the competent authorities when assessing whether a certain payment instrument falls under the exclusion under Article 3(k)(i) of PSD2 are the following:1) the number of providers of goods or services operating within the limited network of services – it should be noted that Article 3(k)(i) of PSD2 does not set limitations to the maximum number of providers of goods or services, nor it sets a requirement for the providers to operate under the same brand, or to be part of the same corporate group or a chain. Considering this, we are of the opinion that the competent authority should not have an option to set a maximum number of providers. What should be taken into account by the competent authorities, instead, is the network's ability to become limited subject to certain criteria. For instance, such criteria could be: (i) a limitation clause in the contract entered between the participants in the network, (ii) the limitation is inherent in the nature of the offered product, e.g. it is sold by a limited number of providers only, (iii) the acceptance of new members to the limited network is subject to consent of all existing participants, (iv) historical data about the network evidencing that since the establishment of the network it has not increased significantly (or not at all), and (v) regulatory considerations with respect to the expansion of the network, such as an increased risk related to concerted practices. In our view, such criteria are significantly more objective compared to the mere application of a mathematical limitation of the number of the participants in a network.
2) the provision of goods and services under a common brand – our understanding of this criterion is that the phrase "common brand" is used in the meaning that there should be a common brand for the payment instrument and not a common brand under which the participants in the limited network should operate. The current drafting of this criterion poses a risk of a misinterpretation by the competent authorities, namely that the limited network of provides should be part of the same corporate group or chain operating under the same commercial brand. Our interpretation, however, is that the payment instrument issued by a number of participants in a limited network may have a brand which is recognizable for the users of such payment instruments. A common brand would avoid confusions in the users that the payment instrument can be used without any limitation to the goods acquired or the commercial premises where it can be used. In addition, a common brand under which a payment instrument is used allows the issuers to build a reputation for such instruments and for themselves and to consider such reputation when assessing potential incompliance (including breach of PSD2 requirements).
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?
We do not have any comments on Guideline 3.Q4. Do you have comments on Guideline 4 on the limited range of goods or services under Article 3(k)(ii) of PSD2?
We generally agree with draft Guidelines 4 as proposed in the Consultation paper.With respect to Guidelines 4.1 and 4.2 – we agree that a direct functional connection between the goods and/or services should exist. Our concern, however, is that local competent authorities may struggle in identifying the range of such goods / services. Payment instruments benefiting from the exclusion under Article 3(k)(ii) of PSD2 can be issued for numerous commercial sectors and range of goods/services. Hence, it is not excluded that a local competent authority may omit to take into consideration certain goods/services as having a functional connection with another leading good/service. Hence, we believe that the competent authorities should be involved in active communication and cooperation with the issuers of such payment instrument, so that they will be able to identify all range of ancillary goods/services which may be acquired via the payment instrument. For instance, in the area of sale of petroleum products, ancillary goods and services should be not only goods/services which serve for maintenance of vehicles, such as spare parts, vignettes, toll fees, etc., but also all goods/services which are customary for a petrol station (e.g. coffee, sandwiches, snacks, other drinks, etc.).
With respect to Guideline 4.4 – we do not agree that the number of users of the payment instruments should be one of the criteria when assessing whether a payment instrument falls within the exclusion under Article 3(k)(ii) of PSD2. Certain commercial sectors, such as the retail of petroleum products, have basically an uncountable number of users, as these could potentially be all drivers in the EU. Further, the exclusion under Article 3(k)(ii) of PSD2 does not deal with the limitation of providers/users, but only with the limitation of goods/services which may be acquired via such payment instrument. Hence, we do not consider this criterion applicable or viable for the assessment of a competent authority.