Small-scale payment services providers

Companies which are going to provide payment services have an obligation to register into the register of small-scale payment services providers, or to obtain authorisation to perform the activities of a payment institution.

Typical providers of payment services are companies such as American Express Payment Services, PayPal and PayU, however providers of other financial services, for example Zonky and P2P finance CZ, are also included.

The registration or authorisation is issued by Czech National Bank (hereinafter „CNB“) and based on it the subject gains permission to provide payment services further specified in Act No. 284/2009 Coll., on payment (hereinafter “ZoPS“).

This article intends to provide the reader with basic information about what exactly payment services are, who can be considered a small-scale payment services provider and particularly to explain minimal requirements for registration of such providers by CNB.

What are payment services, based on ZoPS?

Payment services are defined in § 3 paragraph 1 of ZoPS as:

  1. service enabling cash deposit on a payment account held by provider,
  2. service enabling cash withdrawal from a payment account held by provider,
  3. transfer of financial means from a payment account, ordered by the payer, beneficiary or payer through beneficiary, if the provider does not provide the financial means transferred by the user as credit,
  4. transfer of financial means from a payment account, ordered by the payer, beneficiary or payer through beneficiary, if the provider provides the transferred financial means as credit to the user,
  5. issuing and administering of means of payment a devices designed to accept means of payment,
  6. transfer of financial means during which both payer and beneficiary do not use payment account held by provider (money remittance),
  7. transfer of financial means provided by a provider of communication servicesif the consent of payer with the transfer is given through an electronic communication device.

Who are small-scale payment providers?

Small-scale payment provider is (hereinafter “Provider“) is defined in § 36 of ZoPS as a person, who is entitled to provide payment services based on registration into the register of small-scale payment providers.

The Provider is entitled to provide the payment services only if the monthly average of the amount of payment services he provided in the Czech Republic, including those provided by his commercial agents, during the last 12 months does not exceed an amount of money equal to 3 000 000 EUR.

On 30. 3. 2016 CNB registered 132 such Providers.

What activities can be performed by small-scale payment provider?

Provider can perform activities specified in § 8 of ZoPS:

  • provide payment services stated in his registration of small-service payment provider,
  • provide activities related to providing payment services stated in his registration of small-service payment provider, including granting credit meeting further conditions,
  • provide payment systems with the exception of a payment system with the final entry into the accounts.

What are requirements for registration into the register of small-scale payment services providers?

Registration of the Provider is specified by ZoPS and subsequent decree No. 141/20111 Coll.

For successful registration, the applicant has to submit the application into the register of small-scale payment services providers and in accordance with § 37 of ZoPS and the subsequent decree2, which was amended by decree No. 233/2014 Coll.3 with effect from 1. 12. 2014, meet following requirements:

  • have his registered seat or principal place of business in a member country, in which he really carries on his business and a branch in the Czech Republic,
  • submit his business plan4, which is in accordance with the conditions stipulated by law in § 36 paragraph 2 of ZoPS,
  • secure financial means, which were entrusted to him by the users to perform the payment transaction,
  • he has not been condemned for a criminal offence against property, an economic criminal offence or a criminal offence in connection with financing of terrorism; this applies also for senior officers of the applicant,
  • there are no facts which would consist an impediment to engage in trade in accordance with the law regulating the business in trade,
  • if the applicant is a natural person, he has to meet general conditions for engaging in trade in accordance with the law regulating the business in trade,
  • submit his business licence,
  • submit his certificate of no criminal records issued by foreign country of the applicant and also certificates of no criminal records and questionnaires for every senior officer,
  • enclose a description of the method of performing individual payment services and all activities associated, the selected method of protecting funds entrusted for the purpose of conducting a payment transaction and rules for the investments of funds.

If the applicant into the register of small-scale service providers is registered in the Register of Trades, it is deemed that there are no facts which would consist of an impediment to engage in trade in accordance with the law regulating the business in trade. If he is also a natural person, it is deemed that he meets general conditions for engaging in trade in accordance with the law regulating the business in trade.

If the applicant meets all the above mentioned requirements, CNB will register him into the register of small-scale service providers within 1 month from delivering the application and will issue a certificate to him in the same period of time. The CNB will describe in the certificate which payment services is the Provider authorized to provide.

If the applicant does not provide evidence of fulfilling the requirements for the registration into the register of small-scale payment services provider, or if any doubt regarding the correctness or completeness of information contained in the application will rise, the CNB will reject the application.

In a case when the Provider decides to extend the scope of the payment services provided to which his registration applies, he has to submit his business plan, which has to be based on real economic calculations and in accordance with the conditions stipulated by law in § 36 paragraph 2 of ZoPS in the same manner as new applicants.

1 Decree No. 141/2011 Coll., on the pursuit of business of payment institutions, electronic money institutions, small-scale payment service providers and small-scale electronic money issuers.

2 Decree No. 141/2011 Coll., on the pursuit of business of payment institutions, electronic money institutions, small-scale payment service providers and small-scale electronic money issuers.

3 Decree 233/2014 Sb., which amends decree No. 141/2011 Coll., on the pursuit of business of payment institutions, electronic money institutions, small-scale payment service providers and small-scale electronic money issuers, as amended by decree No. 31/2014 Coll.

4 In accordance with Decree No. 141/2011 Coll., on the pursuit of business of payment institutions, electronic money institutions, small-scale payment service providers and small-scale electronic money issuers business plan means really intended entrepreneurial plan of the applicant for first three accounting periods compiled in the form of consolidated account statements in accordance with the law regulating accounting based on real economical calculations along with commentary, which consists of:

  1. intentions of the applicant regarding the scope and volume of provided payment services or issued electronic money and other activities based on the law and description of planned method how to achieve them, including characteristic of target group of clients and commercial network of the applicant,
  2. baselines and preconditions upon which the business plan is based along with justification of interconnectedness of the quantitative data of the plan and feasibility of the results of the planned activities.

5 § 36
(2) Small-scale payment services provider is entitled to provide payment services only if the monthly average of the amount of payment services he provided in the Czech Republic, including those provided by his commercial agents, during last 12 months does not exceed amount of money equal to 3 000 000 EUR. If the small-scale payment services provider provides payment services for shorter period of time than 12 months, the amount of payment services is calculated based on his business plan.