UKÆs E-Money Legislation May Speed Its Uptake
Electronic money (e-money) is defined as a prepaid form of currency stored on an electronic device, such as a plastic card, for acceptance as a payment mechanism by entities other than the issuer. Plastic payments are undergoing strong growth in the UK, and e-money is predicted to be a cash-replacement vehicle in sectors such as transit and small-value retail payments. Cash spent in the UK totals Stg 266 billion per year, payments entity APACS reports, with the average Londoner spending Stg 16 per day, and two-thirds of these transactions are for less than Stg 5.Since 2002, e-money issuance in the UK has been regulated by the Financial Services Authority (FSA) and actual or intending issuers must comply with FSA rules and with two other regulations. These are the Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2002 and the Electronic Money (Miscellaneous Amendments) Regulations 2002. Entities wishing to issue e-money are defined as æElectronic Money InstitutionsÆ (ELMIs), must be located within the UK and must not have other business interests except for those related to e-money.
If an ELMI becomes insolvent, the protections of the UKÆs Financial Services Compensation Scheme do not apply, which means that cardholders do not automatically receive compensation. ELMIs are governed by the Financial Ombudsman Service with regard to customer complaints, which means issuers need to consider how e-money cards are issued, circulated and used to restrict the unlawful transfer of funds. In an evolving industry, consumer protection is paramount and issuers themselves must structure an e-money scheme to limit risk or liability where possible. Related Links:
UK's Plastic Card Trends Show Healthy Growth
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