Payment Service Providers

Payment Service Providers (PSP) are the participants of the Latvian financial market acting in accordance with the Law on Payment Services and Electronic Money. To form the internal European market, and to remove barriers to the free movement of goods, services and finances, the European Parliament and the Council of 27 November 2015 adopted a Directive under the 2015/2366 number.

Services that can be provided by the PSP are:
  • Services that result in cash been credited to the payment system user's account;
  • Services that result in cash been withdrawn from the payment system user’s account;
  • Processing payments such as direct debit payments, payments using payment cards or similar systems, credit transfers, and regular payments;
  • Same as in the previous point, but with the application of a credit limit;
  • Produce and issue payment instruments (e.g. account top-up cards);
  • Transfers without opening of an account;
  • Payment processing using a remote access system (e.g. Personal Internet Account, Mobile Account);
PSP startup requires huge preliminary work to create legal, technical and personal base, which should then be checked and approved by the supervising authority. We have the necessary expertise to help you !
The main function of the PSP.

The main function of a PSP is to act as a financial intermediary with the purpose to process customers payments. PSP is a channel for movement of funds that do not belong to a company itself.

For example, a PSP can organise the collection of utility payments and a further allocation of funds between utility service providers, collect third party payments (e.g. from internet retailers or mobile operators). Also, at its own expense, a PSP can provide fast money transfers between financial institutions in different regions.

PSP services are limited in time (not more than 5 working days, including day of payment order receipt). Sources and destinations of payments are always known. Payment service cannot split one payment sum and then transfer it to several destinations (exception is commissions paid to intermediaries). During execution of a payment service a PSP is liable to a payment sender for its completion.

There are various PSP function models. Our specialists can help you implement various models, and advise whether a PSP is suited to your needs or if you also need an ELMI status instead.

Activities, financial condition and other areas of a PSP are controlled by the supervisory authority of the state - Financial and Capital Market Commission. (FCMC).

Requirements and Limitations imposed on a PSP

If a PSP will comply with certain restrictions, than it is enough to register (instead of authorization/licensing) the PSP with the FCMC to start working. The license in this case is not obligatory. The restrictions that must be followed to operate without a license are given in the section “Requirements and Limitations” below.

PSP that is authorized and has a PSP license has no limitation in turnover value and in territories of it's activity. In this case PSP must comply with Capital Adequacy Requirements.

A PSP must comply with the law on Prevention of Money Laundering and Terrorism Financing.

NB: In contrast to a PSP, an Electronic Money Issuer gives electronic money (e-money) in exchange for cash, and provides services unlimited in time without prior knowledge of payments destinations. Electronic Money Issuer also has an option to split payments and accumulate funds. Electronic Money Issuer is obliged to pay out money in exchange for e-money at any moment. Work specifics of Electronic Money Issuer are described below in “Electronic Money Issuer” section.
Electronic Money Issuer

The European Parliament and the Council of 16 September 2009 adopted a Directive under the 2009/110/EC number. The Directive has been adapted by various countries including Latvia. The Law on Payment Services and Electronic Money identified a new type of participants in the Latvian financial market - Electronic Money Issuers (ELMI).

ELMI undertakes its activities with the use of e-money issued by itself in exchange for the monetary funds received from its customers. Customers, who receive e-money in exchange for their real money, can make payments to other ELMI’s clients that are prepared to accept the Issuer’s e-money in exchange for their products or services.

An Issuer, by issuing e-money, takes on itself an obligation to buy its e-money from any e-money holder at any time.

There are two main forms of e-money existence. One form is the money balance recorded electronically on a stored-value card. Another form is the money balance recorded virtually in the server of a payment system (network money).

Our specialists can advise you if your preferred business model falls under ELMI activities.

Requirements and Limitations imposed on an ELMI

If a ELMI will comply with certain restrictions, than it is enough to register (instead of authorization/licensing) the ELMI with the FCMC to start working. The license in this case is not obligatory. The restrictions that must be followed to operate without a license are given in the section “Requirements and Limitations” below.

ELMI that is authorized and has a ELMI license has no limitation in turnover value and in territories of it's activity. In this case ELMI must comply with Capital Adequacy Requirements.

