PERG 15.3 Payment Services

Q14. Where do we find a list of payment services?

In Schedule 1 Part 1 to the PSD regulations. There are seven payment services, set out in full in Annex 2 to this chapter. References to categories of payment services below adopt the structure of Schedule 1 to the PSD regulations: for example, paragraph (1)(f) refers to "money remittance".

Q15. When might we be providing services enabling cash to be placed on a payment account (paragraph 1(a))?

When you are accepting cash electronically or over-the counter or through ATMs which is placed on a payment account which you operate.

The crediting of interest to a payment account is not a service enabling cash to be placed on a payment account.

Q16. What is a payment account?

"Payment account" is defined in regulation 2 as "an account held in the name of one or more payment service users which is used for the execution of payment transactions". When determining whether or not an account is a "payment account" for the purposes of the regulations, in our view it is appropriate to focus on its underlying purpose. To establish this it is necessary to consider a number of factors including:

  • the purpose for which the account is designed and held out;
  • the functionality of the account (the greater the scope for carrying out payment transactions on the account, the more likely it is to be a payment account);
  • restrictive features relating to the account (for example, an account that has notice periods for withdrawals, or reduced interest rates if withdrawals are made, may be less likely to be a payment account);
  • a limited ability to place and withdraw funds unless there is additional intervention or agreement from the payment service provider (this will tend to point more towards the account not being a payment account); and
  • the extent to which customers use an account's payment service functionality in practice.

Accordingly, in our view, "payment accounts" can include, for example, current accounts, e-money accounts, flexible savings accounts, credit card accounts and current account mortgages. On the other hand, in our view fixed term deposit accounts (where there are restrictions on the ability to make withdrawals), child trust fund deposit accounts and cash Individual Savings Accounts (ISAs) are not payment accounts.

We consider only the features of the account used for the purpose of making transactions, to which the regulations apply, fall within scope. For example, in the case of a current account mortgage, the mortgage element of the account would be out of scope, albeit that a mortgage payment from the current account would be subject to the regulations.

In our view, mortgage or loan accounts do not fall within the scope of the regulations. This is on the basis that the simple act of lending funds or receiving funds by way of repayment of that loan does not amount to provision of a payment service.

Q17. When might we be providing services enabling cash withdrawals from a payment account (paragraph 1(b))?

When you provide, for example, an ATM cash withdrawal or over the counter cash withdrawal service in relation to the payment accounts which you operate.

Q18. When might we be providing execution of (i) direct debits, including one-off direct debits, or (ii) payment transactions through a payment card or a similar device or (iii) credit transfers, including standing orders (paragraph 1(c))?

When you provide a service to clients enabling them to complete payment by way, for example, of direct debit, payment card (such as a debit card), electronic cheque or credit transfer (such as a standing order). Where these services are provided using a credit line though, you will be providing the service in paragraph 1(d).

In our view, the simple act of accepting payment by way of debit card or credit card for supply of your own goods or services does not generally amount to the provision of the service of execution of payment transactions through a payment card. For instance, where a restaurant accepts payment from a customer using his payment card it is not providing a payment service to the customer, but simply accepting payment for the price of the meal. It is merely a payment service user receiving payment from the customer. The firm providing the merchant acquiring service enabling the restaurant to process the card transaction and receive payment is providing a payment service in this instance.

As regards a "direct debit", regulation 2 defines this as meaning "a payment service for debiting the payer's payment account where a payment transaction is initiated by the payee on the basis of consent given by the payer to the payee, to the payee's payment service provider or to the payer's own payment service provider". As well as the likes of utility and other household bills, in our view this definition extends to a case where sender and recipient are the same person, for example where the person holds two bank accounts in two different banks.

Q19. When might we be providing execution of the following types of payment transaction where the funds are covered by a credit line for the payment user-

(i) direct debits, including one-off direct debits,

(ii) payment transactions executed through a payment card or a similar device,

(iii) credit transfers, including standing orders (paragraph 1(d))?

When you provide a service to clients enabling them to complete payment, for example, by way of direct debit using overdraft facilities, payment card such as deferred debit or credit card, electronic cheque using overdraft facilities or credit transfer (such as a standing order) using overdraft facilities.

Q20. When might we be issuing payment instruments (paragraph 1(e))?

