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As e-commerce activities rise, more people are adapting to digital payments. Online payments are now a part of daily life, offering a convenient and safe way to transact. PSPs (Payment Service Providers) facilitate these payments by acting as intermediaries between merchants, customers, and financial institutions. Today PSPs have become a necessity, allowing payments through methods like debit and credit cards, net banking, mobile wallets, etc. In a busy nation like the UAE, such services are particularly important. Therefore, starting a business by obtaining a PSP license UAE has strong potential as it addresses this growing necessity.
Operating as a payment service provider (PSP) requires a thorough understanding of the involved legalities, requirements, and the license categories you can obtain. In this guide, we have simplified the PSP license UAE for you, so you can make informed choices without hassle.
Let us understand this in the simplest way. A payment service provider (PSP) is a third-party service provider that enables businesses and merchants to accept online payments through various methods, such as card payments, bank transfers, and more. Think of them as the middlemen between the merchants, who receive the payments, and the customers, who make the payments.
In today’s era, digitization has transformed every sector. People have completely shifted to the online world, where they are buying products, booking services, and even preferring to make payments online. Why? Because online brings convenience. We cannot imagine our lives without online facilities. Similarly, online payments offer more security and efficiency, making traditional payment methods less necessary. For businesses too, online payments bring more efficiency in payment processes. This all make PSP (Payment Service Providers) one of the most lucrative business ideas in Dubai to pursue.
In the UAE, the payment services have become an absolute necessity for residents as it allows them to make payments through multiple channels and in various currencies easily. The UAE, which is already a dynamic and advanced nation, has become a hub for such innovative payment solutions and service providers. According to Statista, the total transaction value in the digital payments market in UAE is projected to reach a whopping USD 29.75 billion in 2024. This growth can be attributed to factors such as high internet penetration, the rise of e-commerce, a tech-savvy population, and the government’s support for startups in this sector. Where there is such a huge market, significant opportunities are bound to be present.
Like any other business setup in Dubai, starting a PSP business in the UAE requires obtaining the proper trade license and approvals. The digital payments sector in the UAE is primarily regulated and overseen by the Central Bank of the UAE (CBUAE). Let us familiarize ourselves with the licensing options available for operating as a Payment Service Provider (PSP) in the UAE. You must know that you can obtain a payment service provider license UAE both in free zones and on the mainland. Here are the major types of PSP license UAE:
The Retail Payment Services and Card Schemes (RPSCS), introduced by the Central Bank of the UAE, outlines the rules and conditions for obtaining and maintaining a license for retail payment service providers in the UAE. The RPSCS regulation covers 9 categories of digital payment services for which you can get a PSP license.
Here are 4 categories of retail payment services license that you can apply as money service provider in UAE:
The activities covered under this license include payment initiation services and payment account information services.
Initial capital requirement: Minimum AED 100,000 regardless of monthly average transaction value.
To obtain this license, you might be providing one or more of the following activities: payment account issuance services, payment instrument issuance services, merchant acquiring services, payment aggregation services, and domestic fund transfer services.
Initial capital requirement: Minimum AED 1 million with monthly average transaction value of AED 10 million or above or at least AED 500,000 with monthly average transaction value of less than AED 10 million.
This license can be obtained for providing one or more of all category III license activities plus cross-border fund transfer services.
Initial capital requirement: Minimum AED 2 million with monthly average transaction value of AED 10 million or above or at least AED 1 million with monthly average transaction value of less than AED 10.
This license can be obtained for providing one or more of all category II license activities plus payment token services.
Initial capital requirement: Minimum AED 2 million with monthly average transaction value of AED 10 million or at least AED 1.5 million with monthly average transaction value of less than AED 10 million.
Some of the requirements of the Central Bank of UAE for the retail payment license:
Read more here: 2021-c-15-2021-retail-payment-services-and-card-schemes-reg_0.pdf (centralbank.ae)
In September 2020, the UAE Central Bank introduced new regulations on Stored Value Facilities. An SVF license is issued by the Central Bank to an applicant for the issuance and operation of Stored Value Facilities (SVF) business, such as e-wallet service provider, in the UAE.
Under this regulation, the SVF license UAE can cover various activities including:
Please note that to issue and operate an SVF in the UAE, you must get a prior license from the Central Bank, except for single-purpose stored value facilities.
