ID 1045. Issuance and redeemability
In order an e-money institution to comply with the limitation for issuance of e-money thought agents the legal interpretation of various issuing techniques need to be clarified.
In particular, if an e-money institution is distributing pre-paid magnetic cards through agents, is it allowed to establish a direct real time connection to the point of sale of the agent, thus enabling the customer to load the instrument with a random amount of money? In this case the amount loaded to the card instrument would be directly recorded in the authorisation system of the e-money institution and accounted as issuance of e-money, wheres the sum would be received by the respective agent and then transferred from it to the e-money institution. Is this allowed, or it would be qualified as "issuance through agents"?
The other option would be the e-money instruments distributed through agents to be charged with fixed amounts of e-money, which is less convenient for the consumers. Furthermore, in this case the e-money would be accounted as issued before any funds are received from a customer, which is encumbering for the e-money institution and would dilute the information about the amount of e-money effectively outstanding.
In accordance with Article 3(4) of Directive 2009/110/EC (EMD), an e-money institution is authorised to use natural and legal persons to distribute and redeem electronic money. As stated in recital 10 of the Directive, distributing electronic money can be organised in different ways "[...], including by selling or reselling electronic money products to the public, providing a means of distributing electronic money to customers, or of redeeming electronic money on the request of customers or of topping up customers’ electronic money products, through natural or legal persons on their behalf, according to the requirements of their respective business models". Article 3(5) EMD stipulates that "Notwithstanding paragraph 4, electronic money institutions shall not issue electronic money through agents". This also applies to 'distributors' under Article 3(4) EMD as confirmed by Article 10 EMD which states that "[...] Member States shall prohibit natural or legal persons who are not electronic money issuers from issuing electronic money". Article 11 EMD clarifies that "electronic money issuers issue electronic money [...] on the receipt of funds". The purpose of this set of rules is to keep accountability, responsibility and control over the issuance of electronic money with the e-money institution as authorised under Title II EMD.
A chosen business model would thus, in principle, be compatible with the EMD if it remains the electronic money institution who actually issues the pre-paid stored value on the receipt of funds. This should not depend on whether the customer can choose the amount to pre-pay at random. Regarding the act of issuing e-money, it follows from the definition of electronic money as set out in Article 2 EMD and from Article 11 on issuance, that e-money will be accounted only as "[...] issued on the receipt of funds". It is up to the national competent authorities to verify all practical, technical and operational aspects of a business model as proposed by an e-money institution and to ensure that the obligations under the directive are met.