Gift cards have become more and more popular. They are bought as presents and some shops have a return policy where items bought physically can be exchanged only for a gift card of the equivalent amount. Are gift cards therefore to be regarded as money in Poland? If so, are the issuers required to obtain authorisation as a payment or electronic money institution?
Money or not?
Under the Polish Act on Payment Services, gift cards generally should be classified as electronic money. Thus, the issuance of such cards is an issuance of e-money. Gift cards have an electronically stored monetary value. They typically contain an identifier that can be attached to them, such as a barcode, magnetic stripe or encoded chip, with an ascribed monetary value. However, if the monetary value is stored on an instrument that can only be used to a limited extent, the "limited networks exclusion" can apply and gift card issuers do not need to be licensed as an e-money issuer.
Limited network exclusion
To qualify for this exclusion, the payment instruments should meet, among others, one of the following conditions: (i) it should allow the holder to acquire goods or services only in the premises of the issuer or within a limited network of entities having a direct commercial contract with an issuer (limited network of entities); (ii) it may be used only to acquire a very limited range of goods or services (limited range of products).
Limited network of entities
A limited network of entities is assumed when the number of companies accepting certain gift cards remains limited. The Polish Financial Supervision Authority ("PFSA") issued a statement on Limited Networks dated 1 June 2022 (the "PFSA's Statement"), introducing the European Bank Authority's guidelines on the Limited Network Exclusion under PSD2, EBA/GL/2022/02 ("EBA Guidelines"), which provides for additional indicators that need to be considered, such as the specific geographic area for the provision of goods and services, the maximum amount to be credited to the payment instruments, the maximum number of payment instruments to be issued, and the volume and value of payment transactions to be carried out with the payment instruments annually.
Limited range of products
To qualify for the exception of limited range of products, there should be a functional connection between the goods/services that can be acquired and the payment instrument. The intended use of the payment instrument is the decisive criterion according to the EBA Guidelines. The total number of the goods/services that can be purchased with the payment instrument is less important than a specifically defined and limited scope of groups of closely related goods/services. This could apply if the gift cards can only be used to purchase a definite range of goods, such as cosmetics, beverages or shoes.
Scope of exclusion
The issuance of gift cards does not have to be notified to the PFSA. However, the notification obligation arises if the total value of payment transactions using the gift cards exceeds EUR 1m for any given period shorter than 12 months. A notification needs to be filed separately for each limited network.
Conclusion
Legislation that provides for a limited network exclusion should be viewed positively. It is a facility for both customers and companies, since if the requirements are met, gift cards can be redeemed in a specified chain of shops in any European country. Nevertheless, the application of this exclusion should be considered case by case based on commercial, operational and marketing factors.
By Paula Weronika Kapica, Attorney at Law, and Aleksandra Golawska, Associate, Schoenherr
