The Financial Conduct Authority has sought stakeholder views on the guidance it provides to payment service providers, and those firms seeking to become authorised for such, on the regulatory regime that applies to them.
Anyone that currently operates within the payments industry is likely to be familiar with the FCA’s current approach document and the Perimeter Guidance Manual as invaluable sources of information.
- The Payment Services Approach Document aims to help firms navigate through the PSRs, how firms go about becoming authorised and sets out the FCA’s general regulatory approach in this area.
- Perimeter Guidance Manual (PERG 15) contains guidance aimed at helping businesses consider whether they need to be authorised or registered for the purposes of providing payment services in the UK.
Both of these sources were introduced at the same time as the PSRs in 2009.
Call for input
On 10 February 2016, the FCA published a paper calling for input into how it approaches the current payment services regime. This is largely in response to the adoption of PSD2 which will amend the current rules for payment service providers. Although HM Treasury will be responsible for transposing the Directive into national law (by January 2018), the FCA will need to update its Approach Document and PERG 15 to reflect the new regime.
The FCA is not seeking views on PSD2, rather it seeks to understand whether the current guidance has “kept pace with market developments and growth in payment services” so that any existing issues can be dealt with at the same time as the PSD2 update.
In this context, here is our input to the FCA on this guidance:
- Really Useful Guidance: we and our clients find the combination of the two Approach Documents and PERG really useful. We regularly refer to it, and while it naturally does not cover all bases, it does cover much of the basic analysis. After many (too many) iterations in the early days, it has settled and become a pretty stable document – this is really important for all stakeholders.
- UK leadership: it also has international reach in that we often refer to it when giving commentary on how the PSD or EMD2 should be interpreted in other parts of the EU. In this way it demonstrates the UK’s lead in this field. Even if the interpretation is different in others Member States, its accessibility, transparency and value add is head and shoulders above others.
- Development: the FCA ‘call for input’ asks for suggestions as to its development. We think there are key areas: structure; scope; and specific topics.
- Structure: given the huge degree of overlap between the PSD and EMD2 and their UK derivatives the PSRs and the EMRs, we strongly believe that there would be real merit in having a single combined Approach Document covering both fields. The signposting to PERG could be improved, indeed, it would be helpful if this could be copied out into the Approach Document itself, so that there is one key source material.
- Scope: the scope of the guidance should be expanded in three key ways:
- PERG: perimeter issues are numerous in this field and will become more so when PSD2 is implemented. There is a clear need for further detailed guidance in this respect, including specifically around: acquiring; payment collection services; marketplaces; and the limited network exemption.
- Applications: the combination neatly covers: do I need to be regulated? And how will the FCA regulate me? But it does not cover at all: how do I become regulated i.e. the process of application for authorisation/registration and what the FCA is looking for in this context, for example around head office, MLRO and capital requirements. This feels like a key missing ingredient.
- Other, connected regulations: there are so many other, connected regulations, like the Payment Accounts Directive, the Interchange Fees Regulation, etc., all of which could usefully be signposted as part of the FCA guidance, along with details of the relevant competent authority. This is becoming quite a minefield for interested stakeholders (even the interaction between the FCA and HMRC) and a simple list or table as part of the FCA guidance would help enormously. We suspect it would be difficult to extend this to other initiatives, like the Code on Misdirected Payments, the Open Banking Initiative and so on.
- Specific topics: there is a long list of specific topics any updated Approach Document should include and there is much covered in other industry guidance (such as by the EBF and Payments UK) which could usefully be incorporated (any contention around topics covered into this other guidance should now have dissipated or been countered expressly by the FCA). However, here is our top 5:
- the permitted investments for relevant customer funds held by PSPs/EMIs;
- the distinction between agents and distributors and outsource providers;
- the notification obligations – both the concept of ‘materiality’ and as regards change in controllers;
- around the passporting right – who initiates this, when exactly does it start, etc.; and
- the use of earmarking of funds.
As well as this call for input, which closed on 23 March 2016, the FCA is expecting to engage with relevant stakeholders on the issues raised over the coming months. In addition, the FCA is planning a further consultation that will focus specifically on the changes to its approach brought about by PSD2.
HM Treasury is expected to consult in Summer 2016 on the UK transposition of PSD2.