Some requirements of Central Bank for SVF license in UAE:
Read more here: 3.1.1. Providers of Stored Value Facilities | CBUAE Rulebook (centralbank.ae)
You can obtain a PSP license Dubai in one of the leading financial hubs, the Dubai International Financial Centre (DIFC) Freezone, regulated by the Dubai Financial Services Authority (DFSA). You need to apply to the authority.
Types of PSP license UAE you can get here include:
Category 4 License: Permits money transmission services with a minimum capital requirement of USD 140,000.
Category 3D License: Allows providing and operating payment accounts, executing payment transactions, and issuing payment instruments. The minimum capital requirement is USD 200,000.
Category 3C License: Required for offering wallet services. The minimum capital requirement is USD 500,000.
Abu Dhabi Global Market (ADGM) is a growing financial hub in the MENA region, known for its excellent infrastructure and favourable tax environment. Businesses conducting payment services within ADGM must acquire a PSP license UAE (Category 3C license) from the Financial Services Regulatory Authority (FSRA). It covers activities such as:
The minimum capital requirement for a Category 3C money services business license in ADGM is USD 250,000.
Here are the quick steps you generally need to follow to secure your PSP license UAE:
First things first, you must get acquainted with the regulatory framework of the PSP license in the UAE. You need to understand the different categories of licenses available and the relevant regulatory authorities that grant them.
You can start a PSP business in either free zones or on the mainland in the UAE. Each jurisdiction has its own set of laws, permitted payment services, and licensing regulations. You will need to decide where you want to operate. For example, if you choose to operate in the DIFC free zone, you will need to obtain the PSP license from the DFSA.
Then, you need to decide which money services you will offer. Options include payment account issuance services, payment instrument issuance services, merchant acquiring services, and more. Ensure that the services you choose are permitted in the jurisdiction you have selected.
After selecting the activities, you need to determine the appropriate license for your business. For example, if you choose mainland business setup and offer retail payment services such as domestic or cross-border fund transfers, you will need to obtain a retail payment service license from the Central Bank of the UAE.
For the PSP license UAE application process, you will need to submit several documents, including:
For complete guidance on documentation, you can contact our experts at Dubiz business setup.
Once the application is submitted, it will be reviewed by the relevant zone authority. Be cautious, as incomplete information can result in delays or even cancellation. Ensure that all documentation is thorough and accurate. Additionally, the review process may include background checks and interviews, so be prepared for that.
If everything is in order and you meet all the essential legal requirements, your PSP license UAE will be successfully issued.
Once you are licensed, the responsibilities do not end there. You must continuously meet various requirements to remain compliant, including ongoing risk assessments, maintaining internal control systems, regular reporting, and auditing. Additionally, make sure to stay updated on any new regulations and laws introduced by authorities.
No matter what PSP category you belong to, there are few common necessities that you must fulfil:
Remember there are more requirements to take care of. Our experts at Dubiz business setup can help you with that.
The cost of obtaining a PSP license UAE can vary depending on the license category and your specific business needs. However, given the growing demand and scope for digital payment solutions in the UAE, the PSP license has become one of the most sought-after licenses. Investing in it can be quite rewarding.
Navigating the legalities and formalities can be complex and confusing. That is where our experts at Dubiz come in. With years of experience in UAE company formation, we make the process seamless for you. From identifying the right license category to handling all paperwork and company registration in UAE, we have got you covered.
Connect with us to make your mark in the digital world with your money services business in the UAE. We are here to assist you every step of the way!
Contact DUBIZ today at +971 562986853 or WhatsApp us at +971 569973630. You can also drop an email at info@dubiz.co for any inquiries.
Payment service providers are third-party companies that act as intermediaries between merchants, who receive the payments, and customers, who make the payments. They provide the necessary infrastructure and connect with multiple acquiring banks (also known as acquirers or merchant acquirers) that process payments on behalf of merchants.
Some of the benefits of PSP license UAE include:
RPSCS regulation allows 9 types of digital payment services for PSP license, which include:
The PSP license fees in DIFC includes an application fee and license fees each starting from around USD 15,000*.
Yes, given the increasing demand for digital payment solutions, tech-savvy population, top-notch infrastructure, and strong government support, operating as a payment service provider in Dubai can unlock many opportunities and substantial profit for you.
