Thursday, 20 July 2017

All Hands On Deck: UK Sailing Close To #PSD2 Deadline

The UK government has just announced its final approach to implementing the new Payment Services Directive (PSD2), along with the final version of the Payment Services Regulations 2017 that will apply from 13 January 2018. So firms don't have long to figure out whether they fall within the definitions and, if so, how to apply and comply. 

The FCA is expected to finalise its guidance and application forms by September, and can only begin accepting applications for authorisation/registration from 13 October 2017. That only leaves 3 months for the FCA to authorise/register firms who offer the newly regulated 'account information services' and 'payment initiation services' or who are losing their exemptions, as briefly explained below.

Payment initiation services

What constitutes a PIS is quite complex, but firms who are broadly in that space (including payment gateway providers) are perhaps more aware of the scope of their activities and the challenge ahead - although those relying on an exemption need to check their assumptions.  

Account information services

The new “account information service” basically involves providing information from one or more payment accounts held by the user with one or more other payment service providers. Initially, the list of services the government said might constitute account information services included some services of a much broader nature:
"• price comparison and product identification services;
• income and expenditure analysis, including affordability and credit rating or credit worthiness assessments...
[and] might include accountancy or legal services, for example”.
The government says it has heard the concerns that its interpretation was too broad and overlooked the requirement that a service must be conducted 'by way of business' in its own right, rather than merely as an ancillary part of a wider service. Examples of services that the government says that respondents were concerned about include:
"banks’ corporate functions; price comparison websites; accountants; financial advisors; legal firms; and Credit Reference Agencies (CRAs). Many of these services are currently provided via a contractual relationship between service providers, users, and ASPSPs, often referred to as Third Party Mandates (TPMs)."
The government now confirms, however, that:
"many uses of these mandates are likely to be outside of the scope of the PSDII. Examples could include power of attorney, where the services are unlikely to be undertaken ‘in the course of business’."
In addition, the FCA has already suggested this narrower view, based on the 'business test' in its own consultation on how it proposes to supervise PSD2.

Some narrower exemptions

Commercial agents can no longer act for both payer and payee. 

Firms operating gift card and other loyalty schemes not only face a stricter test of 'limited network', but must also notify the FCA if the total value of transactions executed over the preceding 12 months exceeds the amount of 1 million euros, and the FCA must then decide whether the exemption criteria. There is no allowance for transition if the service does not meet the exemption.

Technology service providers are no longer exempt if they also offer the newly regulated account information services or payment initiation services.   

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