Payment Services Licence: Costs & Requirements

In order for an entity to file an application to act as a financial institution providing payment services as envisaged under the Second Schedule to the Financial Institutions Act (the “Act”) a number of initial requirements must be satisfied.

The licensing requirements for a payment service provider are the following:

• The financial institution must have enough funds to satisfy the minimum initial share capital and an amount of own funds of not less than as set out by the Financial Institutions Rule 01 (the “Rule”) as described further below;
• A number of individuals (at least two) must effectively direct the business of the financial institution from Malta;
• All persons directing or managing the operation must be fit and proper persons and the Malta Financial Services Authority (“MFSA”) must be satisfied that the minimum criteria relating to prudent conduct, integrity and professional staff and safety of potential depositors are fulfilled with respect to the applicant;
• The applicant and relevant connected parties should be able to provide the relevant and sufficient information to the MFSA in order to monitor the fulfilment of prudential criteria and to identify and prevent any threats to the interests of potential clients;
• The applicant must have sound and prudent management, robust governance arrangements and adequate internal control mechanisms; and
• The MFSA may require active participation by way of a shareholding interest or by way of management by an institution that is authorised in a reputable jurisdiction.

The MFSA requires that all applications for a licence shall be filed in accordance with its official application forms as applicable and shall be accompanied by the following documentation:

1. The Memorandum and Articles of Association of the applicant;
2. Audited financial statements for three years (if applicable);
3. A business plan including the structure, organisation and management systems of the prospective payment service provider;
4. The identity of all directors and managers of the institution;
5. The identity of all shareholders with a qualifying shareholding;
6. The identity of the individuals who will be effectively directing the business of the prospective payment service provider;
7. A programme of operations, setting out in particular the type of activities envisaged to be undertaken; and
8. Proposed level of initial capital.

As stated earlier, the MFSA shall require financial institutions licensed to provide payment services to hold, at the time of authorisation, initial capital as follows:

• Where the institution provides only money remittance services, its capital shall at no time be less than €20,000;
• Where the institution provides the payment service listed in paragraph 2(g) of the Second Schedule to the Act, its capital shall at no time be less than €50,000; and
• Where the institution provides any of the payment services listed in paragraphs 2(a) – (e) of the Second Schedule to the Act, its capital shall at no time be less than €125,000.

Like all other Financial Institutions regulated by the MFSA and the Financial Institutions Act, payment service providers must maintain, at all times, own funds calculated in accordance with one of the three methods laid down in paragraph 24 of the Rule, as will be determined by the MFSA.

Under the terms of Article 5(2) of the Act, the MFSA must determine an application for a licence within three months of receipt of the application but in the event where an application is not filed in compliance with what is required or if additional information is requested then the MFSA must determine that application within three months of the actual date of compliance. In any case, an application shall be determined within six months of receipt. Where the MFSA fails to determine the application within the six-month timeframe, it would automatically be deemed to be considered as a refusal.

The application and processing fee payable to MFSA (excluding professional fees) is €3,500.

The annual supervision fee payable to MFSA is equivalent to the total assets times the rate of 0.0002. This amount may not be less than €2,500.