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Treasury asks for advice on eMoney

Who'd want to be a banker these days?

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The UK Treasury is consulting on the whos and hows of electronic money, and opening the door for network operators who'd prefer to think of themselves as banks.

The consultation asks how the Treasury should regulate companies who issue electronic representations of cash, and what guarantees such companies should be required to provide while they're looking after our money. This is all with a view to letting mobile network operators, and everyone else, issue pre-paid tokens that can be used for anything we like.

Single-function tokens are already exempted from banking regulations - no one wants gift tokens to be subject to the same burden of legislation as banks - and the new category of electronic money will fit somewhere between the two. How to go about putting companies into categories is one of the things with which the Treasury would like help, with banks facing the full burden, e-money vendors a lighter load and gift tokens continuing in their current form.

For e-money companies that legislation includes allowing punters to reclaim their cash, or any part of it, at any time and forever - just as banks are obliged to keep track of abandoned bank accounts. There is a suggested six-year cut-off, but as it wouldn't apply to banks, or bank-issued pre-payment cards, it's not very fair.

Somewhere between £5m and £7.5m is abandoned annually from pre-payment cards – to the benefit of those running the systems. The Treasury reckons much of that is down to having a few quid left on the end of a card, which is why companies will be required to refund even small amounts on request.

And you'll be able to store more money too - the current limit of €150 is to be removed, though companies will still be required to do some due diligence before issuing tokens worth more than €250, or rechargable tokens that process more than €2,500 a year. That means you can lose more too, depending on the policy of the company running the service.

Those companies, or "Electronic Money Institutions" as they will be known, have a responsibility to provide insurance, and some liquidity, so it will be up to the insurance companies to consider the levels of security necessary, and how much the company can be trusted.

Mobile network operators will be well-placed in both regards, being in possession of huge amounts of collateral in terms of radio spectrum and infrastructure, and already having the infrastructure to accept and process pre-payments as well as skirting the existing legislation as their pre-payment systems can already be used to pay for music, movies and applications (hardly limited to a single company, or industry). They've also flirted with Near Field Communications on more than one occasion, which is why the new consultation is of such interest to NFC World and its ilk.

The consultation closes at the end of November, and it won't be long after that we'll see network operators lining up to become Electronic Money Institutions. Whether they can make a go of that business is a more complicated question. ®

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