The Payment Services Regulations 2017 (SI 2017/752) set the payment services perimeter in the United Kingdom. A business inside that perimeter will generally need FCA authorisation or registration before it moves money, unless an exemption under regulation 3 or another regulatory status applies.

An activity falls inside on three conditions, all of them in regulation 2(1): it is one of the eight activities listed in Schedule 1 Part 1; it is carried on as a regular occupation or business activity; and it is not one of the activities that Schedule 1 Part 2 puts back outside. Checking the Part 1 list alone answers one condition of the three, and a business that clears all three may still owe duties under these regulations, because three of the exclusions carry duties of their own.

Which activities fall inside the payment services perimeter?

Eight activities are payment services. Schedule 1 Part 1 paragraph 1 names them: placing cash on a payment account and the operations required to operate one; withdrawing cash from a payment account and the same operations; executing payment transactions, including direct debits, card transactions and credit transfers; executing those same transactions where the funds are covered by a credit line; issuing payment instruments or acquiring payment transactions; money remittance; payment initiation services; and account information services. Nothing outside those eight is a payment service, whatever it looks like commercially.

The second condition is the one most often missed, and it appears twice. Schedule 1 Part 1 opens with the words subject to Part 2, the following, when carried out as a regular occupation or business activity, are payment services, and regulation 2(1) states the same condition in its definition. It is the reason a solicitor operating a client account and a letting agent holding rent are not payment institutions.

In its Perimeter Guidance at PERG 15.2 Q9 the FCA takes the view that the services must be provided as a regular occupation or business activity in their own right and not merely as ancillary to another business activity, and among its worked examples it gives client accounts, tenants’ deposits, debt management plan receipts, payments made under a power of attorney for a family member, and crowdfunding platform transfers. That is guidance on a statutory phrase rather than a statutory safe harbour, and the phrase is undefined in the regulations, so a business relying on it relies on a judgement rather than on a rule.

What does Schedule 1 take back out?

Fifteen classes of activity are not payment services even though they would otherwise fall within the eight. Schedule 1 Part 2 paragraph 2 sets them out at (a) to (o) in an order that is a sequence rather than a taxonomy, and two further exclusions were added to the same Part later, at paragraphs 3 and 4. Grouped by what they are actually doing, the fifteen fall into six families, and only three of them leave any duty behind.

Paragraph	The activity	Family
2(a)	Payment transactions executed wholly in cash directly between payer and payee, with no intermediary	No intermediary
2(b)	Payments through a commercial agent authorised to negotiate or conclude the sale or purchase on behalf of the payer or the payee, but not both	No intermediary
2(c)	The professional physical transport of banknotes and coins, including collection, processing and delivery	Physical cash
2(d)	Non-professional cash collection and delivery as part of a not-for-profit or charitable activity	Physical cash
2(e)	Cashback at the till, given by the payee on the payer’s explicit request immediately before execution	Physical cash
2(f)	Cash-to-cash currency exchange where the funds are not held on a payment account	Physical cash
2(g)	Transactions on paper cheques, bankers’ drafts, paper-based vouchers and paper postal orders	Paper instruments
2(h)	Transactions within a payment or securities settlement system between providers, settlement agents, central counterparties, clearing houses, central securities depositories, central banks and other participants	Systems and technical
2(i)	Transactions related to securities asset servicing, including dividends, income, redemption and sale, carried out by a person within paragraph 2(h) or by an investment firm, credit institution, collective investment undertaking or asset management company	Systems and technical
2(j)	Technical service providers who never enter into possession of the funds, including data processing and storage, trust and privacy protection, authentication, information technology, network provision and terminal maintenance. Payment initiation and account information services are excluded from this limb	Systems and technical
2(k)	Instruments usable only in a limited way, in four cases: on the issuer’s premises; within a limited network of providers holding direct commercial agreements with the issuer; for a very limited range of goods or services; or UK-only instruments provided at the request of an undertaking or public sector entity, regulated by a national or regional public authority for specific social or tax purposes, to acquire specific goods or services from suppliers holding a commercial agreement with the issuer	Limited use
2(l)	Transactions billed by a provider of electronic communications networks or services, for digital content and voice-based services, or for tickets and charitable donations, subject to caps of £40 per transaction and £240 per subscriber per month	Limited use
2(m)	Transactions between payment service providers, or their agents or branches, for their own account	Own account
2(n)	Transactions between a parent undertaking and its subsidiary, or between subsidiaries of the same parent, without an intermediary outside the group	Intra-group
2(o)	Cash withdrawal services through ATMs where the provider acts for card issuers, is not party to the framework contract with the customer, and conducts no other payment service	Limited use
3	Cash provided otherwise than through an ATM, against a transfer from a payment account held by the recipient to a relevant person, where the account is not provided by a relevant person. Inserted by section 44 of the Financial Services Act 2021	Physical cash
4	Issuing a qualifying stablecoin under article 9M of the Regulated Activities Order. Inserted for specified purposes only, and not generally in force	Time-shifted

