Malta Payment Institutions: Introduction
Malta Payment Institutions are regulated by the Financial Institutions Act, following the transposition into Maltese law of part of the regulations found in the 2007 Payment Services Directive; Directive 2007/64/EC of the Council and the European Parliament.
The Financial Institutions Act: Activities of Malta Payment Institutions
The Second Schedule of the Financial Institutions Act lays down the activities payment institutions may engage in, namley:
(a) Services enabling cash to be placed on a payment account as well as all the operations required for operating a payment account;
(b) Services enabling cash withdrawals from a payment account as well as all the operations required for operating a payment account;
(c) Execution of payment transactions, including transfers of funds on a payment account with the user’s payment service provider or with another payment service provider:
(i) execution of direct debits, including one-off direct debits;
(ii) execution of payment transactions through a payment card or a similar device;
(iii) execution of credit transfers, including standing orders;
(d) Execution of payment transactions where the funds are covered by a credit line for a payment service user:
(i) execution of direct debits, including one-off direct debits;
(ii) execution of payment transactions through a payment card or a similar device;
(iii) execution of credit transfers, including standing orders;
(e) Issuing and/or acquiring of payment instruments;
(f) Money remittance;
(g) Execution of payment transactions where the consent of the payer to a payment transaction is transmitted by means of any telecommunication, digital or IT device and the payment is made to the telecommunication, IT system or network operator, acting solely as an intermediary on behalf of the payment service user and the supplier of the goods and services.
Other Activities of Malta Payment Institutions
Malta payment institutions may additionally carry out other activities:
(a) The provision of operational and closely related ancillary services such as ensuring execution of payment transactions, foreign exchange services strictly in relation to payment services, safekeeping activities, and storage and processing of data;
(b) The operation of payment systems;
(c) Without prejudice to the provisions of article 5(6) of this Act, business activities other than the provision of payment services;
(d) When payment institutions engage in the provision of payment services, they may only hold payment accounts used exclusively for transactions; any funds received by payment institutions from payment service users with a view to the provision of payment services shall not constitute a deposit or other repayable funds within the meaning of article 2 of the Banking Act, or electronic money within the meaning of article 2 of the Banking Act;
(e) Payment institutions may grant credit related to payment services referred to in paragraph (2)(d), (e) or (g) of this Schedule only if the following requirements are met:
(i) the credit is ancillary and granted exclusively in connection with the execution of a transaction; and
(ii) notwithstanding national rules on providing credit by credit cards, the credit granted in connection with a payment and executed with the act shall be repaid within a short period which shall in no case exceed twelve months; and
(iii) such credit is not granted from the funds received or held for the purpose of executing a payment transaction; and
(iv) the own funds of the payment institution are at all times, to the satisfaction of the supervisory authority, appropriate in view of the overall amount of credit granted.
Initial Capital Requirements
According to FIR 01/2011, issued by the MFSA, in the case of financial institutions carrying out activities listed in the Second Schedule of the Financial Institutions Act, the Authority shall require that at the time of authorisation such financial institutions hold the hereinafter mentioned initial capital.
- Where the institution provides only the payment services listed in Article 2(f) of the Second Schedule to the Act, its capital shall at no times be less than €20,000;
- Where the institution provides the payment services listed in Article 2(g) of the Second Schedule, its capital shall at no time be less than €50,000; and
- Where the institution provides any of the payment services listed in Article 2(a)-(e) of the Second Schedule, its capital shall at no time be less than €125,000.
Determination of an Application for a Licence
The Financial Institutions Act lays down that the Authority must determine an application for a licence within three months of its receipt. Where the applicant has however not submitted the application with the complete information required, the Authority must determine that application within three months of the actual date of compliance.
EU/EEA Financial Institutions Undertaking Payment Services Benefitting From the Right to “Passport”
Once the Malta licence is obtained, it is possible to passport the licence into the EU/EEA Member State countries by following basic procedures of notification. This would allow the Malta Payment Institution to provide services within the aforementioned Member States either through the establishment of a branch or remotely.
Why Malta for Payment Institutions?
The same factors that have driven the growth of the rest of the financial services sector in Malta are at work here, namely:
- An accessible and open minded regulator
- Sound technological infrastructure
- Access to a wide network of tax treaties, and potentially advantageous tax treatment
- Well educated, English speaking workforce
- The opportunity to provide an EU wide service through passporting
In addition, Malta benefits from having a financial services regulator that has dealt with a number of payments services businesses and has thus developed a sound understanding of the commercial and technical principles at work, which in turn facilitates both set-up and compliance.
How we can help
We offer a wide range of consultancy, legal, compliance and accountancy services to assist you throughout each step of the application process. Our experienced team of professionals will not only assist you during pre-licensing process but can also provide you with holistic post–licensing services and on-going support with respect to regulatory compliance, accounting and legal matters.
