PSD2 Fact 9: Redefining the Telecom Exclusion
Under the first PSD, payment transactions by means of telecom or IT devices where the network operator operates as intermediary for the delivery of digital goods/services through the device but also in cases where the operator also adds value to those goods/services,are excluded from the scope of the directive (article 3 exclusion L). According to consideration 15 of PSD2, this has resulted in the development of new business models (low-value sale of digital content and voice-based services: chat, music/games downloads, weather/news information, TV/radio participation etc). Despite that the EC has recognized that this has not developed into a general payment intermediation service. Nevertheless, the EC felt the need to make changes under PSD2, as the first directive’s exclusion for telecom providers was too ambiguous, resulting in different implementation across Member States, a reduction in consumer protection in certain areas and a lack of standardisation and interoperability between different payment solutions. This has led to legal uncertainty for operators and consumers and occasionally an unlimited use of the exclusion. PSD2 clarifies and narrows the scope of eligibility for that exclusion by specifying the types of payment transactions to which it applies.
Intent of Exclusion (L) under article 3
PSD2 clarifies that the exclusion for telecom/IT payment transactions should focus specifically on micro-payments for digital content and voice-based services (consideration 16). Therefore, the EC considers it necessary to include a clear reference to payment transactions for the purchase of electronic tickets. The exclusion should further only apply where the value is below a specified threshold and therefore of low risk according to the EC. Payment transactions relating to donations to charities should be excluded according to the EC. Member States may decide to limit this to only donations to registered charitable organizations. So unless a charity wants to obtain a payment institution license, it better ensures that it becomes registered.
The exclusion now covers only payments made through telecom operators for the purchase of digital services that are downloaded on a digital device or of electronic tickets or donations to charities. Digital content like ringtones, wallpapers, music, apps, games and videos are allowed under the exclusion. Any purchase (of for instance a physical good) or any transaction value not fulfilling the above, means that the network operator falls within scope of PSD2 and needs to obtain a payment institution license.
Does the new text meet the purpose?
Article 3 paragraph 1 sub L states that the directive shall not apply to:
“payment transactions by a provider of electronic communications networks or services provided in addition to electronic communications services for a subscriber to the network or service:
(i) for purchase of digital content and voice-based services, regardless of the device used for the purchase or consumption of the digital content and charged to the related bill; or
(ii) performed from or via an electronic devise and charged to the related bill within the framework of a charitable activity or for the purchase of tickets;
provided that the value of any single payment transaction referred into the above points and does not exceed 50 EUR and the cumulative value does not exceed 300 EUR per month.”
The European Commission indicates that the threshold exclusions are inserted to avoid the risk of exposure to substantial financial risks to payers. The question however is whether a purchase of digital services exceeding the threshold results in any financial risk at all. The purchase has been completed, payment will (through operator billing or direct to phone-bill purchases) be finalized and the service would have been delivered at the same time. If the network operator would fail to transfer any such received payments to the service provider, the service was already delivered. The risk of the network operator therefore rests with the service provider, not the payers?
Further, the second threshold exclusion of cumulative 300 EUR (first draft of PSD2 stated 200 EUR) mentions the circumstance where a subscriber pre-funds its account with the network provider as long as the 300 EUR threshold is not exceeded. Such pre-funding however – in my view – defeats the purpose of what a network operator undertakes and the execution of payment transactions just being an ancillary service. The network operator will hold its client funds until it decides to use it to execute payment transactions. Does this not have close similarities to payment method issuers such as e-wallets? It is unclear why this specifically was referenced. The exemption is intended to have a more restricted focus and should therefore only apply to ancillary payment services carried out by providers of electronic communication networks or service. The line between an operator operating payment services as ancillary or as main activity is blurry with this text.
Telecom operators that engage in such an activity shall notify to the competent authorities, on an annual basis, that they comply with these limits. The activity will also be listed in the public registers. Telecom operators looking to develop their direct operator billing platform into a broader range of goods and services such carefully reconsider their business strategy. It will need to ensure that its acceptance stays within the boundaries, obtain a license or obtain support from a licensed institution (but then will need to consider how to differentiate the different products or run all purchases through the licensed institution, which comes at a cost where prices and margins are already quite low). We will need to wait and see how telecom operators will respond to the changes.
