Fintech

Areas of Expertise

Technology has changed the way we live, communicate and do business.  Over the last decade, the use of technology in the financial industry has increased significantly.

Fintech is more than a buzz word and describes the convergence between finance and technology.

Operators in the Fintech industry are usually disruptors trying to break barriers in a heavy regulated financial services industry through new business models and concepts.

Because of our expertise in technology, we are perfectly positioned to assist clients that are desirous of obtaining a financial license in Malta and to provide ongoing regulatory and legal support.

Payment Institutions

Payment Institutions

General Overview

What is a payment institution?

A payment institution is a company that is engaged in the following activities:

  1. Issuing and/or acquiring of payment instruments;
  2. Execution of payment transactions where the funds are covered by a credit line for a payment service user:
    • execution of direct debits, including one-off direct debits;
    • execution of payment transactions through a payment card or a similar device;
    • execution of credit transfers, including standing orders;
  3. 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:
    • execution of direct debits, including one-off direct debits;
    • execution of payment transactions through a payment card or a similar device;
    • execution of credit transfers, including standing orders;
  4. Services enabling cash withdrawals from a payment account as well as all the operations required for operating a payment account;
  5. Services enabling cash to be placed on a payment account as well as all the operations required for operating a payment account;
  6. Money remittance;
  7. 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.

Can a payment institution engage in other activities pursuant to the Act?

 Yes.  The licensed entity can engage in the following activities.

  1. Trading for own account or for account of customers in:
    • money market instruments (cheques, bills, Certificates of deposit and similar instruments);
    • foreign exchange;
    • financial futures and options;
    • exchange and interest rate instruments;
    • transferable instruments;
  2. Guarantees and commitments;
  3. Issuing and administering other means of payment (travellers cheques and bankers’ drafts and similar instruments)
  4. Venture or risk capital;
  5. Financial leasing;
  6. Lending (including  personal  credits,  mortgage  credits,  factoring  with  or without recourse, financing of commercial transactions including forfeiting);
  7. Underwriting share issues and participation in such issues;
  8. Money broking;
  9. Issuing of electronic money

Who regulates payment institutions?

The Malta Financial Services Authority (“MFSA”) regulates financial services in Malta.

What is the main legislative instrument?

The Financial Institutions Act (“Act”), Chapter 376 of the Laws of Malta regulates the activities of financial institutions in Malta.  The Act transposes the Payment Services Directive and the e-Money Directive.

What are the main requirements?

Company

An application has to be submitted in the name of a company.  For further information about the setting up of Maltese entities and the applicable tax regime, please refer to our specific pages.

Initial Capital

The initial capital of a Payment Institution relates to the activity undertaken.  If the license holder will only engage in the provision of payment services, the initial capital is calculated as follows:

Activity Initial Capital
Money Remittance € 20,000
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. € 50,000
Services enabling cash to be placed on a payment account as well as all the operations required for operating a payment account;

Services enabling cash withdrawals from a payment account as well as all the operations required for operating a payment account;

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;

·    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;

·    Issuing and/or acquiring of payment instruments.

€ 125,000

If the license holder engages in other activities, the initial capital threshold will be determined on a case-by-case basis commensurate to the risk and proposed business activities.

Effective Management

In order to ensure business continuity, and in accordance with the “four-eyes principle”, at least two individuals must effectively direct the business of the financial institution in Malta.

 

Due Diligence Process

A due diligence process will be undertaken by MFSA in relation to all shareholders and directors.

Operational Scrutiny

A financial institution is required to have a sound and prudent management, robust governance arrangements, and adequate internal control mechanisms, including a clear organisational structure with well defined, transparent and consistent lines of responsibility, risk management procedures, and sound administrative and accounting procedures.

 

What are the statutory application fees?

A non-refundable fee of €3,500 is due upon the submission of the application.

A Licence holder is also required to pay an annual supervision fee equivalent to 0.0002 of the total assets as reported by the Licence holder in the statutory schedules under applicable Rules and pertaining to the year immediately before the year when the fee is payable. In any case, such supervision fee may not be less than €2,500.

The first supervision fee payable by a Financial Institution licensed after the 1st January of any calendar year would be due immediately once a Licence is granted, and would be equal to a proportion of the minimum fee. The fee payable would be proportionate to the period remaining between the date of the granting of the Licence and the end of that calendar year.

Can a Payment Institution issue electronic money?

The issuance of electronic money is regulated by the provisions of the Act.  However, a separate authorisation is required.  Further information may be obtained from our specific page dealing with e-money institutions.

Payment Institutions

How can we assist?

Assistance relating to the application process

Drafting and negotiating agreements with agents, suppliers, hosting companies.

Agreements with payment processors, acquirers and issuers

Regulatory advisory services in relation to applicable Maltese laws and regulations, EU laws

Impact analysis of current and upcoming legislative instruments (such as PSD2)

Guidance on anti-money laundering legislation

Guidance on data protection matters

E-Money Institutions

Emoney Institutions

General Overview

What is eMoney?

eMoney means monetary value as represented by a claim on the issuer which is:

  1. stored electronically, including magnetically;
  2. issued on receipt of funds;
  3. used for the purposes of making payment transactions;
  4. accepted as a means of payment by persons other than the issuer.

Can eMoney be issued against credit?

No.

What are the conditions to issue eMoney?

eMoney is to be issued at par value immediately upon the receipt of funds.

Can an eMoney institution grant interest?

Yes.  However interest must not be related to the length during which the electronic money is held.

Who is the regulator?

The Malta Financial Services Authority (“MFSA”) regulates financial services in Malta.

What is the main legislative instrument?

The Financial Institutions Act (“Act”), Chapter 376 of the Laws of Malta regulates the activities of financial institutions in Malta.  The Act transposes the Payment Services Directive and the e-Money Directive.

What are the main requirements?

Company

An application has to be submitted in the name of a company.  For further information about the setting up of Maltese entities and the applicable tax regime, please refer to our specific pages.

Initial Capital

The initial capital of an eMoney institution is set at €350,000.

Effective Management

In order to ensure business continuity, and in accordance with the “four-eyes principle”, at least two individuals must effectively direct the business of the financial institution in Malta.

 Due Diligence Process

A due diligence process will be undertaken by MFSA in relation to all shareholders and directors.

Operational Scrutiny

A financial institution is required to have a sound and prudent management, robust governance arrangements, and adequate internal control mechanisms, including a clear organisational structure with well defined, transparent and consistent lines of responsibility, risk management procedures, and sound administrative and accounting procedures.

What are the statutory application fees?

A non-refundable fee of €3,500 is due upon the submission of the application.

A Licence holder is also required to pay an annual supervision fee equivalent to 0.0002 of the total assets as reported by the Licence holder in the statutory schedules under applicable Rules and pertaining to the year immediately before the year when the fee is payable. In any case, such supervision fee may not be less than €2,500.

The first supervision fee payable by a Financial Institution licensed after the 1st January of any calendar year would be due immediately once a Licence is granted, and would be equal to a proportion of the minimum fee. The fee payable would be proportionate to the period remaining between the date of the granting of the Licence and the end of that calendar year.

Emoney Institutions

How can we assist?

Assistance relating to the application process

Drafting and negotiating agreements with agents, suppliers, hosting companies.

Agreements with payment processors, acquirers and issuers

Regulatory advisory services in relation to applicable Maltese laws and regulations, EU laws

Impact analysis of current and upcoming legislative instruments (such as PSD2)

Guidance on anti-money laundering legislation

Guidance on data protection matters

Areas of Expertise