PIF Seeks Clarity, Exemptions as U.K. Moves toward PSD2

Written by FinTech Futures
5th April 2017

As the U.K. moves ahead with plans to implement the revised Payment Services Directive (PSD2), the Prepaid International Forum (PIF) has asked regulators for more clarification on certain aspects of how the framework will be applied in the country. In a response letter to HM Treasury’s February request for industry consultation on its PSD2 implementation plan, PIF expressed support for the government’s strategy.

The U.K.-based prepaid industry association also encouraged regulators to take advantage of certain exemptions in PSD2 to benefit U.K. payment services providers facing uncertainty during the ongoing Brexit process. (The U.K. will implement PSD2 by January 2018, despite its planned departure from the European Union.)

Questions Remain on PSD2

In the letter, PIF requested clarification from HM Treasury on several points, including the interpretation of which types of products would be exempt from certain requirements of PSD2, including those that can only be used at a specific retailer or specific retail chain. PIF also requested exemptions for limited acceptance payment products, which can be used at multiple retailers but only those that sign up to accept the product. Products like these, which would include shopping mall cards, should be exempt from the Strong Customer Authentication (SCA) requirements of PSD2 because they typically are non-reloadable, prohibit cash withdrawals and are usable only in one EU member state, all of which mitigate the risk of fraud losses. Requiring SCA procedures for those products would introduce costs that could threaten the commercial viability of such programs, PIF contends.

PIF also requested more detailed information on the procedure for firms that were previously unregulated but will be brought under the scope of PSD2. The process to appeal such a decision and transition arrangements for a wind-down of unregulated programs and startup of regulated programs also should be clarified, PIF said.

The group also took issue with PSD2 requirements to subject exempt providers from annual review to assess whether they should maintain exempt status. Mandating annual review “is likely to adversely impact the business’s growth, third-party confidence in the program structure (including potential partners and participants of a program) and consequently the overall value of these programs,” PIF wrote in its letter. “Given the impact on business, we would like to understand the motive of the annual review and ask whether it is necessary.”

The public comment period for the PSD2 proposal ended on March 16. The U.K. Treasury currently is analyzing comments and is expected to publish the results soon.

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