In the context of payment services and e-money, many speak of Limited Networks and Limited Range. This refers to exclusions. If such an exclusion exists, there is no payment service and no e-money business, even if the criteria for these activities are otherwise met. If a product falls under an exclusion, the product issuer does not need a licence and does not have to comply with any money laundering obligations.
- for the purchase of goods or services only in the premises of the issuer or
- within a limited network of service providers under a direct commercial agreement with a professional issuer (otherwise limited network)
According to the administrative practice of the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht – BaFin), the following products may fall under the exclusion of the Limited Network:
- Inhouse card: Payment instruments that can be used at different merchants in a department shop (shop-in-shop system).
- Other limited network products: payment instruments that can be used at merchants operating under the same brand (e.g. restaurants or merchants in franchise systems); city cards within certain postcode areas, shopping mall cards, sport stadium payment cards.
BaFin considers that the exclusions of the Limited Network does not apply where a payment instrument can be used outside Germany. According to BaFin, a professional issuer exists if there is at least one accepting entity who is not the issuer. Strictly speaking, this is no additional requirement. If the issuer is the sole accepting entity, then there is already no payment service and no e-money business. The exclusion is therefore no longer relevant.
According to Section 2 (1) no. 10 b) ZAG, a limited range exists if a payment instrument can be used to acquire a very limited range of goods or services. In the opinion of BaFin, this may in particular be the case in the following constellations:
- fuel cards which can only be used to purchase products that are used to operate a motor vehicle (e.g. fuel, motor oil, wiper blades).
- meal cards which only enable to buy food and beverages intended for immediate consumption.
- fashion cards, which can only be used to purchase items that serve to give a person’s appearance (e.g. clothing, costume jewelry, cosmetics).
In contrast to the Limited Network, BaFin believes that the exclusion of the Limited Range can also apply to products that can be used cross-border.
Further Requirements for Limited Networks and Limited Range
In the case of prepaid products, BaFin is of the opinion that a limited network or limited range is generally only present if no more than EUR 250 are stored on a product and no more than EUR 250 are processed per month. If a company performs an activity within the scope of a limited network or a limited range and the total value of payment transactions relating to each single product executed over the preceding 12 months exceeds the amount of EUR 1 million, the company must notify BaFin of this. This applies regardless of whether the product is prepaid or postpaid.
Cover picture: Copyright © Yury Zap