On 28.6.2023, the EU Commission presented proposals for a Payment Services Directive (“PSD3“) and a Payment Services Regulation (“PSR“). We have already given a brief overview of the main contents of the PSD3 and the PSR as well as of significant innovations compared to the PSD2 and the E-Money Directive in our article “The EU Commission’s proposal for PSD3 and PSR – a first overview” of 5 July 2023. In the following, we will look in a little more detail at the proposed new rules on limited networks and limited range instruments. In the following, we summarise these exemptions under the term “LNE exemptions” for better readability.
What the LNE exemptions are about
The LNE exemptions are constellations in which the legislator exceptionally assumes that no payment service or e-money business exists, although the requirements for a payment service or an e-money business would actually be met. In practice, these exceptions are relevant for the following payment products, among others:
– stadium tickets
– gift cards from retail chains
– city cards
– fuel cards.
In these constellations, an LNE exception applies if certain conditions are met. Those who would like to learn more about the LNE exceptions can do so in our FinTech online course #7.
This is what would change with the PSD3 and the PSR for the LNE exemptions
Many people dealing with an LNE exemption today are concerned that something will change about the existing requirements for LNE exemptions. This is because the written administrative practice of BaFin and the EBA has provided a lot of clarity on when a payment product falls under an LNE exemption and when it does not. We can reassure these people. The Commission’s proposals for PSD3 and PSR would change virtually nothing in terms of the requirements for LNE exemptions. A little uncertainty remains nevertheless. This is because the EBA is supposed to work out details on the LNE exemptions in so-called Regulatory Technical Standards (RTS). Since these RTS do not yet exist, no one knows what the EBA will write into them. On the other hand, the EBA has published guidelines on this topic in 2021. We do not believe that the EBA will substantially deviate from these guidelines when drafting the RTS. Therefore, we believe that those of you dealing with LNE exemptions can sit back a little for now.
What’s happening with special purpose cards
The most attentive readers may have noticed that we have not written anything about purpose cards in this post. Purpose cards are payment products for specific social and tax purposes, which are also supposed to fall under an LNE exemption under certain conditions. We have not written anything about purpose cards because there are to be no changes to them. This is a bit of a pity because there is practically no use case for these products in Germany. This is because the BaFin requirements for these products are in principle already included in the requirements for limited-range products. This means that purpose cards hardly have an independent use case besides limited-range products. We would have liked the Commission to breathe a little life into the purpose cards. This is also because the EBA is also rather coy in its guidelines on these products.