As we move well into the digital age, payment service companies are proliferating and mobile payment is being adopted globally in different ways. As technology advances there becomes an increasing requirement to changes the law regulations to reflect the constant change in technological advancements. If you are looking at becoming a Payment Service Provider, here are a few regulatory changes that you should be aware off.

A payment service provider (PSP) digitial platform can be presented through many different business models. Most PSP’s offer shops online services for accepting electronic payments by a variety of payment methods including credit card, bank-based payments such as direct debit, bank transfer, and real-time bank transfer based on online banking. Typically, they use a software as a service model and form a single payment gateway for their clients (merchants) to multiple payment methods.

The Central Bank earlier this year issued a decree, outlining the definitions and the characterization in which Payment Service Provider’s are to operate within.

The Regulations further define the concept of a Payment Service Provider into four distinct sub-categories, each of which is subject to additional individual requirements from a licensing and compliance perspective. These sub-categories are as follows:

• Retail Payment Service Provider: Authorized commercial banks and other licensed PSPs offering retail, Government, and peer-to-peer digital payment services as well as money remittances

• Micropayments Payment Service Provider: PSPs offering micropayments solutions facilitating digital payments targeting the unbanked and under-banked segments in the UAE

• Government Payment Service Provider: Federal and local Government statutory bodies offering Government digital payment services

• Non-issuing Payment Service Provider: Non-deposit taking and non-issuing institutions that offer retail, Government, and peer-to-peer digital payment services.

The Regulations also defined the specific activities of payment services and the activities that are considered to be within their scope.

The Regulations characterize the Payment Service Provider activities through the following subcategories:

• Cash-in services – the exchange of cash for digital money, which is placed in a payment account;

• Cash-out services – the exchange of digital money for cash, which is taken out of the payment account;

• Retail credit /debit digital payment transactions;

• Government credit / debit digital payment transactions;

• Peer-to-peer digital payment transactions; and Money remittances.

• On the other hand, the Regulations also provide a list of services to which they do not apply (though which may be subject to other applicable laws or regulations), as follows:

• Payment transactions in cash without any involvement from an intermediary;

• Payment transactions using a credit card / debit card;

• Payment transactions using paper cheques;

• Payment instruments accepted as a means of payment only to make purchases of goods/ services provided

• from the Issuer / any of its subsidiaries, (i.e. closed loop payment instruments);

• Payment transactions within a payment /settlement system between settlement institutions, clearing houses, central banks, and PSPs;

• Payment transactions related to transfer of securities/ assets ( including dividends, income, and investment services);

• Payment transactions carried out between PSPs (including their agents/ branches) for their own accounts;

• and

• Technical Service Providers.

New Payment Service Provider entrants must be capable of satisfying the Central Bank’s criteria and show that the company has the appropriate experience, expertise, and knowledge to provide the proposed digital payment services in the manner contemplated in the license application. PSPs are also required to comply with a minimum capital requirement dependent on the characterisation of the PSP, and to implement and demonstrate effective governance and compliance related policies (for example, obligations not to commingle user-held funds with any other funds the PSP is using for wider business purposes).

While the regulations were issued on the 1st of January 2017, there is grace period whereby any PSP that was already providing digital payment services has a period of one year to take the appropriate steps to ensure they bring their operations into compliance.

If you require assistance with a Payment Service Provider (PSP) License or for further information, please contact us at info@how2uae.com