The Payment Services Directive 2007/64 of the European Parliament and of the Council of 13 November 2007 on payment services in the internal market has been implemented by way of amendments under the Financial Institutions Act and the enactment of a Directive under the Central Bank of Malta Act. The former Act regulates the licensing aspect while the latter implements the substantive provisions of the Payment Services Directive.
Essentially, a person who regularly or habitually undertakes the carrying out of payment services (i.e. provides and executes payment services in relation to banknotes, coins, scriptural money and electronic money) qualifies as a payment institution, and as such, needs to be licensed as a financial institution under the Financial Institutions Act, 1994.
Payment institutions may engage in the following activities:
(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.
Payment institutions may also engage in the following 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) When payment institutions engage in the provision of payment services, they may only hold payment accounts used exclusively for transactions;
(d) Payment institutions may grant credit related to payment services 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.