Two exclusions attract more argument than the rest. The commercial agent exclusion at paragraph 2(b) covers a payment between payer and payee through a commercial agent authorised to negotiate or conclude the sale or purchase of goods or services on behalf of one of them but not both, and the FCA reads the authorisation limb as requiring legal authority to bind the principal, not merely the provision of the technical means by which an order is placed or accepted. On that reading, at PERG 15.5 Q33A, an e-commerce platform acting for both the payer and the payee will generally fall outside it, as will an escrow provider holding funds pending the payee’s fulfilment of conditions.

The technical service provider exclusion at paragraph 2(j) covers services supporting the provision of payment services where the provider never enters into possession of the funds, and the paragraph expressly does not extend to payment initiation services or account information services. Outsourcing a technical function does not move the regulated firm’s own responsibility.

When does cashback fall outside?

Cashback falls outside the definition of a payment service under two separate provisions, and which one applies depends on whether there is a purchase. Paragraph 2(e) covers cash given by the payee to the payer as part of a payment transaction for goods or services, on the payer’s explicit request made immediately before execution, which is cashback at the till.

Paragraph 3, inserted on 29 June 2021 by section 44 of the Financial Services Act 2021, covers the provision of cash otherwise than through an automatic teller machine where a corresponding amount is transferred from a payment account held by the recipient to a relevant person and the account is not provided by a relevant person. That is cashback without a purchase, and it was added so that shops and post offices could hand over cash as a service in its own right.

Paragraph 3(3) is the limb to watch. The transfer itself, and the services enabling that transfer, stay within the definition of payment services. The person handing over the notes is outside the payment services perimeter. The person moving the money is not.

Where does issuing a qualifying stablecoin sit?

Paragraph 4 of Schedule 1 is on the statute book but not yet generally in force, and the distinction matters commercially. It provides that the activity specified by article 9M of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001, issuing qualifying stablecoin, does not constitute a payment service. It was inserted by the Financial Services and Markets Act 2000 (Cryptoassets) Regulations 2026 (SI 2026/102), made on 4 February 2026, and regulation 1(2) of that instrument sets the full commencement day at 25 October 2027.

Regulation 1(3) commenced the provisions on 25 February 2026 for specified purposes only: enabling the FCA to make or approve designated activity rules and general rules, give guidance, give directions and take other preparatory steps; enabling applications for a Part 4A permission, for a variation of one under section 55H, for permission under section 55NA, or for approval under Part 5 by way of section 59, to be made and determined; and enabling the FCA to exercise its Part 4A and Part 5 powers over the new activity. Regulations 53 to 56 are transitional and saving provisions for firms with in-flight or refused applications, and they too are keyed to the full commencement day.

The consequence is that paragraph 4 would take issuing a qualifying stablecoin outside the definition of a payment service, and would do so generally from 25 October 2027. It does not do so today for general purposes, and an issuer’s position under the PSRs 2017 and the Electronic Money Regulations 2011 continues to be governed by the pre-existing analysis in the meantime. An issuer can engage now with the FCA’s rule-making and can apply now for the new permission. It cannot yet rely on paragraph 4 as an answer to the question whether what it does is a payment service.

When must the limited network exclusion be notified?

A business issuing an instrument usable only in a limited way can rely on the limited network exclusion, and three of its four limbs carry a notification duty under regulation 38.

