Payment Institutions are regulated entities under the Second Schedule to the Financial Institutions Act (FIA). They provide global services to companies and merchants in Malta and are regulated under the FIA which is the key act transposing the EU Second Payment Services Directive. Payment Institutions must make use of their funds exclusively in the interest of providing payment services and are not allowed to receive deposits or other repayable funds from the public.
Once authorized Payment Institutions may authorize cash to be placed on a payment account and can provide operations required for operating a payment account, execute payment transactions, issue and/or acquire payment instruments and offer money remittance services. They enjoy less stringent regulatory and supervisory requirements than traditional credit or financial entities. In fact, more than 250 iGaming companies are established in Malta, and all these companies and other e-Commerce companies require payment gateways, which Payment Institutions provide.
The Licencing Requirements to establish such an institution involve:
- The submission of an application for authorization and the required documentation
- own funds determined in accordance with the payment services provided (these range between €20,000/ €50,000 / €125,000 dependent upon the specific activities to be carried out)
- at least two individuals who shall direct the business from Malta, and
- such individuals must be of prudent conduct, good reputation and are required to be fit and proper persons who work with integrity and professionalism.
The application procedure is straightforward. The Licencing Timeframe usually goes on for a period of three (3) months from when the MFSA deems to have reviewed and received satisfactory replies to the submitted draft completed application form and supporting documents and the process may be divided into two distinct processes:
- The analysis of the business plan in detail which includes a forecast budget calculation for the first three financial years, risk presented by the Company, governance structure, internal control systems and source of funds to name a few, and
- The due diligence exercises of the involved persons.
For authorization as a Payment Institution, a Licence Application shall be submitted to the Malta Financial Services Authority, together with, but not limited to the following list of documents:
- A copy of the Memorandum and Articles of Association of the institution, or the equivalent deed of partnership;
- Audited financial statements for the last three years;
- A business plan including the structure, organisation and management systems of the institution;
- Description of the internal control mechanisms;
- Description of the structural organization; and
- The identification of key persons involved in the Company and providing the necessary due diligence requirements.
Upon receiving the Maltese licence, the Payment Institution would then be able to passport such licence into the EU/EEA Member State countries through basic procedures of notification. This would enable the Maltese Company to provide its services through the establishment of a branch or by means of cross border services to the relevant Member State.
The Regulatory Fees are one-time non-refundable fees:
- The application fee itself is €3,500 and
- The annual supervision fee is a minimum fee of €2,500, or an equivalent of 0.0002% of the total assets as reported at the end of the preceding year in the balance sheet.
To date there are forty-three (43) Financial Institutions licenced to undertake payment services under the Second Schedule to the FIA.