FSA

[businessowner350]

Hi everyone,

If I were to run a "Giftcard" system for the retail industry, would I have to be regulated by the FSA?

All I would be doing, would be providing the software as well as hosting the backend database systems which keeps track of how much money is on the gift card. All actual financial transactions would be done with the shop

Thanks

[cis_paul]

I'm intrigued... will the giftcards be VISA/MasterCard payment cards? or something 'bespoke' you will create...

[businessowner350]

I'm intrigued... will the giftcards be VISA/MasterCard payment cards? or something 'bespoke' you will create...

Just simple cards with a magnetic stripe. Nothing fancy like Visa or Mastercard.

The idea is that they would be branded for a particular store.

[cis_paul]

Hmmm...

I (have) worked in the pre-paid card industry extensively - not sure how this translates to your setup, but if you're judged to be providing a cash or cash equiv. (IE the cards can be used almost anywhere) I can't see you avoiding the PCI (and FSA) 'headaches'.

How widely will your card be accepted? (Widely = bad)

Could they facilitate money laundering? (Yes = bad)

Will all the card holders be your clients or clients of the retailers? (Your clients = bad)

Have you any prior experience of the issues involved here?

[businessowner350]

Hmmm...

I (have) worked in the pre-paid card industry extensively - not sure how this translates to your setup, but if you're judged to be providing a cash or cash equiv. (IE the cards can be used almost anywhere) I can't see you avoiding the PCI (and FSA) 'headaches'.

How widely will your card be accepted? (Widely = bad)

Could they facilitate money laundering? (Yes = bad)

Will all the card holders be your clients or clients of the retailers? (Your clients = bad)

Have you any prior experience of the issues involved here?

Thanks for your reply.

No, these cards won't be able to be used outside the a particular retailer's chain. So my clients would be the actual retail businesses.

Yes, I have experience in PCI compliance, however this doesn't apply here at all, as PCI compliance isn't law and is part of Visa and Mastercard's terms and conditions. I am not doing anything with any of those companies.

It is very simple how the system will work. The stores will be given magnetic swipe cards. Their tills can "top up" the cards. This sends a "top up request" to our backend infrastructure which just updates a database to increase the amount on a certain card. The opposite happens for tenders. All "real" money transactions happen in the respective store.

Thanks

[cis_paul]

Ah - probably then the retail store has the headache. Although I'd definitely not take my opinion on that. Be keen to see what everyone else says.

I know one client I did work for stored data & software for card processors (much like you are doing) and he was not regulated, however, the regulated parties *did* do inspections of his DC operation to ensure it met with their requirements.

[businessowner350]

So does that mean that all shops that accept electronic gift cards have to be regulated by the FSA?

[mark088]

So does that mean that all shops that accept electronic gift cards have to be regulated by the FSA?

I assume that this is going to work in a similar manner to phone cards or hamper savings clubs (which are not regulated).

You are not giving financial advice or providing a credit facility so you should be exempt.

However, the best people to ask are the FSA

[cis_paul]

My understanding is that the FSA regulation applies (Someone is sitting on client funds).

The only uncertainly is to whom.

If not to you then it must be the retail shop. Who has the client's money?

Have you asked the FSA or checked their website - it's pretty clear I think. (I can't post the link - forum says "no")

[businessowner350]

My understanding is that the FSA regulation applies (Someone is sitting on client funds).

The only uncertainly is to whom.

If not to you then it must be the retail shop. Who has the client's money?

Have you asked the FSA or checked their website - it's pretty clear I think. (I can't post the link - forum says "no")

I'll give them a call tomorrow. However I doubt that many retail chains are FSA regulated? I've never seen a sign on Waterstones or HMV give cards which says "Authorised and regulated by the FSA"

[akirk]

Things are changing with the FSA as a result of recent decisions by the government, so I would check anything with them / your account.

Alasdair

[businessowner350]

Hi Everyone,

So I did some reading into the FSA documents. I'm not sure if the new government is going to change anything, but the current rules are that if you qualify as a "small issuer", then you can get a certificate from the FSA to say you are exempt (with no annual costs). I would say that 99% of all high street retail chains qualify for this (As the max limit within a single group is 10 million euros).

You can look at the certificate here:

http://fsahandbook.info/FSA/docs/elm/elm_8_annex1g.pdf

Since all I will be providing is the software and the backend infrastructure (read: no financial liabilities), then I am under the opinion that I do not have to register with the FSA.

Some please correct me if I'm way off track..

Thanks

[businessowner350]

Actually, I think my post above is slightly wrong. If it is the issuer of the gift cards are the same legal entity that accept it as payment, then I think that you don't need to register at all. You only need to register if others (including subsidiaries or a group of companies) are going to accept it as payment.

I get this from this text:

"E-money is proposed to be
defined in the Regulated Activities Order as:
‘……..monetary value as represented by a claim on the issuer which is:
(i) stored on an electronic device; and
(ii) accepted as a means of payment by persons other than the issuer.’"

[akirk]

Hi Everyone,

So I did some reading into the FSA documents. I'm not sure if the new government is going to change anything...

Well, not much other than closing down the FSA :)
by 2012 it will be no more...

its duties will go to the Bank of England and a few others

http://www.fool.co.uk/news/investing/2010/06/17/bank-of-england-to-take-over-fsa.aspx

regards

Alasdair

[businessowner350]

Oo i wonder how that will affect e-money issuers?

I doubt it will change anything if you the issuer is also the acceptor (As that's an EU definition). It's the issue of "small issuers" i'd worry about - however I doubt they would change this as a lot of small chains use electronic gift vouchers..