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The aim of the Payment Services Directive is to foster a single market in retail payment services across the European Economic Area (EEA).

All firms providing payments services by way of business must:

  • Be authorised by or registered with the FCA, unless they are exempt; and
  • Meet the Payment Services Regulations 2009 (PSR’s) conduct of business requirements.

Who is affected by the PSRs?

  • The firms that will be affected by the PSRs include banks, building societies, e-money issuers, and money remitters.
  • Firms affected by the PSRs must be authorised or registered with the FSA as a Payments Institution (‘PI’).
  • Firms which are already registered with the FCA and appear on the FSMA Register and E-Money register do not need further registration.

Which services are covered by the PSRs?

Services covered include, amongst other things, those relating to the operation of payment accounts (for example, cash deposits and withdrawals from current accounts and flexible savings accounts), execution of payment transactions, card issuing, merchant acquiring, money remittance and certain mobile phone-based payment services.

The focuses are on electronic means of payment including direct debit, debit card, credit card, standing order, mobile or fixed phone payments and payments from other digital devices as well as money remittance services; it does not apply to cash-only transactions or paper cheque-based transfers.

Exemptions and exclusions

There is a broad range of activities which do not constitute payment services. Amongst these excluded activities are:

• Money exchange business (for example, bureaux de change);  • Payment services based on instruments used within a limited network of   service providers or for a limited range of goods or services.

Passporting

Once authorised, the firm acquires the right to ‘passport’ that authorisation to other EEA member states, this means that a UK authorisation gives them the right to establish or provide services across the EEA.

Conditions for authorisation

The FSA may refuse the application for authorisation unless certain conditions are met in relation to - holding the amount of initial capital required; the location of the registered office or head office; the applicant must satisfy the FSA that, taking into account the need to ensure the sound and prudent conduct of the affairs of the institution, it has robust governance arrangements for its payment service business, including a clear organisational structure with well-defined, transparent and consistent lines of responsibility, effective procedures to identify, manage, monitor and report any risks to which it might be exposed; and adequate internal control mechanisms.

The FSA must be satisfied that any persons having a qualifying holding in the firm are fit and proper persons.The firm must comply with a requirement of the Money Laundering Regulations 2007.

Small payment institutions

Broadly, the category of small payment institutions will only be relevant to firms executing payment transactions with a monthly average of 3 million euros (or an equivalent amount) or less, over a 12 month period. Broadly, small payment institutions are not subject to certain requirements of the PSD regulations (including capital requirements), but they are subject to a registration regime and the conduct of business provisions. Such institutions do not benefit from the right to passport.

Conduct of Business

All PIs must comply with conduct of business requirements, these relate broadly to information that must be provided to the customer before and after execution of a payment transaction and the rights and obligations or both payment service provider and customer in relation to payment transactions.

FC3

Disclaimer: These guides are intended to provide information only and should not be viewed as a recommendation or advice. Oury Clark are authorised and regulated by the Financial Services Authority for investment business.

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