This article is going to briefly discuss the use of electronic payments. The use of a payment service is bound by a complex set of regulatory requirements. It involves several regulators such as, the Financial Conduct Authority (FCA). The Payment Services Directive ((EU) 2015/2366) which is applied in the United Kingdom (UK) with the Payment Services Regulations 2017 (PSRs) governs the provision of payment services in the UK by regulated payment service providers. The PSRs cover strict requirements on the conduct of business by payment service providers, security and protection of customer data and customer authentication.
Schedule 1 of the PSRs cover what a payment service is. They are:
- Services that enable cash to be paid into or withdrawn from a payment account and all the operations required for operating a payment account.
- Execution of payment transactions (direct debits, credit transfers and card payments).
- Issuing of payment instruments (credit/debit cards).
- Acquiring payment transactions.
- Money remittance.
- Account information services.
- Payment initiation services.
Payment initiation services provide a new way to pay electronically without the use of a payment card as payment is initiated directly using a push payment instruction on the payer’s payment account, with consent.
Some traders use recurrent electronic payments which often take the form of direct debit transactions using an instruction to the consumers bank or electronic money institution. These payments are subject to the banking industry consumer protection rules including the Direct Debit Guarantee vetting process.
Subscription pricing methods are also becoming more widespread for electronic payments. Subscription terms and conditions are governed by contract and consumer protection laws such as, the Unfair Contract Terms Act 1977. This payment model has been subject to rising scrutiny by the Competitions and Markets Authority.
The PSRs apply to businesses that provide payment services and their customers. This includes, banks, building societies, electronic money issuers, money remitters, non-bank credit card issuers, non-bank merchant acquires, providers of account information services and payment initiation services.
A UK business that provides payment services as a regular occupation or business activity in the UK must apply to the FCA to become either, an authorised payment institution, small payment institution or a registered account information service provider. Unless it is already another type of payment service provider or exempt.
Electronic money is electronically (including magnetically) stored monetary value, corresponded with a claim on the issuer, which is issued on receipt of the funds to make a payment transaction. It must be accepted as a payment method by a person other than the electronic money issuer. Examples of e-money are electronic pre-paid accounts for online use and pre-paid cards. Electronic money issuers and their customers are governed by the Electronic Money Regulations 2011. A UK business that intends to issue e-money in the UK must also be authorised or registered by the FCA unless it has permission under Part 4A of the Financial Services and Markets Act 2000 or is exempt.
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