Blog by Marina Stedman – The main public focus for the revised Payment Services Directive (PSD2), that came into force on 13th January 2018, has been on the ending of each individual banks’ monopoly on access to their customer’s account information and payment services.
While this is one of the key elements of the European Union Directive, most consumers and the wider charitable industry may have missed the fact that PSD2 also impacts the digital fundraising sector.
The regulation sets out requirements for all firms that act as intermediaries for buyers and sellers (therefore including any on-line charitable giving and crowdfunding platforms that collect money from fundraisers and donors for distribution to third parties such as charities). Under the rules of the Directive, on-line fundraising platforms that operate in the UK can no longer receive payments that are owed by buyers to sellers without a payments license from the Financial Conduct Authority (FCA) (the body responsible for authorising and supervising payment service providers under PSD2). This means that all charitable giving and crowdfunding platforms now fall under its auspices.
At a time when there is increased scrutiny on the authenticity and transparency of on-line fundraising and crowdfunding platforms, the requirement for fundraising platforms to be registered as payment institutions with the FCA will allow on-line platform providers to differentiate themselves in this increasingly complex marketplace by demonstrating that they have met stringent regulatory and financial operating requirements. In fact, these providers cannot lawfully provide any payment services in your own right until the FCA has granted approval of an organisation’s application.
Any fundraisers and donors making donations through a non-registered platform need to be sure that processes are in place to protect their money and make sure that it goes to the good cause(s) for which it was intended (not always the case as we saw from the recent Ammado case in Ireland where donations amounting to €3.8m made to charities through the platform before it went into liquidation are still unaccounted for). In addition, the organisations (and their employees) that provide these platforms can also be found guilty of an offence and liable to imprisonment or to a fine for providing, or purporting to provide any payment service in the United Kingdom without being registered.
In response to the FCA’s role in charitable sector regulation, The Fundraising Regulator (the independent regulator of charitable fundraising) has said that it will “continue to work closely with the FCA” to ensure there is no doubling up of regulation. It is also continuing its own drive to enhance the Code of Fundraising Practice to meet the needs of the rapidly evolving fundraising industry.
The Good Exchange is part of the taskforce working with the Fundraising Regulator to re-write the Code of Fundraising to make it relevant for the digital age.
Our advice to anyone thinking of using a charitable payment, fundraising or crowdfunding platform for fundraising or for making a donation, is that to always check that it is registered with the Financial Conduct Authority under the Payment Services Regulations 2017 (FRN: 797421) for the provision of payment services.
Find out more about the Financial Conduct Authority’s approach to the revised Payment Services Directive (PSD2) here.