In February 2022, the European Banking Authority (EBA) published its final „Guidelines on the limited network exclusion under the Payment Services Directive“. The EBA has in this way specified in more detail how Article 3(k) of the Payment Services Directive 2 (PSD2), which is implemented in Germany through section 2 (1) no. 10 of the German Payment Services Supervision Act (Zahlungsdiensteaufsichtsgesetz – ZAG), is to be applied.

The background to this is the catalogue of exclusions regulated in PSD2, which lists the cases not included in the Directive’s scope of application. The Guidelines, which become effective from 1 June 2022, constitute consistent and mandatory procedures valid across the EU for applying the limited network/very limited range exclusion. BaFin will adjust its administrative practice accordingly. However, relatively little will change in Germany overall. This is because BaFin’s administrative practice has already taken account of the new EBA Guidelines for the most part. Nevertheless, there will be changes, and some entities are thus required to take action in the coming months.

Quantitative information now also required

What is new in particular is that BaFin must now also demand quantitative alongside qualitative information concerning the business model as part of its assessment of whether a company qualifies for the limited network and/or very limited range exclusion.

In future, BaFin will process such requests for exclusion only if the companies provide conclusive information on the geographical area of a network, the expected number of annual payment transactions, the expected volume of payments and the risks associated with these factors.

With immediate effect, pure online stores may also benefit from the exclusions. However, online marketplaces, which do not themselves distribute goods or services but which merely provide a meeting place for buyers and sellers, are not covered by the exclusions.

Another new aspect is that it will no longer be possible to combine regulated and non-regulated payment instruments on a single means of payment – the Guidelines refer in this context to card-based or other means of payment, e.g. a digital wallet. To ensure transparency and consumer protection, these payment instruments will now have to be accommodated on different means of payment. But combining several payment instruments that have qualified for exclusion on one means of payment will continue to be allowed.

In future, the Guidelines will also continue to disallow a combination of several of the possible exclusion clauses in one single payment instrument – i.e. those regarding very limited range, limited network or cards for specific purposes. In other words, only one of the three exclusions may be claimed by each payment instrument.

As before, authorised payment service providers and electronic money issuers may continue in future to issue payment instruments that do not fall under the application scope of PSD2 and/or the ZAG. In this case, however, a non-regulated payment instrument on a particular means of payment must be clearly recognisable as such. Consumers may not be trapped into believing that the payment instrument benefits from the special protection under PSD2.

Furthermore, the Guidelines clearly state that an intermediary providing services for transferring funds to payment instruments, in particular prepaid payment instruments, could be providing a payment service that requires authorisation. In such cases, the intermediary transferring the funds is generally unable to invoke network or product exclusion since the transfer of funds does not directly serve the acquisition of a good or service. BaFin explicitly welcomes this clarification as it concurs with BaFin’s previous assessment of this matter.

Entities take note: notification deadline is 1 September 2022

Entities that had already previously submitted a notification under Article 37(2) of the PSD2 (in Germany: section 2 (2) of the ZAG) to register in order to make use of the limited network or the very limited range exclusion must step into action. This is due to a number of new rules regarding the notification procedure. For the new Guidelines require that all entities concerned submit a new notification by 1 September 2022. This notification must contain the relevant information based on the Guidelines’ specifications. To simplify the procedure, BaFin has prepared an electronic form (only available in German) that the entities concerned may use for entering all the information required for a supervisory assessment.

The entities need to check very carefully whether it is necessary for them to make a notification. They should note the following: only issuers of payment instruments are required to submit a (new) notification. There is no need for entities that merely settle up payment instruments but are not the issuers of these instruments to make a notification, and no entry is made for them in the BaFin and the EBA registers either.

More information on the limited network exclusion and the exclusion of a very limited range of goods and services can be found in BaFin’s ZAG Guidance Notice (only available in German).

Risk of deletion from register if entity fails to meet deadline

It is important that all entities concerned meet the deadline of 1 September 2022. The previous register will no longer exist after this date. If a new notification is not submitted or is not submitted within the prescribed period, BaFin will have to delete the previous register entry on expiry of the deadline. In the event of failure to submit a new notification to BaFin within the prescribed period, such a notification will be treated as a first-time notification and be assessed in due course. BaFin can only make a new entry in the register after the assessment has been successfully completed.

Entities unsure as to whether they meet the requirements should seek legal advice. BaFin is neither authorised nor otherwise appointed to advise individual undertakings in legal matters. BaFin will conduct its assessment of the new applications promptly. Due to the anticipated high number of notifications, a considerable amount of time will be required for this task.

Submissions no longer possible via associations

Entities wishing to submit a notification should bear in mind that it is no longer possible to obtain support from the associations as was the case with the previous notifications. Entities must send their new notifications directly to BaFin, preferably electronically to the mailbox ZAG-Neuanzeigen@bafin.de. Please state the name of the company in the mail subject header. Alternatively you can send the notification by post. In this case, the date on which the notification was received at the BaFin post room determines whether the deadline was met.