Paragraph 2(k) applies to an instrument that can be used only in a limited way and that also meets one of four conditions: instruments allowing the holder to acquire goods or services only on the issuer’s premises; instruments issued by a professional issuer allowing acquisition only within a limited network of service providers holding direct commercial agreements with the issuer; instruments usable only to acquire a very limited range of goods or services; and instruments valid only in the United Kingdom, provided at the request of an undertaking or public sector entity and regulated by a national or regional public authority for specific social or tax purposes.

Staff catering cards, fuel cards, campus cards, transport cards and government childcare vouchers are the everyday examples.

Regulation 38 requires a service provider relying on the first three of those limbs to notify the FCA once the total value of payment transactions executed through the service exceeds one million euros in any period of twelve months. The regulation is in euros and regulation 2(2) supplies the sterling equivalence, so there is no separate sterling figure to convert to.

The notification must describe the services offered and specify the exclusion relied on, and the FCA must then assess whether the services do fall within the limbs claimed. Where it concludes that any part of them does not, regulation 38(6) requires the FCA to notify the service provider, who may then refer the matter to the Upper Tribunal. Regulation 38 does not reach limb (iv), so an issuer under a public authority scheme owes no notification duty under it.

The requirement that catches people is in the opening words of the paragraph rather than in the four limbs. Paragraph 2(k) covers instruments that can be used only in a limited way and meet one of the four conditions, so a business must satisfy the general requirement and a specific limb, not one or the other.

PERG 15.5 Q40 supplies the FCA’s content for that general requirement, drawing on recitals 13 and 14 of the second Payment Services Directive: an instrument usable across more than one limited network, or in a continuously growing network, or one that starts as specific purpose and becomes general purpose, may fail even where a limb is met on its face. The FCA also expects functional restriction and consistent marketing rather than reliance on customer terms and conditions alone. The requirement is statutory. That content for it is guidance, and a business relying on the exclusion should treat it as a view to check rather than as settled law.

What does the electronic communications exclusion allow?

The electronic communications exclusion is the only one of the three that requires notification before the service starts. Paragraph 2(l) covers payment transactions resulting from services provided by a provider of electronic communications networks or services, provided in addition to the communications service for a subscriber and charged to the related bill, where the additional service is either the purchase of digital content and voice-based services, whatever the device, or is performed from or via an electronic device for the purchase of tickets or for donations to registered or recognised charities. Two caps apply and both must hold: £40 on any single payment transaction, and £240 cumulative for an individual subscriber in a month.

Regulation 39 requires the provider to notify the FCA with a description of the service before it starts to provide it, and then to provide an annual audit opinion, at such times as the FCA directs, testifying that the transactions comply with those limits. The audit opinion is a recurring assurance duty, and it continues after a business has correctly concluded that it is not providing payment services.

What duties does an excluded provider still owe?

A business relying on three of the fifteen exclusions still owes duties under these regulations, and the other twelve carry no duty of their own under them. That is a statement about these regulations alone: an excluded activity can still engage financial promotion, consumer protection, money laundering, data protection or payment system rules, depending on the model.

Regulation 2(1) defines an excluded provider as a provider of services falling within paragraphs 2(k)(i) to (iii), 2(l) or 2(o) of Schedule 1, which is the limited network, electronic communications and independent ATM populations. The same regulation extends the definition of payment service provider to include excluded providers, but only for the purposes of Part 9, the FCA’s supervisory and enforcement chapter, and Schedule 6. That extension is the whole of the mechanism, and its limits matter as much as its reach.

What follows is asymmetric, and unhelpfully so for the excluded provider. The FCA’s Part 9 powers do reach it in respect of the duties it owes: monitoring under regulation 108(1)(a), information requirements under regulation 109(1), public censure under regulation 110, financial penalties under regulation 111, the warning and decision notice procedure with a reference to the Upper Tribunal under regulation 112, injunctions under regulation 113, and restitution under regulations 114 to 116. A failure to notify under regulation 38 or 39 is therefore something the FCA can fine a business for.

Part 7, the conduct of business chapter, does not reach it at all, because regulation 63(1) confines Part 7 to payment services meeting its territorial conditions, and an excluded provider’s services are by definition not payment services.

