On 13 April 2017, the UK Financial Conduct Authority (“FCA”) launched a consultation on a draft approach document setting out its approach to the implementation and interpretation of the Second Payment Services Directive (“PSD2”). Following a call for input in February 2016, the FCA’s revised draft approach is set out in a document entitled ‘Payment Services and Electronic Money – Our Approach’. The paper covers both the FCA’s approach to the regulation of payments services under PSD2 and the revisions to the e-money regulation and will replace separate FCA guidance documents on each of these topics.
PSD2 must be transposed into UK legislation by 13 January 2018 and will replace the UK’s existing Payment Services Regulations. In advance of this overhaul, some of the key topics the draft approach document provides guidance on are:
- Authorisation and Registration – PSD2 introduces changes to the information which must be provided and the conditions for authorisation when a business applies to become a Payments Institution (“PI”) or E-money Institution (“EMI”). The draft approach document sets out the FCA’s proposed interpretation of these additional requirements for prospective PIs and EMIs, as well as requirement as to when existing PIs and EMIs must provide additional information.
Appointment of Agents – The draft approach document sets out the FCA’s proposed changes to the appointment of agents and reflects the requirement for agents to be entered on a European Banking Authority register. In particular, it makes clear the information that is required to be provided to the FCA where a PI or EMI proposes to register an agent (information such as specifying the payment services the agent has been appointed to provide).
Passporting – PSD2 also introduces additional operational and security requirements for PIs and EMIs wishing to passport their services and introduces changes to the notification process between Member State regulators, which are outlined in the draft approach document.
Conduct of Business – The draft approach document sets out the FCA’s proposed changes to its conduct of business guidance reflecting introduced by PSD2 as well as feedback received in its February 2016 consultation and changing market conditions. These changes include amendments to the complaints handling process such as a general reduction in the time that payment service providers have to respond to customer complaints.
Safeguarding – The draft approach document contains information on the FCA’s proposed changes to safeguarding and provides additional guidance on how safeguarding should be managed by payment service providers. It also sets out when the obligation to safeguard starts and ends and also expands on the methods available to institutions for safeguarding funds.
Account Information Services – Account information services (“AIS”) are being brought within the scope of FCA regulation for the first time. An institution providing the account information must comply with the requirements set out by the FCA in the draft approach document which include: ensuring customers’ security credentials are not accessible to others; obtaining explicit consent of the customer before providing AIS; and ensuring only information from designated payment accounts and associated payment transactions is accessed.
The draft approach document is supported by a consultation document, asking for feedback in relation to specific questions concerning the FCA’s proposals. The consultation remains open until 8 June 2017 and the FCA intends to publish a Policy Statement in Q3 2017.