What is a Payment Institution?
‘’Payment institution’’ means a legal person who has obtained and retains authorization by the Cyprus Central Bank or by the competent authorities of another Member State to provide payment services.
The term “Payment Institution” refers to a category of payment service providers which came into being as a result of the enactment of the Payment Services Directive (PSD). The five main objectives of the PSD were to:
Create the potential for more efficiency of EU payment systems.
What are payment institutions allowed to do?
The new category of payment institutions can offer their customers the following services:
The PSD is currently being reviewed, and the list of activities the Payment Institutions can carry is expected to increase (to include for example Payment Initiation Services).
Our Tornaritis Law firm can advise you also on the introduction of the Payment Services Directive II (PSD2) will open up the payment services market by regulating the FinTech revolution currently happening on a community level. The EU-wide harmonisation of online payments is aimed at increasing the security for payment transactions and account information and creating a level playing field to enhance competition.
What is the difference between a payment institution and an e-money institution?
Both EMIs and PIs are regulated by the same authority, the Central Bank of Cyprus;
Both PIs and EMIs can provide payment services.
The main difference between the two types of payment service providers is that only e-money institutions can issue electronic money. E-money is a digital equivalent of cash stored on an electronic device or remotely at a server.
Services allowed by PIs:
telecommunication, digital or IT device and the payment is made to the telecommunication, IT system or network operator, acting only as an intermediary between the payment service user and the supplier of the good and services.
In order for a legal person to apply for an authorization to the Central Bank of Cyprus, for operating as a Payment Institution, it must be incorporated and its head office must be in Cyprus. Also, the legal person must submit an application to the CBC with the information and documents prescribed in paragraph 3 of the Payment Institutions and Access to the Payment Systems Directive of 2009 and Payment Services Directive II (PSD2) issued by the CBC by virtue of the powers vested in it under the Law. CBC also defines, among other things the following information:The amount of the initial capital and the amount of own funds that payment institutions must maintain
How can Tornaritis Law help?
NOTE: References to time and cost included in this document refer to those applicable at the time of preparation of this document.
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