Payment Services and Electronic Money – Our …

Payment Services and Electronic Money ? Our Approach The FCA's role under the Payment Services Regulations 2017 and the Electronic Money Regulations 2011

September 2017

The FCA's role under the Payment Services Regulations 2017 and the Electronic Money Regulations 2011

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returns you to the contents list takes you to helpful abbreviations

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Contents

Preface

3

1 Introduction

4

2 Scope

12

3 Authorisation and registration

23

4 Changes in circumstances of

authorisation or registration

58

5 Appointment of agents and use of distributors

69

6 Passporting

75

7 Status disclosure and use of the FCA logo

83

8 Conduct of business requirements

84

9 Capital resources and requirements

141

10 Safeguarding

155

11 Complaints handling

167

12 Supervision

175

13 Reporting and notifications

180

14 Enforcement

192

15 Fees

196

16 Payment service providers' access to

payment account services

198

17 Payment initiation and account

information services and confirmation

of availability of funds

205

18 Operational and security risks

218

19 Financial crime

219

Annex 1

Useful links

224

Annex 2

Useful contact details

226

Annex 3

Status disclosure sample statements

228

Annex 4

Merchant acquiring

229

Annex 5

The Payment Process

232

Glossary of Terms

233

Abbreviations and Acronyms

235

The FCA's role under the Payment Services Regulations 2017 and the Electronic Money Regulations 2011 Preface

Preface

This document will help businesses to navigate the Payment Services Regulations 2017 (PSRs 2017) and the Electronic Money Regulations 2011 (EMRs) (together with our relevant rules and guidance), and to understand our general approach in this area. It is aimed at businesses that are, or are seeking to become:

? authorised payment institutions or small payment institutions (collectively ? PIs)

? authorised e-money institutions or small e-money institutions (collectively ? EMIs)

? registered account information service providers (RAISPs)

? credit institutions, which must comply with parts of the PSRs 2017 and EMRs when carrying on payment services and e-money business

The first version of the Payment Services Approach Document was issued in April 2009. Since then we have kept the document under review and have updated it to clarify our interpretation of the Payment Services Regulations 2009 (PSRs 2009) and answer businesses' questions. When the second Electronic Money Directive (2EMD) was implemented in the UK on 30 April 2011 through the EMRs, we produced a separate Approach Document for the e-money regime.

This September 2017 Approach Document has been updated throughout to reflect the following:

? changes brought about by the introduction of the revised Payment Services Directive (PSD2)1

? changes in the market that have an impact on the guidance we first published in 2009 and 2011 respectively

? the feedback received in the course of the Call for Input we published in February 2016

? feedback received in the course of CP 17/11 (published in April 2017)

? feedback received in the course of CP 17/22 (published in July 2017)

Our consultation papers and feedback statements can be accessed on our website.

We have merged our Approach Documents on the PSRs 2017 and the EMRs as an outcome of the Call for Input.2

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Directive (EU) 2015/2366 of the European Parliament and of the Council of 25 November 2015 on payment services in the internal

market, amending Directives 2002/65/EC, 2009/110/EC and 2013/36EU and Regulation 1093/2010, and repealing Directive

2007/64/EC.

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Previously, "The FCA's role under the Payment Services Regulations 2009" and "The FCA's role under the Electronic Money

Regulations 2011" respectively.

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Chapter 1

The FCA's role under the Payment Services Regulations 2017 and the Electronic Money Regulations 2011

1 Introduction

1.1 This document describes our approach to implementing the PSRs 2017, the EMRs and the small number of payment services and e-money-related rules in our Handbook of Rules and Guidance (the Handbook). It gives readers a comprehensive picture of the payment services and e-money regulatory regime in the UK. It also provides guidance for a practical understanding of the requirements, our regulatory approach and how businesses will experience regulatory supervision.

1.2 We use a number of similar terms with distinct meanings in this document. The glossary of terms, abbreviations and acronyms at the end provides a full list.

1.3 PSD2 requires the European Banking Authority (EBA) to produce a number of technical standards and guidelines for the implementation of PSD2. Where relevant, these should be read alongside this document.

