Malta’s banking sector has taken great strides forward in the last fifteen years, expanding from four banks offering services to the Maltese population to a sophisticated EU-compliant banking sector which comprises a large amount of payment institutions (PIs) complementing this sector. This was greatly aided by the transposition of the European Payment Services Directive (2007/64/EC) into the Financial Institutions Act so as to regulate payment institutions in Malta. However, the revised Directive will introduce changes with regard to access to payment systems, restriction on charges, unauthorised payment transactions and refunds for payment transactions. There are currently fifteen payment institutions licensed in Malta with others offering their services in the EU or possessing a branch in Malta.

The Financial Institutions Act lists a vast amount of activities which can be carried out by a licensed payment institution. An applicant must submit a detailed business plan to the MFSA and the minimum initial capital which must tally with the service being carried out. The time frame for the application to be processed is usually about three months, depending on the completeness of the information given to the MFSA and the submission of all the required documentation. The PI will also be subject to regulatory fees both at the time of application and on an annual basis thereafter.

The PI is required to have a minimum of two people who will effectively direct the business of the payment institution in Malta, who are also subject to a minimum amount of due diligence checks. Furthermore, the office must be based in Malta. Qualification for a Maltese license renders it possible to passport the PI license into the EU/EEA Member State countries.

More than 250 E-Gaming companies have already been established and many more E-commerce institutions are to be set up in the future. These entities would need payment gateways in order to provide payment services to their customers. The facility of such institutions to set up in Malta has been aided by various factors such as a pro-business government and a stable macro-economic environment. Malta is a renowned front-runner in IT and also an international financial centre as it possesses a flexible regulatory approach to payment services, a robust banking infrastructure and a very attractive tax regime. These factors together with a state of the art telecoms infrastructure, low operational costs and salaries together with  a multilingual and efficient workforce makes Malta an ideal environment in which one can set up a payment institution.

By Dr. Yanica Borg