Out-Law News 2 min. read

Transfers between e-money accounts not subject to rules on standards for credit transfers and direct debit transactions, says European Commission


Payment service providers will not have to conform to strict 'single euro payment area' requirements over the transfer of 'electronic money' (e-money) between dedicated e-money accounts, the European Commission has said.

In circumstances where e-money is transferred to a 'payment account' those requirements will have to be complied with, it added.

The Commission said that e-money accounts and payment accounts were different and that requirements contained in the EU's single euro payments area (SEPA) Regulation would not always need to be conformed to for e-money transfers.

"Since [the SEPA Regulation] refers to payment accounts, it is not applicable in the context of specific accounts used for the storage of electronic money," the Commission said.

E-Money is seen as being central to innovation in mobile payments while banks are considering how to establish and integrate their services via online platforms, tablets and smartphones.

E-Money generally involves the storage of the value of money on a pre-paid card; in a specific online space, such as in the cloud or on a service provider's server; or potentially on the 'hard drive' of an electronic device, such as a tablet or mobile phone. The perceived benefits of using e-money include efficiencies in mobile banking, where technical requirements for bank transfers do not need to be observed, and the ability of consumers to conduct transactions without giving out credit or debit account details.

Under the SEPA Regulation payment service providers must establish "payment schemes" that have the same "rules" for the purpose of carrying out credit transfers and direct debits. This is regardless of whether those transactions take place within national borders or a cross EU borders. The measures are designed to ensure that different payment systems are "technically interoperable" with one another in the trading bloc.

The Regulation sets out certain requirements that payment service providers must conform to when conducting those transactions, which include using a particular "payment account identifier" and "message formats", among other things.

Crucial to the application of the Regulation's rules is what is meant by 'payment account'. This is because the rules relate to transactions made to and from payment accounts. The term is defined in the text as "an account held in the name of one or more payment service users which is used for the execution of payment transactions".

However, the Commission said that the way that 'e-money' has been defined and referred to in the EU's Electronic Money Directive (EMD) means that what constitutes an e-money account is different to what constitutes a payment account, and that therefore the rules impacting on transactions to payment accounts do not need to be complied with for transfers between specific e-money accounts.

Under the EMD e-money is defined as "electronically, including magnetically, stored monetary value as represented by a claim on the issuer which is issued on receipt of funds for the purpose of making payment transactions ... and which is accepted by a natural or legal person other than the electronic money issuer".

A recital in the EMD, which is not binding but which allows for interpretation of the parts that are, states that "the definition of electronic money should cover electronic money whether it is held on a payment device in the electronic money holder's possession or stored remotely at a server and managed by the electronic money holder through a specific account for electronic money".

The Commission said that this implied that "a payment account is different from what is called an e-money account, which is a specific account for the storage of e-money in case of server based electronic money."

However, if transactions occur between e-money and payment accounts where the payment accounts are identified using either country-specific or international standard payment account identifiers – a basic bank account number or international bank account number – then the payment service providers will be required to conform to the SEPA Regulation rules, it said.

Earlier this week Google announced a new cloud-based expansion to its 'Google Wallet' application. Google Wallet enables users to make transactions using their mobile phone. However, now Google's servers will store users' credit or debit card details whilst a "wallet ID" is securely stored on users' phones and used to "facilitate transactions at the point of sale".

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