MARCH 15 2021: The scope of Payment Services Directive 2 (Directive (EU) 2015/2366) currently includes the 27 EU Member States, plus three Member States of the European Economic Area (EEA, i.e. Norway, Iceland and Liechtenstein).
PSD2 requires an authorisation for the provision of seven (7) different types of payment services (and see below in relation to AIS) and these payment services are defined in some detail in article 4 of Directive (EU) 2015/2366 (PSD2), are further explained in certain recitals to PSD2, are listed in Annex I to PSD2 and in the Schedule to the PSRs. Two of the payment services are new, being payment initiation services (PIS) (which enable the payer to avoid using a credit card) and account information services (AIS) . The provision of AIS services (called RAIS in the UK) requires an application for registration with the CBOI. The authorisation requirements and registration requirement applies/apply to payment services providers who are payment institutions.
Payment institutions may engage in certain ancillary activities to the extent permitted by regulation 29(1) of the PSRs and may grant credit relating to the payment services as referred to in paragraphs (4) or (5) of the Schedule to the extent permitted by regulation 29(4) of the PSRs (not reproduced here).
A payment institution must not conduct the business of taking deposits or other repayable funds, within the meaning of Article 9 of Directive 2013/36/EU (regulation 29(5) of the PSRs).
PSD2 is supplemented by Commission Delegated Regulation (EU) 2018/389 (PSD2 Regulation), which amongst other things creates regulatory technical standards for (i) strong customer authentication (SCA) of which the SCA exemptions are of particular importance, but are complex, (ii) application program interfaces of credit institutions, interfacing with other credit institutions and payment services providers and (iii) for secure communication.
The requirements of the PSD2 Regulation and PSD2 are very significant from the perspective of developing the applicant’s payment services software and the drafting of the applicant’s terms of business.
An applicant seeking authorisation/registration as a Payment Institution (PI) or Electronic Money Institution (EMI) must be a corporate body constituted under Irish law and it must have its head office, and its registered office, in Ireland . In order to meet the requirements of regulation 21 of the PSRs, an applicant PI must carry out at least part of its payment services business in Ireland.
Long before making an application, it is vital for the applicant to have gone through the (i) CBOI Application Form of May 2018 (though it can change) its Guidance Note; (ii) the CBOI Anti Money Laundering, Counterterrorist Financing and Financial Sanctions Pre Authorisation Risk Evaluation questionnaire , (iii) the Qualifying Holding Application Forms and (iv) as regards Fitness and Probity, the relevant Individual Questionnaire (IQ) for each person who will hold a PCF role (typically board members, senior management and key function holders). These documents are accessible through this link >.
Guidance on Fitness and Probity is currently accessible through this link > and the related CBOI “Dear CEO Letter” of 17 November 2020 on compliance with the Fitness and Probity Regime is accessible here >.
Connected to Fitness and Probity, are the Minimum Competency Code and the Minimum Competency Regulations which will often change: these need to be checked for applicability.
For AIS (service 8 of the Schedule to the PSRs) is Nil; Money Remittance (service 6 of the Schedule to the PSRs) is €20,000, PIS (service 7 of the Schedule to the PSRs) is €50,000. For the other payment services (services 1-5 of the Schedule to the PSRs) is €125,000.
For EMIs, Initial Capital Required EMI is €350,000 or for Small EMI is €125,000 .
For applicants who wish to provide any or all of the payment services 1 to 6, these are calculated using one of three methods A, B or C (as determined by the CBOI) in Articles 8 and 9 of PSD2 ( regulations 9 to 16 of the PSRs). Where an applicant intends to provide non electronic money related payment services, they must ensure that calculations under A, B and C are all provided. The Central Bank is obliged to direct the firm to calculate its own funds requirement under one of these methods
Generally see pages 19 to 21 of the CBOI Guidance Note which explains the issues related to Own Funds including the additional requirements for EMIs clearly .
The CBOI application form requires the submission of the following documents with it:
The CBOI has set out clearly on its website what are the Key Stages of the Application process.
It is essential an applicant uses a legal firm with the knowledge and experience to advise on and help apply and draft all the documents referred to above. This is particularly true as regards the Security Policy document. The writer has such knowledge and experience.
March 2021 © Copyright Paul Foley – All Rights Reserved.
For advice on any aspect covered in this report, contact Paul Foley
Law Society of Ireland S3846 and F10040
Law Society of England and Wales SRA number 209146