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Licensing Options For Payment Service Providers In the UAE

PUBLICATIONS / Articles / 2019 / Licensing Options for Payment Service Providers in the UAE
Payment Service Providers offer online payment solutions that authorize merchants and sellers to accept credit and debit card payments on multiple channels including phone and online store.

As we all know E-commerce is booming worldwide and consumers are happily purchasing many goods and services online. At the same time, regulations are getting tighter.

Payment Service Providers (PSP) offer online shopping services through electronic payments by using credit card, direct debit, online bank transfer etc. while acting as a third party between banks and customers. The necessity of online banking is increasing day by day with the advancement in technology.

Most PSP’s offer shops online services for accepting electronic payments by a variety of payment methods including credit card, bank-based payments such as direct debit, bank transfer, and real-time bank transfer based on online banking.

Four Recognized PSPs

As per the Regulatory Framework for Stored Values and Electronic Payment System, there are four (4) types of Payment Service Provider services (PSPs) recognized in UAE.
 
  • 1) Retail PSP: Authorized commercial banks and other licensed PSPs offering retail, Government, and peer-to-peer digital payment services as well as money remittances.
  • 2) Micropayments PSP: PSPs offering micropayments solution facilitating digital payments targeting the unbanked and under-banked segments in the UAE.
  • 3) Government PSP: Federal and local Government statutory bodies offering Government digital payment services.
  • 4) Non-issuing PSP: Non-deposit taking and non-issuing institutions that offer retail, Government, and peer-to-peer digital payment services.

Activities not subjected to regulation

The Entities providing the following payment services will not be subject to regulation:

  • Payment transactions in cash with no intermediary involvement.
  • Payment transactions using a credit or debit card.
  • Payment transactions using paper cheques.
  • Payment instruments accepted as a means of payment only to purchase goods or services provided from an issuer — closed loop payment instruments such as loyalty cards or rewards programs that a department store issues to a user to spend only in that department store.
  • Payment transactions within a payment/settlement system between settlement institutions, clearing houses, central banks and PSPs.
  • Payment transactions related to transfer of securities/assets (including dividends, income and investment services).
  • Payment transactions carried out between PSPs (including their agents/branches) for their own accounts.
  • “Technical Service Providers,” defined as entities providing support services to PSPs but which do not handle user funds, e.g., processing and storage of transactional data; privacy protection services; data and entity authentication; IT network provision; and provision and maintenance of terminals and devices used for payment services.

Conclusion

PSP's are allowed to operate in UAE however this activities are strictly regulated by Central Bank of UAE. Moreover the minimum capital requirement of setting up a PSP license will depended on the type of PSP you need to register in the UAE.

A PSP license can be obtained by mainland companies and those and in certain free zones (depending on the activity of PSP).



If you wish to know more about obtaining a Payment Service Provider License in the UAE, do not hesitate to contact us.






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