The operational and security risk duty in regulation 98 and the incident reporting duty in regulation 99 impose nothing on it, and regulation 109(4) expressly carves it out of the fraud statistics reporting duty. Part 8 does not help it either: regulation 105, which requires credit institutions to grant access to payment account services, is confined to paragraphs (a) to (f) of the base definition of payment service provider and does not pick up the Part 9 extension, so an excluded provider has no right of access to a bank account under it.

An independent ATM provider owes a different duty again. Regulations 38 and 39 do not reach paragraph 2(o) providers at all, so they owe no notification duty. What they owe instead is the information duty in regulation 61, which requires a provider of cash withdrawal services falling within paragraph 2(o) to give the customer information on withdrawal charges before the withdrawal and on receipt of the cash. They can also be directed by the Payment Systems Regulator under regulation 125(2A), which is a separate regulator on a separate enforcement track.

How is the notification actually made?

The mechanics are not in the FCA Handbook. The FCA has made directions under regulations 38(4) and 39(3) and (4), which bind in their own right rather than as guidance, and it summarises them on dedicated pages for the limited network exclusion and the electronic communications exclusion. A provider submits the notification through the FCA’s Connect portal and pays a fee under FEES 3 Annex 8R, and the FCA then shows the notifier on the Financial Services Register.

For the limited network exclusion the notification is due within 28 days of the conditions first being met and must be repeated every twelve months while they continue to be met. For the electronic communications exclusion the notification is due before the service starts, the annual audit opinion follows, and a provider ceasing the service must say so within ten business days.

A business needs all three layers to know where it stands: the statutory duty to notify in regulations 38 and 39, the FCA direction fixing the mechanics of that notification, and PERG’s guidance on whether the underlying exclusion is available at all. The direction binds and the guidance does not, and treating the two as interchangeable is the error we see most often.

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Every provision, indexed to the figures

Provision	What it covers	In scope or excluded	Notification duty	See figure
Regulation 2(1)	Defines a payment service as a Schedule 1 Part 1 activity carried on as a regular occupation or business activity and not within Part 2	The gateway	None	Figure 1
Regulation 2(1)	Defines an excluded provider, and extends payment service provider to include one for Part 9 and Schedule 6 only	Excluded	None in itself	Figure 5
Regulation 2(2)	References to euro amounts include equivalent sterling amounts	Interpretation	None	Figure 3
Schedule 1 Part 1 para 1	The eight payment services	In scope	None	Figure 1
Schedule 1 Part 2 para 2(a) to (o)	The fifteen exclusions	Excluded	Only 2(k)(i) to (iii) and 2(l)	Table 1, Figure 2
Schedule 1 para 3	Cash provided otherwise than through an ATM, without a purchase	Excluded	None	Table 1
Schedule 1 para 4	Issuing a qualifying stablecoin under article 9M of the Regulated Activities Order	Would be excluded generally from 25 October 2027	None	Table 1
Regulation 38	Notification of use of the limited network exclusion once transactions exceed one million euros in twelve months, FCA assessment and Upper Tribunal reference	Excluded, with a duty	Yes, limbs (i) to (iii)	Figure 3
Regulation 39	Notification of use of the electronic communications exclusion before launch, and an annual audit opinion	Excluded, with a duty	Yes	Figure 4
Regulation 61	Information on withdrawal charges owed by a paragraph 2(o) cash withdrawal provider	Excluded, with a duty	No, an information duty	Figure 2
Regulation 63(1)	Confines Part 7 to payment services provided from a UK establishment on stated currency and location conditions, which is why Part 7 does not reach an excluded provider	Excluded from Part 7	None	Figure 5
Regulations 98 and 99	Operational and security risk management, and incident reporting	Does not reach an excluded provider	None	Figure 5
Regulation 105	Credit institutions must grant access to payment account services to providers within paragraphs (a) to (f) of the definition	Does not reach an excluded provider	None	Figure 5
Regulations 108 to 116	FCA monitoring, information, censure, penalties, notices, injunctions and restitution	Reaches an excluded provider	Enforces the duty	Figure 5
Regulation 109(4)	Fraud statistics reporting, expressly excluding an excluded provider	Does not reach an excluded provider	None	Figure 5
Regulation 125(2A)	Payment Systems Regulator direction to a paragraph 2(o) cash withdrawal provider	Reaches paragraph 2(o) only	None	Figure 2

Frequently asked questions about the payment services perimeter

Do I need FCA authorisation to run a gift card or closed-loop scheme?

