Question ID
2023_6910
Legal act
Directive 2015/2366/EU (PSD2)
Topic
Other topics
Article
4
Paragraph
14
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
Not applicable
Article/Paragraph
n/a
Type of submitter
Competent authority
Subject matter
Interpretation of payment instrument
Question

What devices or procedures can be considered as payment instrument as per Art. 4(14) of PSD2?

Background on the question

This question has been raised previously, but is resubmitted because it would still benefit from clarification.

In the context of an application for authorisation as payment service provider under PSD2, this question is raised with regard to determining whether or not the intended activities of the applicant qualify as payment services, more explicitly if the fuel card qualifies as a payment instrument. In order to be compliant with Article 37 PSD2, it is required to establish if the services provided qualify as payment services under PSD2. In this case, it concerns a fuel card, for which the applicant seeks authorisation under PSD2. Besides this application, we receive several notifications from issuers of fuel cards, to qualify under the limited network exclusion of Article 3(k). In those cases, we need to make a decision if a given solution meets the requirements of limited network exclusion. However to apply an exclusion, or - in the current procedure - to grant authorisation, we should first establish that the solution falls under the definition of one of the payment services described in PSD2. Mostly, it is issuing of payment instruments and/or acquiring of payment transactions. Therefore, the question occurred that a given solution (e.g. a fuel card) based on the business model can be considered as payment instrument hence the CAs should consider the granting of an authorisation of the application of an exclusion. In this case, a multinational oil company has explained that the fuel cards are not used for initiating the payment transaction, in other words there is no payment order given with the card itself, but the card services the purpose of identification and an “authorisation” of the fact whether the oil company issued the fuel card has a deferred payment agreement with the card holder. After a certain period, a formal invoice is issued and the settlement of the invoice is done via a regular credit transfer. Should a (fuel) card that  is functions as such, be considered to consitute a payment instrument? 

Submission date
Final publishing date
Final answer

‘Payment instrument’ is defined under Article 4(14) of Directive 2015/2366 (PSD2) 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”. To be considered as a payment instrument within the meaning of PSD2, the fuel card must thus meet the following conditions:

• be a personalised device(s) or set of procedures agreed between the payment service user and the payment service provider; and

• be used in order to initiate a payment order.

The latter condition must be understood in articulation with the definitions of ‘payment order’ and ‘payment transaction’ in PSD2. Accordingly, ‘payment order’ is defined in Article 4(13) PSD2 as “an instruction by a payer or payee to its payment service provider requesting the execution of a payment transaction”. ‘Payment transaction’ is defined in Article 4(5) PSD2 as “an act, initiated by the payer or on his behalf or by the payee, of placing, transferring or withdrawing funds, irrespective of any underlying obligations between the payer and the payee”.

As regards the first condition – ie be a personalised device(s) or set of procedures -, it should be noted, in accordance with paragraph 70 of the Court’s judgement C 287/19 referring to the interpretation of ‘payment instrument’ in Article 4(23) of Directive 2007/64 (PSD1) held in its judgment C 616/11, that “in order to be considered as ‘personalised’, within the meaning of that provision, a payment instrument must allow the payment service provider to verify that the payment order was initiated by a user authorised to do so”.

In the case described by the submitter, the fuel card allows the fuel card issuer to verify that the cardholder is a party to the deferred payment contractual agreement with the issuer, thus meeting the first condition of the definition of ‘payment instrument’.

As regards the second condition – ie be used in order to initiate a payment order - it should be noted that, in the aforementioned judgement C 616/11, the Court considered that both a transfer order form signed by the payer in person and online banking constituted payment instruments insofar as both represented sets of procedures agreed between the user and the payment service provider and used by the user in order to initiate a payment order. In the case described, the presentation of the card and the process of verification of the cardholder as a party to such agreement constitute steps in the procedure allowing the cardholder to request the execution of a payment transaction resulting in a transfer of funds to the fuel seller. The fact that this is a payment transaction where the funds are covered by a credit line provided by the fuel card issuer to the cardholder, and which is subsequently settled, does not materially invalidate this procedural link between the steps of card presentation and cardholder verification, on the one hand, and the instruction for the execution of a payment transaction, on the other hand, thus meeting the second condition in the definition of ‘payment instrument’.

Disclaimer:

The answer clarifies provisions already contained in the applicable legislation. It does not extend in any way the rights and obligations deriving from such legislation; nor does it introduce any additional requirements for the concerned operators and competent authorities. The answer is merely intended to assist natural or legal persons; including competent authorities and Union institutions and bodies in clarifying the application or implementation of the relevant legal provisions. Only the Court of Justice of the European Union is competent to authoritatively interpret Union law. The views expressed in the internal Commission Decision cannot prejudge the position that the European Commission might take before the Union and national courts.

Status
Final Q&A
Answer prepared by
Answer prepared by the European Commission because it is a matter of interpretation of Union law.

Disclaimer

The Q&A refers to the provisions in force on the day of their publication. The EBA does not systematically review published Q&As following the amendment of legislative acts. Users of the Q&A tool should therefore check the date of publication of the Q&A and whether the provisions referred to in the answer remain the same.