1.4 The Payment Systems Regulator has published a separate Approach Document on the aspects of the PSRs 2017 for which it is solely responsible, including access to payment systems, and information to be provided by independent ATM deployers.

The payment services and e-money regulatory regime

1.5 The regime implements PSD2 and 2EMD. As with the first Payment Services Directive (PSD1)3, PSD2 and 2EMD (and their implementing regulations) are closely interlinked. Most e-money issuers will be carrying on payment services in addition to issuing e-money so will need to be familiar with both the PSRs 2017 and the EMRs, including the changes made as a result of the implementation of PSD2.

Payment Services 1.6 PSD2 was published in the European Union's (EU) Official Journal on 23 December

2015. The full text of the PSD2 can be found on the EU's website. PSD2 replaces PSD1 and updates the regulatory regime to reflect changes in the market and remove barriers to market entry. The main changes are summarised below. PSD2's aims include:

? contributing to a more integrated and efficient European payments market

? levelling the playing field for payment service providers (PSPs)

? promoting the development and use of innovative online and mobile payments

? making payments safer and more secure

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Directive 2007/64/EC of the European Parliament and of the Council of 13 November 2007 on payment services in the internal

market amending Directives 97/7/EC, 2002/65/EC, 2005/60/EC and 2006/48/EC and repealing Directive 97/5/EC.

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The FCA's role under the Payment Services Regulations 2017 and the Electronic Money Regulations 2011 Chapter 1

? protecting consumers

? encouraging lower prices for payments

1.7 PSD2 will continue to govern the authorisation and prudential requirements for PIs and set the conduct of business rules for providing payment services.

1.8 The PSRs 2017 and parts of the Handbook implement PSD2 in the UK. Most PSPs are required to be either authorised or registered by us under the PSRs 2017 and to comply with certain rules about providing payment services, including specific requirements for payment transactions.

1.9 The PSRs 2017 replace the Payment Services Regulations 2009 and make the following changes to the regulatory regime:

? Amend the authorisation and prudential regime for PSPs and e-money issuers that are not banks or building societies (and so otherwise authorised by us). Such businesses are known as authorised payment institutions (authorised PIs) and authorised e-money institutions (authorised EMIs). Authorised PIs and authorised EMIs can passport their services to other European Economic Area (EEA) States. Because of their UK authorisation, they have the right to establish or provide services across the EEA.4 The exercise of passporting rights is amended through the PSRs 2017 as well as the EBA Regulatory Technical Standards on passporting under PSD2. Further information can be found in Chapters 3 ? Authorisation and registration, 6 ? Passporting and 9 ? Capital resources and requirements.

? Continue to allow PSPs and e-money issuers operating beneath certain thresholds to be registered instead of obtaining authorisation (regulation 14 of the PSRs 2017 and regulation 13 of the EMRs). Such small PIs and small EMIs are unable to passport. See Chapter 3 ? Authorisation and registration and Chapter 6 ? Passporting for further information.

? Continue to exempt certain PSPs (e.g. banks) from PSD2 authorisation and registration requirements.

? Apply requirements to PIs regarding changes in qualifying holdings, so that the requirement (which already applied to EMIs) that individuals wishing to acquire or divest shares ? when they pass a given threshold ? are required to notify us. See Chapter 4 ? Changes in circumstances of authorisation and registration for further information.

? Make changes to the appointment of agents. See Chapter 5 ? Appointment of agents for further information.

? Make changes to the conduct of business requirements. This means requirements for information to be provided to payment service users, and specific rules on the respective rights and obligations of payment service users and providers. See Chapter 8 ? Conduct of business requirements for further information. In addition,

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At the time of publishing this Approach Document, PSD2 has been adopted under scrutiny by the EEA. It has not yet been

incorporated into the EEA Agreement or come into force in Norway, Liechtenstein or Iceland. For clarity, we will refer to PSD2

throughout this Approach Document as if it has been incorporated into the EEA Agreement and has come into force in Norway,

Liechtenstein and Iceland.

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