PERG 15.5 Negative scope/exclusions

Schedule 1 Part 2 to the regulations contains a list of activities which do not constitute payment services. The following questions only deal with a selection of these. You should consult Annex 3 to this chapter for a full list of provisions, if you require more details.

Q33. Our business consists of cash payments directly from or to our customers - do the regulations apply to us?

No. The regulations

do not apply to payment transactions made in cash, without the intervention of an intermediary (see PERG 15 Annex 3, paragraph (a)).

Q34. We are a charity which collects cash donations and transmits funds via bank transfer to the intended recipients - do the regulations apply to us?

No. The regulations do not apply to payment transactions consisting of non-professional cash collection and delivery as part of a not-for-profit or charitable activity (see PERG 15, Annex 3, paragraph (d)).

Q35. We provide a "cashback" service to our customers when they pay for their goods at the checkout - do the regulations apply to us?

No. The regulations do not apply to cashback services (see PERG 15, Annex 3, paragraph (e)).

Q36. We are a bureau de change providing cash only forex services and our clients do not have accounts with us - are these services outside the scope of the regulations?

Yes. The regulations do not apply to money exchange business consisting of cash-to cash operations where the funds are not held on a payment account (see PERG 15, Annex 3, paragraph (f)). If you allow a customer to pay for foreign currency using a payment card, this does not mean that you will be providing a payment service. The regulations will though apply to the payment transaction made using the payment card and the payment service provided to you by the merchant acquirer. In other words, the regulations apply to the merchant acquirer's services but yours remain outside the scope of authorisation or registration.

The regulations do not affect your obligations under the Money Laundering Regulations1.

Q37. Do the regulations distinguish between (i) payment transactions between payment service providers and (ii) payment services provided to clients?

Yes, broadly the object of the regulations is the payment service provided to specific clients and not the dealings among payment service providers to deliver the end payment arising from that service.

A payment transaction may involve a chain of payment service providers. Where a bank, for example, provides a cash withdrawal or execution of payment transaction service to its customer which involves the use of a clearing bank, it will still be providing a payment service to its customer.

The regulations do not though cover inter-bank settlement. More specifically, the regulations do not apply to payment transactions carried on within a payment or securities settlement system between payment service providers and settlement agents, central counterparties, clearing houses, central banks or other participants in the system (see PERG 15 Annex 3, paragraph (h)).

Q38. We are an investment firm providing investment services to our clients - are payment transactions relating to these services caught by the regulations?

Generally, no. Where payment transactions only arise in connection with your main activity of providing investment services, in our view it is unlikely that you will be providing payment services by way of business. In those limited cases where you are, the regulations do not apply to securities assets servicing, including dividends, income or other distributions and redemption or sale (see PERG 15 Annex 3, paragraph (i)).

Q39. We are a firm simply providing IT support in connection with payment system infrastructures - are these services subject to the regulations?

No. There is an exclusion for technical service providers which simply provide IT support for the provision of payment services (see PERG 15 Annex 3, paragraph (j)). Other services excluded from the regulations include data processing, storage and authentication.

Q40. Which types of payment card could fall within the so-called "limited network" exclusion (see PERG 15, Annex 3, paragraph (k))?

The "limited network" exclusion forms part of a broader exclusion which applies to services based on instruments that can be used to acquire goods or services only-

  • in or on the instrument issuer's premises; or
  • under a commercial agreement with the issuer, either within a limited network of service providers or for a limited range of goods or services...".

As regards (a), examples of excluded instruments could include:

  • staff catering cards - reloadable cards for use in the employer's canteen or restaurant;
  • tour operator cards - issued for use only within the tour operator's holiday village or other premises (for example, to pay for meals, drinks and sports activities);
  • store cards - where the card can only be used at the store's premises (so where a store card is co-branded with a third party debit card or credit card issuer and can be used as a debit card or credit card outside the store, it will still fall within the regulations).

As regards (b), this exclusion has two discrete limbs and so applies either to instruments that can be used only:

  • within a limited network of service providers; or
  • for a limited range of goods or services.

In our view, examples of excluded instruments falling within (b) include:

  • transport cards - where these are used only for purchasing travel tickets (for example, the Oyster card which provides access to different service providers within the London public transport system);
  • petrol cards (including pan-European cards) - where these are issued for use at a specified chain of petrol stations and forecourts at these stations;
  • membership cards - where a card can only be used to pay for goods or services offered by a specific club or organisation;
  • store card - where the card can be used at a specified chain of stores at their premises or on their website.

Instruments for the purpose of this exclusion can include, for example, vouchers and other devices.

Q41. Do the regulations specify or define what a "limited network" is for these purposes?

Neither the PSD nor consequently the PSD regulations provide any definition, conditions or criteria for determining what is a "limited network of service providers". The issue of whether or not a "limited network" is in existence is ultimately a question of judgement that, in our view, should take account of various factors (none of which is likely to be conclusive in itself). These include the number of service providers involved, the scale of the services provided, whether membership of the network is open-ended, the number of clients using the network and the nature of the services being offered.

While a "limited network" could include transport cards, petrol cards, membership cards and store cards, we would not generally expect "city cards" to fall within this exclusion, to the extent that these tend to provide users with access to a broad range of goods and services offered by a city's shops and businesses.

Q42. We are a payment services provider which carries out payment transactions for our own account - are these payment transactions excluded from the scope of the regulations?

Yes. Payment transactions carried out between payment service providers, or their agents or branches, for their own account, are all excluded from the scope of the regulations (see PERG 15 Annex 3, paragraph (m)). This would include, for example, electronic payment from one payment services provider to another, in discharge of a debt owed by one to the other.

Q43. We are a company which performs a group treasury function, including providing payment services directly to other group companies - are these intra-group payment services excluded from the regulations?

Yes. Intra-group payment transactions are excluded from the regulations, where payment is made direct from one group company to another (see PERG 15 Annex 3, paragraph (n)). This includes the case where the group company providing the payment service is, itself, a payment service provider otherwise subject to the regulations.

Q44. We are an independent ATM deployer offering cash dispensing facilities to users. We are not a bank. Are we subject to the regulations?

No, assuming you do not provide other payment services listed in Schedule 1 Part 1 to the regulations (see PERG 15 Annex 3, paragraph (o)). If other payment services are provided, all your payment services (including the ATM cash dispensing facilities) will be subject to the regulations, to the extent that other exclusions are inapplicable.