Q26. Are there any exclusions from the definition of electronic money that we should be aware of?
Yes. The Electronic Money Regulations have two express exclusions:
- the first covers monetary value stored on instruments that may be used to purchase goods and services only in the issuer's premises or within a limited network of service providers or for a limited range of goods or services (regulation 3(a)). See PERG 15 Q40 & Q41 which deal with the same term for the purposes of the Payment Services Regulations; and
- the second covers monetary value used to make payment transactions executed by means of any telecommunication, digital or IT device where the goods or services are delivered to and used through such a device but only where the operator of the device does not act only as an intermediary between the user and the supplier (regulation 3(b)). See PERG 15 Q23 for guidance on what 'acting only as an intermediary' might include.
Q27. We offer branded prepaid cards which consumers can use to purchase goods in a particular shopping mall. Are we issuing electronic money?
Yes, it is likely that you will be issuing electronic money unless you are able to fall within an exclusion. The most likely exclusion is if the card is only used to purchase goods and services in your premises or within a limited network of service providers. In our view you will only be able to take advantage of this exclusion here if:
- it is made clear in the relevant terms and conditions of the card that the purchaser of the value is only permitted to use the card to buy from merchants located within that particular shopping mall; and
- the facility to use the card to purchase goods and services outside this shopping mall has been disabled.
For the purposes of the second exclusion referred to at Q26, can you explain when goods or services are "used through" a telecommunication, digital or IT device ("a relevant device")?
It is important to realise that it is the good or service purchased on a relevant device that must be used through that device for the purposes of this exclusion.
So, for example, where a person purchases travel or cinema tickets using prepaid credit on a mobile phone and the ticket is sent to this phone and then used to gain entry onto a transport system or into a cinema, what is being purchased are rights to travel or to watch a film. The ticket itself is a form of receipt confirming the purchase of such rights. Accordingly, as the travel rights or the visit to the cinema cannot be experienced on a relevant device, such a purchase is likely to fail the "used through" part of the regulation 3(b) exclusion.
Examples of the sorts of goods and services that could meet the "used through" part of the regulation 3(b) exclusion are music, online newspaper or video content, electronic books and mobile phone applications. This is because these products are all capable of being enjoyed through the relevant device they have been delivered to.
For more guidance on this exclusion see PERG 15, Q23 and 24.