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Electronic Vouchers: Regulatory Requirements for Issuance and Distribution in Germany

Electronic Vouchers: Regulatory Requirements for Issuance and Distribution in Germany

The sale of vouchers or prepaid cards is increasingly being offered by more and more online retailers. These can be redeemed in the retailer’s online shop or at other retailers. Many online retailers also give away vouchers as part of their promotional campaigns. Some online platforms have also specialized in the online sale of vouchers and prepaid cards.

Authorization requirement for the issue of vouchers

The issuance of vouchers and prepaid cards for a fee may be subject to authorization by the German Federal Financial Supervisory Authority (BaFin) if they are classified as e-money.

E-money is defined by law as “any electronically, including magnetically, stored monetary value in the form of a claim against the issuer, which is issued against payment of a sum of money in order to carry out payment transactions within the meaning of Section 675f (4) sentence 1 BGB and which is also accepted by natural or legal persons other than the issuer”.

Vouchers that are issued free of charge for promotional purposes or as a gesture of goodwill are not considered e-money as they are not issued against payment of a monetary amount. In addition, e-money only exists if the monetary value is stored electronically or magnetically. This can take place both on the medium itself (e.g. a chip card) and centrally on a computer (e.g. on the issuer’s server). Therefore, paper vouchers are not e-money. Also, there is no e-money if the embodied digital value can only be used for payment at the company that issued the voucher or prepaid product.

If e-money exists within the meaning of the definition mentioned above, it can only be issued without authorization in exceptional cases for certain case groups. For example, if it is only accepted for payment purposes by a limited number of acceptance points (e.g. shop-in-shop systems in a department store, acceptance points that operate under a uniform payment brand) or if it can only be used to purchase a limited range of products (e.g. fuel cards, meal vouchers, electronic tickets) or if it is prepaid mobile phone credit.

If these requirements are not met, the issuance of e-money is subject to authorization. If a company issues e-money without the required authorization, BaFin can order the immediate cessation of business operations and the immediate settlement of the e-money business. In addition, the persons responsible can be prosecuted under criminal law. The unauthorized operation of e-money business is a criminal offense punishable by imprisonment of up to five years or a fine.

License requirement for the sale of vouchers

Trading in vouchers and prepaid cards may also be subject to authorization by BaFin. If these are classified as e-money, their sale is generally also subject to authorization. In addition, the seller is subject to certain requirements under money laundering law.

If it is unclear whether a particular product is e-money or not, the companies concerned can submit a written enquiry to BaFin and have the issue clarified.

If the intended activity requires a license, BaFin will issue this on application if all the necessary requirements are proven. These include the existence of initial capital of at least EUR 350,000 for an e-money institution and the presence of at least two professionally qualified and reliable managers. In addition, internal organizational structures must be implemented to ensure proper business operations (e.g. safeguarding of customer funds, establishment of risk management procedures, appointment of a compliance and money laundering officer). Experience has shown that the one-off costs for a license application amount to a six-figure euro sum.

Advice on electronic vouchers

We’d be delighted to provide guidance on alternative structures for your business model, and help determine whether your activity requires a license or assist you in the licensing process. Looking to offer vouchers or prepaid cards internationally? We are also the appropriate point of contact for this. Please don’t hesitate to reach out to us!

Continue reading:
Banking Regulations in Germany (BaFin)
PSD 3 & PSR: Implications for Licensed Payment Services in Germany

Dr. Annette Wagemann

Dr. Annette Wagemann comprehensively advises companies and their managers on questions regarding business law and banking regulations. She is specialized in the legal structuring of business models, corporate governance and compliance, and especially in business models that require a BaFin license.

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