A ELMI must comply with the law on Prevention of Money Laundering and Terrorism Financing.

According to the law, e-money is a monetary value recorded electronically on an electronic device (stored-value card or computer memory).
NB: Besides issuing e-money, an ELMI can provide all other payment services as a PSP can. More on work specifics of a PSP you can read here.
Requirements and Limitations

If a PSP or an ELMI comply with certain restrictions, than it is enough to register it with the Financial and Capital Market Commission to start working. The license in this case is not obligatory.

Differences between company types and limitations.

Differences between a PSP and an ELMI, and limitations under which license is not required.

ParameterPSPELMI
Minimal starting capital at the time of company registration 2800 Euro 2800 Euro
Limitations (simplified) Outbound payments amount not exceeding 500 000 Euro per month.
There is territory of activity limitation.
Amount of issued e-money not exceeding 2 000 000 Euro at any given time.
There is territory of activity limitation.
Minimum number of staff 2 people 2 people
Types of activities Only payment services. E-money issuing;
Payment services providing.
Equity capital requirements Not applicable Not applicable
Reporting State Revenue Service – monthly;
Financial and Capital Market Commission – quarterly.
Bank of Latvia – semiannually, or for transactions over 10 000 euro.
Central Statistical Bureau – on demand.
State Revenue Service – monthly;
Financial and Capital Market Commission – quarterly;
Bank of Latvia – semiannually, or for transactions over 10 000 euro.
Central Statistical Bureau – on demand.

Data on the starting capital and the minimum number of staff listed in the table are the formal minimum. However, it is recommended to have starting capital of not less than 50-100 thousand Euros. This is because the FCMC, when considering the registration or licensing of a new company, will pay attention to the adequacy of its financial resources and the volume of its planned activities.

Besides, the plan of launching a new company can hardly be realized without investing the recommended amount.

Number of staff members must also be adequate for the FCMC to have the confidence that a company will be able to comply with the laws.

Recommended number of staff members for a new company is 8-10 employees.

Also, there is requirement so at least one member of the PSP/ELMI board would be responsible for Prevention of Money Laundering and Terrorism Financing Law fulfillment and has at least 3 years experience in fulfillment of this law requirements by officiating it's duties.

 

Registration and Management

Smartex Media provides full service in setup of PSP and ELMI, including registration with the supervising authority bodies, and full external administration and management of the companies.

Smartex Media services include two parallel cycles - registration cycle and administrative cycle.

Smartex Media registration cycle includes the following steps:
  • Preparation of documents for registration of a legal entity - regular Limited Liability Company;
  • Preparation of guidance documentation for a PSP or an ELMI;
  • PSP/ELMI registration (or licensing) with the FCMC, including communication with the FCMC during the whole process.
Smartex Media administrative cycle includes the following steps:
  • Search of an office space, registration of an agreement with the landlord;
  • Equipment of the new office, provision of workplaces;
  • Recruitment of employees with necessary qualifications;
  • Training of key employees in understanding the requirements of obligatory legislation and regulations;
  • Organisation of reporting and tasks monitoring systems;
  • Organisation of IT Infrastructure for the office;
  • Organisation of a physical and information security for the company;
  • Installation and setup of a payment system for the company;
  • Connection of a third-party payment systems to the company’s payment system;
  • Registration of the payment system with the Data State Inspectorate;
  • Training of employees to work with the payment system;
  • Management of internal control system.

Actions necessary to perform the fulfillment of the administrative cycle are carried out by Smartex Media employees. Some actions require legal authority rights to be able to represent the new company. For this purpose the post of an agent is formed. The agent with granted power of attorney acts on the company’s behalf and represents it in the state and other organisations.

The benefit is that agent and other specialists continue working at Smartex Media, and are hired out (‘out-staffed’) by the new company. This is part of an Out-staffing process, which gives new companies considerable advantages. Details on the Smartex Media out-staffing process and its benefits you can find in the section “Out-staffing and Outsourcing”.

Guidance Documentation are the policies, procedures and instructions which define actions of employees and recommend reactions to the internal and external factors with the purpose to achieve the best results and full regulatory compliance.
Paymart Suite payment system is a convenient and flexible tool allowing realization of any financial business models. More information on Paymart Suite you can find in the section “Payment System”.