How will the gift card industry be affected by the new E-Money Directive?

The Second Electronic Money Directive or ‘2EMD’ will bring about a shift in this complex area of regulation. For retailers it’s good news. “They operate low risk, self-contained gift card programmes that now fall outside the regulation. It’s the more complicated e-money schemes that face a greater regulatory burden,” says Kalpesh Tanna, head of retail at law firm Osborne Clarke.

Under the previous system, operators of wide-scale e-money schemes such as general prepaid card issuers and potentially operators of mobile payment schemes, benefited from unused funds defaulting to the operator of the scheme after a specified period, as well as from preferential redemption rules. The new rules will change this and, Tanna suggests, the result will be “operators having to rethink their proposition in a bid to remain viable and relevant”.

For retailers hoping their gift card programme falls outside the regulations, the concept of a ‘limited network’ is key. A limited network is an e-money programme restricted in a clear way. Tanna cites “a named retailer’s gift card programme, the value of which can only be redeemed in the named store, or a gift card that can only be used in the stores in a particular shopping mall but nowhere else” as examples.

2EMD aims to open up the market to innovative payment service providers. It places account-based e-money products in scope alongside cards. “Retailers should gear up to embrace new mobile technologies at the point of sale,” says Tanna.