A payment instrument is defined in regulation 2 and means any (a) personalised device or (b) personalised set of procedures agreed between the payment service user and the payment service provider, in both cases where used by the payment service user in order to initiate a payment order.

Examples of persons issuing payment instruments, for the purposes of Schedule 1 to the regulations, include credit card and debit card issuers and e-money issuers. In addition to the issue of physical instruments such as cards, arrangements by way of telephone call with password, or online instruction by which a payment order can be initiated could also amount to issuing payment instruments, depending on the service being provided.

We would not generally expect you to be issuing payment instruments (or providing other payment services) if all you do is issue direct debit mandates simply for the purpose of being paid for the goods or services you provide to your customers or clients. Nor if the payment transaction is initiated by paper, would that document be considered to be a payment instrument.

Q21. When might we be acquiring payment transactions (paragraph 1(e))?

Acquiring of payment transactions is defined in regulation 2 as “a payment services provided with a payment service provider contracting with a payee to accept and process payment transactions which result in a transfer of funds to the payee.”

This includes traditional ‘merchant acquiring’ services enabling suppliers of goods, services, accommodation or facilities to be paid for purchases arising from card scheme transactions. However, as set out in Recital 10 of PSD2 it is designed to be technology neutral and capture different business models, in particular:

In our view, this definition is likely to capture ‘master merchants’ or ‘payment facilitators’ that contract with payees for the provision of acquiring services and activities carried out by businesses that aggregate carrier billing transactions. However, provision of merely technical services to merchants, such as processing or storage of data and provision of terminals or online gateways, will not itself constitute acquiring.

If your business includes "merchant acquiring". This will typically include providing services enabling suppliers of goods, services, accommodation or facilities to be paid for purchases arising from card scheme transactions.

Q22. When might we be providing money remittance services (paragraph 1(f))?

Money remittance is defined in regulation 2 as: "... a service for the transmission of money (or any representation of monetary value), without any payment accounts being created in the name of the payer or payee, where-

  • funds are received from a payer for the sole purpose of transferring a corresponding amount to a payee or to another payment service provider acting on behalf of the payee; or
  • funds are received on behalf of, and made available to, the payee".

The service of money remittance cannot therefore involve the creation of payment accounts. Recital 7 of the PSD describes money remittance as "a simple payment service that is usually based on cash provided by a payer to a payment service provider, which remits the corresponding amount, for example, via communication network, to a payee or to another payment service provider acting on behalf of the payee".

This service is likely therefore to be relevant, for example, to money transfer companies and hawala brokers.

Q23. We are a mobile network operator offering our client facilities to transfer funds - how do we tell whether and when the regulations apply to us (paragraph 1(g))?

You will be subject to the regulations if you provide a payment execution service to customers and:

  • customer consent to execute payment is provided by means of the mobile device you provide; and
  • you receive payment for transmission to a supplier of goods and services, acting only as intermediary between the payment service user and supplier.

By contrast, when you add value to the good or service being purchased from a third party, you will not be acting only as an intermediary and hence will not be subject to the regulations (see PERG 15 Annex 3, paragraph (l)). Adding value may take the form of adding intrinsic value to goods or services supplied by a third party, for instance by providing access (including an SMS centre), search or distribution facilities. Nor will you be providing this service when a customer uses his mobile device merely as an authentication tool to execute payment from his bank account (for example, simply providing instructions to his bank via SMS), and does not transmit payment via you. Mobile phone top-ups also fall outside the scope of the regulations.

Q24 Do the same provisions apply to other types of telecommunications providers as they do to mobile network operators?

Yes, paragraph 1(g) and PERG 15 Annex 3 (l)refer to payment transactions executed by means of any telecommunications, digital or IT device. These could include, for example, desktop and laptop computers, personal digital assistants and interactive television sets. Our guidance for mobile phone operators in relation to these provisions applies, by analogy, to other types of telecommunication provider.

Q25. We are a bill payment firm. Do the PSD regulations apply to us?

Not in our view where you receive payment on behalf of the payee so that your receipt constitutes settlement of the payer's debt to the payee. By contrast, if you provide a remittance service which does not involve receipt on behalf of the payee and corresponds to the definition of "money remittance" in regulation 2, you will be providing a money remittance service.