PERG 3.5 1The application of the e-money definition to various products

1This section of PERG 3 contains guidance on whether certain products involve issuing e-money.

An electronic travellers cheque is a product, based on a plastic card, designed to replace paper travellers cheques. There are two types of electronic travellers cheques:

1. (1)

   ones whose only function is to allow the holder to withdraw cash in a foreign currency from automated teller machines ("ATMs") when abroad; and

2. (2)

   ones that can also be used to buy goods and services from third parties.

The card referred to in PERG 3.5.2 G is loaded with value. The holder pays for the value on issue. The value therefore complies with the part of the definition of e-money that says that the value must be issued on receipt of funds (see PERG 3.3.5 G - PERG 3.3.9 G). The card is likely to be an electronic device for the purpose of paragraph (a) of the definition of e-money (which is explained in PERG 3.3.2 G - PERG 3.3.4 G).

The remaining condition that value must meet if it is to be e-money is that the value must be accepted as a means of payment by persons other than the issuer. This part of the definition is explained in PERG 3.3.10 G - PERG 3.3.13 G.

An electronic travellers cheque falling into PERG 3.5.2 G (2) meets the part of the definition of e-money referred to in PERG 3.5.4 G.

An electronic travellers cheque falling into PERG 3.5.2 G (1) does not meet the part of the definition of e-money referred to in PERG 3.5.4 G if the scheme is set up in such a way that:

1. (1)

   it can only be used to withdraw foreign currency from ATMs owned by the issuer of the value; or

2. (2)

   (if (1) does not apply) the withdrawal of foreign currency by a cardholder will never involve the purchase of the currency from the owner of the ATM but instead the repayment of the prepaid value by the issuer of the prepaid value.

A prepaid electronic value payment system may involve the "float" being paid into a trust account. The float is the running balance of money held by the issuer of the electronic value representing payments for the issue of electronic value less the amount of electronic value that has been redeemed.

Holding the float on trust:

1. (1)

   does not prevent the electronic value from being monetary value as represented by a claim on the issuer (this part of the definition of e-money is described in PERG 3.3.1 G);

2. (2)

   is not relevant to the other elements of the definition of e-money; and

3. (3)

   does not mean that the person who accepts the payment for the electronic value is not the issuer of that value.

The result of PERG 3.5.8 G is that putting the float into a trust account does not prevent the person who accepts the payment for the electronic value from issuing e-money.2