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.
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).
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.
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.
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.
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 a PSP and an ELMI, and limitations under which license is not required.
| Parameter | PSP | ELMI |
|---|---|---|
| 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.
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.
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”.
