The Kingdom of Saudi Arabia - Payment Services Provider Regulatory Guidelines

As part of the Saudi Arabian Monetary Authority’s (“SAMA”) endeavours to achieve the objectives of the financial sector development program, which is one of the pillars of KSA’s 2030 vision, SAMA has issued the Payment Services Provider Regulatory Guidelines (the “PSP Guidelines”). The PSP Guidelines will enable the licensing of non-banking financial institutions such as payment companies and will regulate the provision of payment services in the KSA.

The following are the prominent features incorporated in the PSP Guidelines.

1. Payment Services

1.1 Under the PSP Guidelines the following activities, when carried on by way of business, will be considered Payment Services:

  • the execution of Payment Transactions, including (A) transfers of funds on a Payment Account with the Payment Service User’s Payment Service Provider or with another Payment Service Provider and (B) where the funds are covered by a credit line, and;
    • the execution of Credit Transfers, including Standing Orders.
    • the execution of Direct Debits, including one-off Direct Debits.
    • the execution of Payment Transactions through a payment card or similar physical or digital device.
  • issuing Payment Instruments.
  • issuing Electronic Money.
  • Acquiring Payment Transactions.
  • Money Remittance.
  • services enabling cash to be placed on or withdrawn from a Payment Account and the operation of a Payment Account.
  • Payment Initiation Services.
  • Account Information Services.
  • any other activity designated by SAMA as a Payment Service from time to time.

1.2 However, according to Article 5.2 the following activities do not constitute Payment Services:

  • Activities regulated by SAMA (such as banking business, financing activities and money changing business).
  • Payment Transactions executed wholly in cash and directly between the Payer and the Payee, without any intermediary intervention.
  • Payment Transactions carried out within a Payment System or securities settlement system between Payment Service Providers and settlement agents, central counterparties, clearing houses, central banks or other participants in such system including central securities depositories.
  • Payment Transactions based on cheque, traveller’s cheques, bankers’ drafts, paper-based vouchers and paper postal orders.
  • Payment Transactions and related services between a parent undertaking and its subsidiary or between subsidiaries of the same parent undertaking, without any intermediary intervention by a Payment Service Provider other than an undertaking belonging to the same group.
  • the professional physical transport of banknotes and coins, including their collection, processing and delivery.
  • services provided by technical service providers which support the provision of Payment Services, where the provider does not at any time have possession or control over the funds of a Payment Service User, including:
    • processing and storing data.
    • trust and privacy protection services.
    • data and entity authentication services.
    • provision and maintenance of terminals and devices used for payment services.
    • information technology.
    • communication network provision.
  • cash withdrawal services provided either through Alternative Delivery Channels, where the provider is acting on behalf of one or more Payment Service Providers.
  • the provision of a Limited Network Service.

2. Licensing

2.1 The PSP Guidelines once implemented will apply to all persons that carry on one or more Payment Services in the KSA. This includes, the invitation of inducement of a person located in KSA to enter into an agreement in relation to one or more Payment Services. It also includes a situation where an entity appoints an agent operating from the KSA, where such agent:

  • has a mandate to provide Payment Services in KSA on behalf of its principal;
  • is required or accustomed to act in accordance with the instructions or directions of its principal; or
  • either; (i) provides a Payment Service on its behalf without itself holding a Payment Service Provider licence; or (ii) invites or induces a person in the Kingdom to enter into, or offer to enter into, an agreement in relation to a Payment Service.

2.2 Article 4 states that Payment Services can only be provided by a Payment Service Provider or a Licensed Bank (with the requisite authorisation from SAMA).

2.3 Furthermore, Article 6 provides that the evaluation process undertaken by SAMA for the licensing application will take into account both financial and non-financial parameters. SAMA may also impose additional requirements and/or grant exemptions for certain applicant on a case-by-case basis.

3. Licensing categories

The PSP Guidelines has identified four categories of Payment Service Providers; Micro PI, Major PI, Micro EMI and Major EMI.

Micro PI – must be an Eligible Entity and can carry out Payment Services other than issuing Electronic Money and the average monthly payment transactions value should not exceed SAR 10,000,000.

Major PI – must be an Eligible Entity and can carry out one or more Payment Services but not issue Electronic Money.

Micro EMI – must be an Eligible Entity and can issue Electronic Money but ensures that the average monthly payment transaction value does not exceed SAR 10,000,000. Limitations are also placed on the monetary amount of a customer transactions.

Major EMI – must be an Eligible Entity and can issue Electronic Money with higher thresholds including higher limits on the monetary amount of a customer transactions.

We note that an Eligible Entity means:

  • an entity that has or wishes to obtain a licence as a Major PI, Major EMI or Micro EMI and is:
    • a joint stock company duly incorporated in the KSA; or
    • in the case of a Qualified Foreign Entity, a branch of such Qualified Foreign Entity duly established in the KSA; and
  • an entity that has or wishes to obtain a licence as a Micro PI and is:
    • a joint stock company or limited liability company duly incorporated in the KSA (subject to any further requirements imposed by SAMA in this regard); or
    • in the case of a Qualified Foreign Entity, a branch of such Qualified Foreign Entity duly established in the KSA.

4. Capital requirements

We set out in the table below the initial paid-up capital requirements and in reserve capital requirements for all four categories:

5. Conclusion

The PSP Guidelines also sets out, among other things, the application process and the required documentation to accompany it, the risk management policies and procedures, corporate governance requirements and customer protection rules. We further note that SAMA will establish the “Committee for the Resolution of Payments Disputes and Violations” for assessing and resolving disputes between Payment Service Providers, as well as between Payment Service Providers and Payment System Operators.

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