Payment service directive (PSD2) does not apply to services based on special payment instruments that can be used only in a limited way and that meet one of the conditions stipulated in Article 3(k) PSD2 (limited network exclusion). Such services include store cards, fuel cards, public transport cards etc. Due to inconsistent application of the limited network exclusion by the different EU national competent authorities (NCA) the European Banking Authority (EBA) issued Guidelines on the limited network exclusion under the PSD2 (Guidelines), with the purpose of clarifying how the NCAs should assess whether services based on special payment instruments qualify as limited and are, therefore, not subject to the PSD. Guidelines came into effect on 1 June 2022.
The Guidelines require for issuers already benefitting from the limited network exclusion to resubmit the notification under Article 37(2) PSD2 (notification) taking into account the provisions of the Guidelines at the latest by 1 September 2022. Consequently, this submission turns focus to Guideline 6.1, which stipulates that notification should be submitted by the issuer to the NCA in each Member State where the users of the payment instrument are located and where the total value of payment transactions executed over the preceding 12 months exceeds the amount of EUR 1 million (threshold) in the Member State.
Before the changes introduced by Guidelines, the limited network providers’ obligations were clear and relatively easily met in Slovenia. Slovenian limited network provider, who exceeded the prescribed threshold, would have been required to make notification to the Bank of Slovenia pursuant to Article 37(2) PSD2 and 23(1) Slovenian ZPlaSSIED and the Bank of Slovenia would issue its opinion on whether the service qualifies as limited and therefore out of the PSD2 scope.
However, new Guideline 6.1 now raises several questions on the specific and possibly extended obligations of the limited network provider pursuant to the PSD2 and the Guidelines. Most significant questions being:
i) Must now the issuer of the special payment instrument that is being issued to users in other Member States (i.e. to legal persons registered abroad or natural persons with address abroad) send notification to NCAs in all Member States, where the users are located and in which the threshold is exceeded?
ii) Must the issuer of the special payment instrument notify NCAs in all Member States in which users are located directly at the time of the special payment instrument use (when their seat or address is in some other Member State), if the threshold is exceeded?
iii) Will NCA of each Member State review and evaluate such notifications independently or will such notifications only be a formality and primarily competent authority (i.e. Bank of Slovenia for Slovenian issuer of the special payment instrument) will make evaluation on whether services based on special payment instruments qualify as limited?
As per Bank of Slovenia clarifications, it would appear the answers to the first two questions are positive. In accordance with the Guideline 6.1 the issuer of the special payment instrument must send notification to NCAs in all Member States where the users of the special payment instrument are located and where the threshold is exceeded. The notion of “user” is defined as holder of the special payment instrument as well as the supplier of goods and service who allows for the payment with the special payment instrument (merchant). Relevant location is special payment instrument holder’s address or seat as well as physical location of the merchant’s store.
Services that fall under limited network exclusion are not subjected to PSD2 regulation. Consequently, the issuer of the special payment instrument cannot benefit from EU passporting. Thus, NCA of each Member State in which notification will have to be submitted pursuant to the Guidelines, will independently review and evaluate whether special payment instrument may benefit from the limited network exclusion.
As it turns out, Guideline 6.1 is particularly significant for limited network providers who provide their services across EU and exceed the prescribed threshold. The practical effects of the Guideline 6.1 on the notification obligations are major and should be closely reviewed and evaluated by the service providers.
Law firm Kavčič, Bračun & Partners, o.p., d.o.o.
Ljubljana, 5 July 2022