Today, the act of 26 March 2018 regarding the legal status and the supervision of credit institutions and electronic money institutions, the access to the undertaking of payment service provider and to the activity of issuing electronic money, and the access to payment systems (hereinafter the Act) has been published in the Belgian Official Gazette, and has immediately entered into force.
The new Act partially implements Directive (EU) 2015/2366 of 25 November 2015 on payment services in the internal market (hereinafter PSD II), and repeals and replaces the act of 21 December 2009.
Most of the public law aspects of PSD II are reflected in Book II of the Act. More specifically, the aim of the Act is to open up the payment market to third party payment service providers (offering payment initiation or account information services), to adopt stricter security requirements regarding electronic payments and the protection of customers' financial information, to increase the powers of the European Banking Authority and to implement regulatory technical standards. The private law aspects will be reflected in a different act, i.e. amending Book VII, Title 3 (Payment Services) of the Economic Law Code.
Since "goldplating" is not allowed by PSD II, almost all of the provisions have been literally copied from the text of PSD II. This is why the present client alert is focused on the scope of application of the Act, and the clarifications given thereunder (and in the preparatory works) compared to the act of 21 December 2009 and PSD II. For an overview of the other prudential obligations relating to security, sanctions, cross-border supervision, etc. we refer to our client alert of 23 December 2015 on PSD II.
2. Authorised or registered?
Book II of the Act partially retains the structure of the act of 21 December 2009. However, the Act now also contains a clear distinction between "authorised payment institutions" and "registered payment institutions", which are treated in two different Chapters of Title II. Every Chapter distinguishes the respective authorisation procedure, conditions for obtaining a licence or registration and conduct of business rules.
Authorised payment institutions are subject to the provisions of Chapter I. These institutions offer payment services in Belgium which trigger a licence requirement with the National Bank of Belgium (hereinafter the NBB). These are the payment services referred to in points 1 to 7 of Annex I.A (i.e. all payment services except for account information services).
Registered payment institutions are subject to the provisions of Chapter II. These institutions offer payment services involving risks that are considered less important for the market and the users than the risks associated with the activities of authorised payment institutions. These institutions are therefore exempt from the application of some of the provisions applicable to authorised payment institutions under Chapter I, to be determined by the King. Since they are subject to less strict regulations, they are not required to obtain a licence but merely have to be registered with the NBB. Within the category of registered payment institutions, a further distinction is made between "limited payment institutions" and "payment institutions offering account aggregation services".
"Limited payment institutions" are payment institutions which offer one or more of the payment services as referred to in points 1 to 5 of Annex I.A, but with a limited volume of activities (i.e. monthly average of the total value of payment transactions to be executed in the coming 12 months is lower than 1 million EUR). This category of institutions is not new; Article 48 of the act of 21 December 2009 was already devoted to this type of institution. It should also be noted that, as was the case before, these institutions cannot benefit from the passporting procedure.
The offering of "account aggregation/information services" is discussed under point 4 below.
3. Offered "in Belgium"
The Act itself does not specify when payment services are deemed to be "offered in Belgium", but the preparatory works of the Act of 10 December 2009 on payment services, now incorporated in Book VII, Title 3 (Payment Services) of the Economic Law Code (which will likely be amended in light of PSD II), provide some clarification. The preparatory works provide that a payment service is provided in Belgium, if a payment service provider, directly or through mediation, wishes to enter into a contractual relationship with potential payment service users in Belgium. For this purpose, the payment service provider must develop activities in Belgium or direct such activities, regardless through which means, towards Belgium or different countries, including Belgium.
With respect to the provision of financial services by foreign financial institutions, the NBB developed a practice, which is generally in line with the Commission's interpretative communication on the freedom to provide services and the interest of the general good in the Second Banking Directive, published on 20 June 1997, except for the influence of distant marketing or distant offering of a financial service on licensing requirements.
According to the NBB, it should be analysed case-by-case to which extent the provision and marketing of financial services to Belgian customers triggers the applicability of Belgian law. Financial services are being offered "in Belgium" if:
- the financial services are delivered in Belgium; or
- the offshore financial institution actively solicits “services” or “orders” from investors in Belgium by means of remote sales and marketing techniques or advertising.
The NBB holds the view that financial services are offered in Belgium, not only when the actual service (to be understood as the “characteristic performance” of the service) takes place on the Belgian territory, but also if the offshore financial institution solicits orders from Belgian residents in Belgium by means of remote sales techniques (e.g., cold calling, post, fax or e-mail), advertising or visits of relationship managers soliciting “services” or “orders”. Any active solicitation of Belgian clients directly or via intermediaries triggers Belgian licensing requirements.
There will, however, always exist a grey area between activities clearly requiring a licence and activities not requiring a licence. This should be analysed on a case-by-case basis.
