PSD2 Payment services - Payment Institution


Under schedule 1 of the Payment Services Regulations 2017, you can offer the following payment activities under a payment institution license.

1. Subject to Part 2, the following, when carried out as a regular occupation or business activity, are payment services—

(a) services enabling cash to be placed on a payment account and all of the operations required for operating a payment account;

(b) services enabling cash withdrawals from a payment account and all of the operations required for operating a payment account;

(c) the execution of payment transactions, including transfers of funds on a payment account with the user’s payment service provider or with another payment service provider—

(i) execution of direct debits, including one-off direct debits;

(ii) execution of payment transactions through a payment card or a similar device;

(iii) execution of credit transfers, including standing orders;

(d) the execution of payment transactions where the funds are covered by a credit line for a payment service user—

(i) execution of direct debits, including one-off direct debits;

(ii) execution of payment transactions through a payment card or a similar device;

(iii) execution of credit transfers, including standing orders;

(e) issuing payment instruments or acquiring payment transactions;

(f) money remittance;

(g) payment initiation services;

(h) account information services.

Lets now look at the above permissions under the payment license in more depth.

1. Payment account

Permissions a, b, c, and d relate to issuing a payment account to customers. For example, your bank account with your high street bank is a payment account. Under the above context, with a payment institution license, you are able to issue your own payment accounts to customers. Under the payment account, you can enable your customer to perform the following payment activities under your payment account:

a. enable customers to withdraw cash

b. enable customers to deposit cash into the account

c. use your payment account to make purchases from retail merchants and online stores

d. setup direct debits and standing orders.

2. Merchant acquiring

Under permission (e) you are able to acquire retail merchant and enable them to accept electronic payments from their customers. In this scenario, you will have a direct relationship with your acquirer, which is usually a bank. Under your license, you can offer merchants the facility of accepting card payments.

3. Money remittance

Money remittance means cross-border payment transfers. They are also referred to as a money service business. Typical examples include Western Union, MoneyGram and Transferwise. Under this, you are able to set up either a physical store remittance business or an online business. In order to operate a money remittance business, you must obtain a payment license from the Financial Conduct Authority.

4. Payment and account initiation services

These are relatively new services under PSD2.

Under PSD2 an ‘account information service’ is an online service which provides consolidated information on payment accounts held by a payment service user with payment service providers. These services already exist in the UK, however, PSD2 will bring them within the scope of regulation. This will ensure that account information service providers (AISPs) can receive access to payment accounts, whilst also placing requirements on them to ensure security for users.

Under PSD2, a ‘payment initiation service’ is an online service which accesses a user’s payment account to initiate the transfer of funds on their behalf with the user’s consent and authentication. Payment initiation services provide an alternative to paying online using a credit card or debit card. These services are not widely used for online payments in the UK but are used in other European countries. The new rules will bring payment initiation services within the scope of regulation. This will ensure that payment initiation service providers (PISPs) receive access to payment accounts, whilst also placing requirements on them to ensure security for users.

Buckingham Capital Consulting is a leading international consulting firm, specialising in payment services, electronic money, banking and investment services. We are able to advise you on the best course of action and strategy based upon your business plan and financial product or service. We can you with licencing, compliance, operational setup and related services, including, obtaining banking facilities. Call us today on 02078662512 or 442078662512 if you are calling from abroad. Alternatively, please send an email to info@buckinghamcapitalconsulting.co.uk to arrange a telephone call or to discuss your requirements and plan. We are also able to arrange calls or conference calls using Skype. Our Skype ID is BCC54321. If you wish, we can arrange a meeting at one of our offices.

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