Usually not, because a card usable only on the issuer’s premises or within a limited network falls within the limited network exclusion at paragraph 2(k) of Schedule 1 to the Payment Services Regulations 2017. Authorisation is not the end of the question. Once transactions through the scheme exceed one million euros in any twelve-month period, regulation 38 requires notification to the FCA, and the FCA can then assess whether the exclusion was correctly claimed.

What is the difference between an exclusion and an exemption here?

An exclusion in Schedule 1 Part 2 means the activity is not a payment service at all, so the question of authorisation never arises. Regulation 3 is different: it disapplies the regulations from credit unions, municipal banks and the National Savings Bank, which is an exemption for particular bodies rather than for particular activities. The distinction matters because three of the exclusions still leave duties behind, whereas nothing turns on the other twelve.

Is an online marketplace a payment service provider?

It depends on whether the marketplace takes possession of the funds and on whether it has authority to bind one side of the sale. The commercial agent exclusion at paragraph 2(b) covers an agent authorised to negotiate or conclude the sale on behalf of the payer or the payee but not both, and the FCA’s view in PERG 15.5 Q33A is that this requires legal authority to bind the principal rather than simply providing the technical means to place an order. Marketplaces that hold and settle funds for both sides generally fall outside the exclusion.

Does the limited network exclusion have a transaction threshold?

The exclusion itself has no threshold. The notification duty does. Regulation 38(1) requires a provider relying on paragraph 2(k)(i) to (iii) to notify the FCA once the total value of payment transactions executed through the service exceeds one million euros in any period of twelve months. Exceeding the threshold does not remove the exclusion. It triggers a duty to tell the FCA, and the FCA then assesses whether the exclusion is properly claimed.

Do mobile operators need authorisation to bill for digital content?

Not where the electronic communications exclusion at paragraph 2(l) applies, which requires the service to be additional to the communications service, charged to the related bill, and limited to digital content and voice-based services or to tickets and charitable donations. Two caps apply and both must hold: £40 on any single payment transaction and £240 cumulative for an individual subscriber in a month. Regulation 39 then requires notification before the service starts and an annual audit opinion confirming compliance with those limits.

Can the FCA fine a business that is not providing payment services?

It can, where the business is an excluded provider and has failed a duty the regulations impose on it. Regulation 2(1) deems an excluded provider to be a payment service provider for the purposes of Part 9, which carries the FCA’s enforcement powers, so a failure to notify under regulation 38 or 39 exposes the business to public censure under regulation 110 and a financial penalty under regulation 111, with the warning and decision notice procedure and a reference to the Upper Tribunal under regulation 112.

Does an excluded provider have a right to a bank account?

No. Regulation 105 requires credit institutions to grant access to payment account services, but it is confined to the payment service providers listed at paragraphs (a) to (f) of the definition in regulation 2(1) and to applicants for authorisation or registration. The Part 9 extension that brings excluded providers within the definition does not reach Part 8, so an excluded provider is exposed to the FCA’s enforcement powers without the access right that authorised firms enjoy.

Is issuing a stablecoin a payment service in the UK today?

Paragraph 4 of Schedule 1 would take issuing a qualifying stablecoin outside the definition, and would do so generally from 25 October 2027. It was inserted by SI 2026/102 and commenced on 25 February 2026 for specified purposes only, principally to let the FCA make rules and to let permission applications be made and determined. Until full commencement an issuer’s position under the Payment Services Regulations 2017 and the Electronic Money Regulations 2011 continues to be governed by the pre-existing analysis.

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Related payments regulation pages

A business that lands inside the payment services perimeter should read Payment Institution Authorisation and Licensing next, and an issuer of electronic money should read EMI Authorisation and E-Money Regulation. The two companion explainers cover what the regulations then require: The PSRs 2017 Explained: Information Requirements and Framework Contracts on what must be disclosed and when, and The PSRs 2017 Explained: Payment Authorisation, Liability and Execution Times on liability, refunds and execution deadlines. For the open banking services at paragraphs 1(g) and (h), see Open Banking and Variable Recurring Payments.