From the FSA’s Perimeter Guidance manual

Q26. Are there any
exclusions from the definition of electronic money that we should
be aware of?

Yes. The Electronic Money
Regulations have two express exclusions: the first covers monetary
value stored on instruments that may be used to purchase goods and
services only in the issuer’s premises or within a limited network
of service providers or for a limited range of goods or services
(regulation 3(a)).

Q27. We offer branded
prepaid cards which consumers can use to purchase goods in a
particular shopping mall. Are we issuing electronic
money?

Yes, it is likely that you will be
issuing electronic money unless you are able to fall within an
exclusion.

The most likely exclusion is if the
card is only used to purchase goods and services in your premises
or within a limited network of service providers. In our view you
will only be able to take advantage of this exclusion here if: it
is made clear in the relevant terms and conditions of the card that
the purchaser of the value is only permitted to use the card to buy
from merchants located within that particular shopping mall; and
the facility to use the card to purchase goods and services outside
this shopping mall has been disabled.”

And under Q 26 above the following
are referred to which were drafted in respect of the Payment
Services Regulations 2009:

Q40. Which types of payment
card could fall within the so-called “limited network”
exclusion?

The “limited network” exclusion forms part of a broader
exclusion which applies to services based on instruments that can
be used to acquire goods or services only –

(a) in or on the instrument
issuer’s premises; or

(b) under a commercial agreement
with the issuer, either within a limited network of service
providers or for a limited range of goods or services…”.

As regards (a), examples of
excluded instruments could include:

1. staff catering cards –
   reloadable cards for use in the employer’s canteen or
   restaurant;
2. tour operator cards – issued
   for use only within the tour operator’s holiday village or other
   premises (for example, to pay for meals, drinks and sports
   activities);
3. store cards – where the card
   can only be used at the store’s premises (so where a store card is
   co-branded with a third-party debit card or credit card issuer and
   can be used as a debit card or credit card outside the store, it
   will still fall within the regulations).

As regards (b), this exclusion has
two discrete limbs and so applies either to instruments that can be
used only:

(i) within a limited network of
service providers; or

(ii) for a limited range of goods
or services.

In our view, examples of excluded
instruments falling within (b) include:

1. transport cards – where
   these are used only for purchasing travel tickets (for example, the
   Oyster card which provides access to different service providers
   within the London public transport system);
2. petrol cards (including
   pan-European cards) – where these are issued for use at a specified
   chain of petrol stations and forecourts at these
   stations;
3. membership cards – where a
   card can only be used to pay for goods or services offered by a
   specific club or organisation;
4. store card – where the card
   can be used at a specified chain of stores at their premises or on
   their website.

Instruments for the purpose of this
exclusion can include, for example, vouchers and other devices.

Q41. Do the regulations
specify or define what a “limited network” is?

Neither the PSD nor consequently
the PSD regulations provide any definition, conditions or criteria
for determining what is a “limited network of service
providers”.

The issue of whether or not a
“limited network” is in existence is ultimately a question of
judgement that, in our view, should take account of various factors
(none of which is likely to be conclusive in itself). These include
the number of service providers involved, the scale of the services
provided, whether membership of the network is open-ended, the
number of clients using the network and the nature of the services
being offered.

While a “limited network” could include transport cards, petrol
cards, membership cards and store cards, we would not generally
expect “city cards” to fall within this exclusion, to the extent
that these tend to provide users with access to a broad range of
goods and services offered by a city’s shops and businesses.

See also:

2EMD:
Where is the limit?

Sign up for our daily news round-up!

Give your business an edge with our leading industry insights.

Sign up