Recently I explained what a regulated e-money or payment service is, from an EU/EEA standpoint. In this post, I'll explain the scope of e-money and payments regulation and why a service might either fall outside that scope or be specifically excluded from it. Please get in touch with me at Leman Solicitors if you would like to discuss any of these issues from an Irish/EEA standpoint.

Is the payments activity itself offered by way of business?

This is where a lot of uncertainty can arise. In some countries (like the UK), the regulator is mainly concerned about payments activity that is operated or offered as the main activity or regular occupation itself, rather than as just a small part of another type of business activity. 

In other countries, however, this may not be a factor that the regulator considers to be very important, if at all, so you could still be regarded as in scope unless a specific exclusion applies. 

So it's worth checking this point with local lawyers in your target countries: there is no 'passporting' for a regulator's interpretation as to whether your service falls out of scope or is excluded.

Even if your activity is in scope, could an exclusion apply?

Some activities that appear to meet the test of being a "payment service" might actually benefit from a specific exclusion under the local law or regulations implementing the relevant directives - although this can still mean a lighter registration requirement.  

There is a long list of possible exclusions. Some reflect day-to-day activies, like paying another person directly, paying by paper cheque etc., or physically transporting cash. Other exclusions relate to quite specialised activity and/or involve a lot of explanation - which raises the possibility for different national regulators to interpret them differently.  

Exclusions that are likely to involve a lot of legal analysis are:

• the commercial agent's exclusion: which cover payment transactions from the payer to the payee through a commercial agent authorised via an agreement to negotiate or conclude the sale or purchase of goods or services on behalf of only the payer or only the payee;

• the technical service providers exclusion: which covers services that support the provision of payment services, without the service provider entering into possession of the funds to be transferred - like 'payment gateway' services or anti-fraud services, for example. Technical services include processing and storage of data, trust and privacy protection services, data and entity authentication, information technology (IT) and communication network provision, provision and maintenance of terminals and devices used for payment services, but exclude payment initiation services and account information services; 

• the limited network exclusion, which I've already mentioned in the previous approach as applying to the definition of e-money. Limited networks can include loyalty schemes, fuel card schemes and so on - and large networks are still subject to a registration requirement.  Some regulators may consider gift cards as falling within this exclusion, while others may not see them as within scope of payments regulation at all - note that, Ireland has also regulated gift cards separately, albeit with some issues. As explained previously, "Limited networks" are services based on specific payment instruments that can be used only in a limited way and meet any one or more of the following conditions:
  • allow the holder to acquire goods or services only in the issuer's premises; 
  • are issued by a professional issuer and allow the holder to acquire goods or services only within a limited network of service providers which have direct commercial agreements with the issuer; 
  • may be used only to acquire a very limited range of goods or services; or 
  • are valid only in a single EEA State, are provided at the request of an undertaking or a public sector entity, and are regulated by a national or regional public authority for specific social or tax purposes to acquire specific goods or services from suppliers which have a commercial agreement with the issuer. 

Conclusion:

There is often no simple answer as to whether your activities constitute a regulated e-money or payment service, or are out of scope or excluded, but I've explained the main issues above. Please get in touch with me at Leman Solicitors if you would like to discuss any of these issues from an Irish/EEA standpoint.