4. Payment initiation and account information
As is the case under PSD II, the Act defines and regulates two new types of payment services, i.e. payment initiation and account information services, which have been added to the list of payment services in Annex I.A of the Act.
Firstly, a payment initiation service is defined under the Act as "a service to initiate a payment order at the request of the payment service user to debit an account held by the payment service user with another payment service provider , and to credit a different account". This definition slightly differs from PSD II, where this type of service is defined as "a service to initiate a payment order at the request of the payment service user with respect to a payment account held at another payment service provider." When a person wishes to offer payment initiation services in Belgium, it is required to obtain a licence from the NBB. We note, in this regard, that there are several new application requirements for obtaining a licence, in line with PSD II. For example, all applications now must include a description of the process in place to file, monitor, track and restrict access to sensitive payment data. There are also some specific additional requirements for payment initiation service providers, e.g., they must prove that they hold a professional indemnity insurance or a similar guarantee.
The definition of an account information service has been copied from PSD II, i.e. "an online service to provide consolidated information on one or more payment accounts held by the payment service user with either another payment service provider or with more than one payment service provider". As is the case under PSD II, the Act does not require that a licence be obtained in order to perform account information services in Belgium (to the extent that no other payment services are offered in Belgium). A mere registration with the NBB suffices. Several entities have started to offer account information services on the Belgian market in the past few months, including the main Belgian banks. The Act foresees a transitional regime, whereby legal persons under Belgian law providing payment initiation or account information services in Belgium before the date of entry into force of the Act, may continue to operate these services if they apply for a licence or registration within three months after the date of entry into force of this Act.
A first category of exemptions are the services that are never considered as payment services under the Act, which are listed in Annex I.B. These exemptions are mainly copied from the act of 21 December 2009 and from PSD II. The preparatory works of the Act provide the following clarifications as to the scope of certain of these exemptions:
- Commercial agents:
An e-commerce platform that operates as an intermediary on behalf of buyers and sellers and that enters into possession of funds (or has control over these funds) in Belgium, should be considered as a payment service and should obtain a licence as payment institution.
- Technical service providers:
The exempted technical services are offered to PSP's and imply that a contract is concluded with these PSP's. This is the main difference with payment initiation and account information services, which imply that a service is offered to the users, and that a contract is concluded with such users. This is why it is specified that payment initiation and account information services do not fall within the scope of this exemption.
- Automated teller machines (ATMs):
Services consisting of withdrawing cash through independent ATMs are not considered as payment services. However, providers offering such services will have to comply with the transparency provisions in PSD II, which will be transposed in Book VII, Title III (Payment Services) of the Economic Law Code.
A second category of exemptions are services that are considered as payment services, but which are not subject to the provisions of the Act, provided that they are offered subject to certain conditions. Therefore, the Belgian legislator has decided to now list these exemptions in Articles 6 and 7, instead of in Annex I.B. In this way, it can be made clear that the provision of payment services in the context of the so-called exemption for "limited networks" or the "telecom" exemption qualifies for a special arrangement, provided that a number of conditions are fulfilled. When these conditions are no longer fulfilled, a licence or registration as a limited payment institution must be obtained for the provision of these services. These exemptions are copied from PSD II, but the preparatory works of the Act provide the following clarifications as to their scope:
- Limited networks:
The following examples are given of payment instruments that can only be used within a limited network: customer cards, fuel cards, membership cards, cards for public transport and parking cards.
The conditions for invoking this exemption have been refined under PSD II, and transposed into the Act. As regards condition 1°, the preparatory works specify that payment instruments that can be used for purchases from merchants included in an open list (which can be extended by the continuous addition of merchants accepting those instruments), can in principle not be considered as instruments that can be used within the framework of a limited network. Regarding the "instruments which can be used only to acquire a very limited range of goods or services"(i.e. condition 2°), the legislator states that this would entail the use of an instrument actually limited to a limitative number of functionally connected goods or services, regardless of the geographical location of the point of sale. The following examples are given of payment instruments complying with condition 3°: meal vouchers (maaltijdcheques) which are offered to employees at the request of an employer, or service vouchers (dienstencheques) which are offered at the request of individuals and are covered by a specific legal framework in the field of tax or social security which aims to promote the use of such instruments.
In order to avoid abuse of this exemption, it should not be possible to use one and the same payment instrument for payment transactions for the purchase of goods or services within more than one limited network, or for the purchase of an unlimited range of goods and services.
Payment service providers must submit a request for recognition as a limited network with the National Bank, where the volume of payment transactions of the past 12 months exceeds 1 million EUR.
The digital content or telecom exemption has been identically transposed into the Act. Telecom operators offering a payment service to their subscribers for the purchase of physical goods will no longer be exempted from the scope of PSD II / the Act. Telecom operators wishing to make use of this exemption must submit a request to the National Bank.