Payment Services and Electronic Money – Our …

1 Payment Services and Electronic Money Our ApproachThe FCA s role under the Payment Services regulations 2017 and the Electronic Money regulations 2011 July 2018 (version 2)2 The FCA s role under the Payment Services regulations 2017 and the Electronic Money regulations 2011 ContentsPreface 31 Introduction 42 Scope 123 Authorisation and registration 234 Changes in circumstances of authorisation or registration 585 Appointment of agents and use of distributors 696 Passporting 757 Status disclosure and use of the FCA logo 838 Conduct of business requirements 849 Capital resources and requirements 14110 Safeguarding 15511 Complaints handling 16712 Supervision 17513 Reporting and notifications 18014 Enforcement 19315 Fees 19716 Payment service providers access to Payment account Services 19917 Payment initiation and account information Services and confirmation of availability of funds 20618 Operational and security risks 21919 Financial

2 Crime 222 Annex 1 Useful links 227 Annex 2 Useful contact details 229 Annex 3 Status disclosure sample statements 231 Annex 4 Merchant acquiring 232 Annex 5 The Payment Process 235 Glossary of Terms 236 Abbreviations and Acronyms 238 approach Document version controlPublished onChanges5 July 2018 (version 2) New Guidance on operational and security risks under PSD2. Chapters affected: 13 and 18. Minor changes to clarify our guidance or reflect legislative change. Chapters affected: 3, 4, 5, 10, September 2017 (version 1) Changes to the approach Document to reflect PSD2 and the PSRs tracked marked version is available on our you to the contents listtakes you to helpful abbreviationsHow to navigate this document onscreen3 PrefaceThe FCA s role under the Payment Services regulations 2017 and the Electronic Money regulations 2011 PrefaceThis document will help businesses to navigate the Payment Services regulations 2 017 ( P S R s 2 017)1 and the Electronic Money regulations 2011 (EMRs) (together with our relevant rules and guidance), and to understand our general approach in this area.

3 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 businessThe 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 (2 EMD) 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.

4 Changes brought about by the introduction of the revised Payment Services Directive (PSD2)2 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 have merged our approach Documents on the PSRs 2017 and the EMRs as an outcome of the Call for 1 As amended by the Payment Systems and Services and Electronic Money (Miscellaneous Amendments) regulations 2017 , available at 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 Previously, The FCA s role under the Payment Services regulations 2009 and The FCA s role under the Electronic Money regulations 2011 Chapter 1 The FCA s role under the Payment Services regulations 2017 and the Electronic Money regulations 20111 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).

5 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 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 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 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 Payment Services and e- Money regulatory The regime implements PSD2 and 2 EMD.

6 As with the first Payment Services Directive (PSD1)4, PSD2 and 2 EMD (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 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 secure4 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 1 The FCA s role under the Payment Services regulations 2017 and the Electronic Money regulations 2011 protecting consumers encouraging lower prices for PSD2 will continue to govern the authorisation and prudential requirements for PIs and set the conduct of business rules for providing Payment The PSRs 2017 and parts of the Handbook implement PSD2 in the UK.

7 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. 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 The exercise of passporting rights is amended through the PSRs 2017 as well as the EBA Regulatory Technical Standards on passporting under PSD2.

8 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 ( 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.

9 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, 5 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.

10 7 Chapter 1 The FCA s role under the Payment Services regulations 2017 and the Electronic Money regulations 2011banks and building societies need to comply with the Banking: Conduct of Business Sourcebook (BCOBS). Make changes to the requirements regarding safeguarding. See Chapter 10 Safeguarding for further information. Make changes to the rules governing the access to Payment account Services that credit institutions provide to other PSPs. The rules state that access should be proportionate, objective and non-discriminatory (POND). See Chapter 16 Payment service providers access to Payment account Services for further information. Introduce two new Payment Services (account information Services (AIS) and Payment initiation Services (PIS)) and set out requirements and rights around when and how Payment accounts can be accessed. Changes relating to these new Payment Services can be found throughout this document.