EVERYTHING YOU NEED TO KNOW ON SETTING UP A MONEY SERVICES LICENSE IN THE UAE

Businesses are going digital. With a rapidly growing e-commerce adoption, there is a growing demand for smarter and faster solutions. Of all the solutions available, receiving or making payments tend to be the most important aspect for many micro and small businesses. Traditional methods of payment are rudimentary and complicated, and companies are looking for innovative ways to engage clients.

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WHAT ARE PAYMENT SERVICE PROVIDERS (PSP) & MONEY SERVICES BUSINESSES (MSB)?

Payment Service Providers (PSP) and Money Services Businesses (MSB) are bridging the gap between merchants and clients while providing a safe and secure environment for clients and enabling numerous unbanked micro businesses. Paypal, Stripe and Noon Pay are examples of PSPs. Businesses offering the services of payment services to other companies are required to be licensed in the UAE and must be regulated by the relevant authority.

WHAT ARE THE OPTIONS FOR SETTING UP A PAYMENT SERVICE LICENSE OR A MONEY SERVICES LICENSE IN THE UAE?

In the UAE, companies can secure a Payment Service License or a Money Services License from free zone jurisdictions such as Dubai International Financial Centre (DIFC) and Abu Dhabi Global Markets (ADGM) or from the Department of Economic in UAE mainland. The requirements for such licenses vary depending on the choice of jurisdiction and this article provides an overview of some of the licensing requirements from the aforementioned jurisdictions.

FREE ZONE – DIFC

Money Services Licenses in the DIFC Free Zone are regulated by the Dubai Financial Services Authority (DFSA). The Regulator categorises the activity under:

Category 4 – Permitting the activities of Providing Money Transmission. The base capital requirement for licenses is USD 140,000 and it may be calculated based on the annual expenditure (6/52 of the annual expenditure) or the size of the transaction.
Category 3D – Allowing the activities of Providing or Operating a Payment Account, executing payment transactions on a payment account, and issuing payment instruments. There is a base capital requirement of USD 200,000 for Category 3D licenses, and it may be calculated based on the annual expenditure (9/52 of the annual expenditure) or the size of the transactions.
Category 3C – Businesses that offer additional wallet services to clients are required to be licensed under this category for the activities of Issuing Stored Value. The base capital requirement for Category 3C licenses is USD 500,000, and it may be calculated based on the annual expenditure (13/52 of the annual expenditure).

Business entities are required to meet the substance and compliance requirements of the DFSA to secure a license to practice.

FREE ZONE – ADGM

Money Services Licenses in the ADGM Free Zone are regulated by the Financial Services Regulatory Authority (FSRA). There are a number of money services licenses issued in ADGM which is a jurisdiction of choice for many money services businesses. The regulator categorises the activity under:

Category 3C – Businesses that offer Money Remittances, Payment Services, and Issue Stored Value are required to be licensed under this category for the activities. There is a base capital requirement of USD 250,000 for Category 3C licenses and it may be calculated based on the annual expenditure or variable capital requirements (whichever is higher).

Businesses are required to meet the substance and compliance requirements of the FSRA to secure financial services permission to practice.

MAINLAND – CENTRAL BANK OF UAE

Businesses practising the activities of Money Services or Payment Services in mainland UAE are required to be regulated by the Central Bank of the UAE. The activities permissible under the license are categorised as:

Category 4 – Payment Initiation and Payment Account Information Services. The initial capital required for this license is at least AED 100,000 regardless of the monthly value of payment transactions.
Category 3 – Payment Account Issuance, Payment Instrument Issuance, Merchant Acquiring Services, Payment Aggregation and Domestic Fund Transfer Services. The initial capital required for this license varies between AED 500,000 to AED 1 million depending on the payment transaction amounts.
Category 2 – In addition to the above, the businesses can provide Cross-border Fund Transfer Services. The initial capital required for this license varies between AED 1 million to AED 2 million depending on the payment transaction amounts.
Category 1 – Businesses with Category 1 can offer Payment Token Services in addition to the activities in Category 2. Initial capital required for this license varies between AED 1.5 million to AED 3 million depending on the payment transactions amounts.

Businesses that deal in the Issuance of Stored Value (wallet services) are required to secure additional approvals from the Central Bank of the UAE. Business entities are required to meet the substance and compliance requirements of the Central Bank of UAE to secure license to practice.

Creation Business Consultants provides a wide range of services to assist you in setting up a Payment Service Providers and Money Services Businesses license in the UAE. For a free consultation, email us at [email protected] or call UAE +971 4 878 6240 Saudi Arabia +966 54 511 2494