How to get a payment service provider license in the UAE?

Fintech advancements, eCommerce growth, and rising public demand for cashless transactions are driving the UAE’s fast expanding digital payments sector. Online payment gateways and the technology providers are essential for the safe processing of electronic transactions in the UAE. You can obtain a payment service provider license in the UAE to fulfill the increasing demand of digital transactions.

Digital payment businesses need a PSP license to lawfully operate in the United Arab Emirates. Also, they have to guarantee complete adherence to the cybersecurity and user data privacy practices. Fulfillment of the legal financial requirements and regulatory compliance is essential as well.

You can start a financial services business in Dubai to facilitate the online payments in the UAE. This guide elaborates on the effective mechanism to acquire a PSP license in the UAE. Keep reading this article to completely grasp the whole nitty-gritty of it all.

Understanding the UAE payment service provider license

Payment service providers (PSPs) serve as a go-between for financial institutions and retailers. PSPs are essential to the UAE’s digital economy, since they offer cutting-edge payment solutions for a range of sectors. Accordingly, they facilitate easy digital transactions, payment processing, and money transfers.

Financial businesses can offer electronic payment solutions with a payment service provider license in the UAE. Therefore, the Fintech providers can guarantee effective transfer of digital transactions for both customers and companies. For transparent financial transactions, adherence to cybersecurity standards, data protection legislation, and anti-money laundering (AML) rules is compulsory.

Types of payment service provider licenses in the UAE

These are some kinds of available payment service provider licenses in the UAE.

• Payment gateways: The payment gateways help digital platforms, mobile apps, and e-commerce websites to accept payments online. They use multi-factor authentication, tokenization, and data encryption to guarantee safe financial transactions. Payment gateways shield consumers from online fraud by integrating with banking systems to allow real-time digital transactions.
• Remittance providers: By managing the international money transfers, remittance providers enable people and companies to send and receive money across the borders. Remittance providers must follow the Anti-Money Laundering (AML) regulations of the Central Bank of the United Arab Emirates (CBUAE). Also, they must adhere to the CBUAE’s Counter-Terrorism Financing (CTF) rules to combat illegal financial activities.
• Merchant acquirers: The merchant acquirers serve as a bridge between retailers, banks, and card networks like MasterCard, Visa, and American Express. These special-purpose PSPs allow financial companies and eCommerce businesses to take payments using credit and debit cards. They guarantee seamless transaction processing by offering charge-back management, fraud detection, and payment authorization services.
• E-Wallet operators: PSP driven e-wallet operators provide digital wallets that enable peer-to-peer transfers, cashless transactions, and electronic fund storage. Google Pay, Apple Pay, PayPal, Amazon Pay, Samsung Pay, Alipay, and Walmart Pay are among the leading e-wallets globally. Also, there are Emirati digital wallets like e& money (formerly Etisalat Wallet), Klip, Payit, Careem Pay, Mashreq Pay, PayBy, etc. Both mobile wallets and e-wallets offer financial inclusion, greater online security, and quick monetary transactions.

Financial services PSP companies of the UAE can undertake

A financial service provider holding a PSP license in the UAE can cover these operations.

• Online and mobile payments: They complete transactions through digital wallets, bank transfers, and credit/debit cards.
• Cross-border payments and remittances: They allow people and companies to transfer money across international borders.
• Point-of-sale solutions: POS services give businesses the tools they need to take electronic payments in person.
• Buy Now, Pay Later: BNPL empowers customers to purchase products/services first, and make payment afterwards in markup free installments.

Regulatory authorities for PSP licensing in the UAE

Three primary financial regulatory bodies oversee various jurisdictions in the United Arab Emirates. They implement distinct regulatory frameworks to regulate the payment service provider license in the UAE. Subsequently, financial services businesses looking to obtain a PSP license in the UAE must consult these regulators.

• Central Bank of the UAE (CBUAE): It is the primary regulating agency for financial organizations operating within the mainland UAE. CBUAE issues the PSP licenses, guaranteeing compliance with Anti-Money Laundering (AML) legislation, cybersecurity rules, and consumer protection policies. To ensure operational transparency, PSPs under the CBUAE supervision are subject to frequent audits and strict financial capital requirements.
• Dubai Financial Services Authority (DFSA): The DFSA independently regulates the Dubai International Financial Center (DIFC), a major financial free zone in Dubai. Thanks to its attention-to-detail, DFSA offers a robust framework for the PSP license in Dubai. Following the best global practices, PSP license by DIFC covers fintech companies, payment gateways, and digital banks.
• Financial Services Regulatory Authority (FSRA): The FSRA independently governs the financial organizations that operate in Abu Dhabi Global Market (ADGM). Startups and global financial service providers select PSP license in Abu Dhabi, because it offers a fintech-friendly regulatory environment. Financial innovation is the main emphasis of the PSP license by FSRA, while strictly adhering to international compliance regulations.

Eligibility requirements for a PSP license in the UAE

Businesses must fulfill certain regulatory, financial, and operational standards to legally work as payment service providers in the UAE. Likewise, they have to build a fully secure digital payment system that is open for all users. They must follow these financial and legal rules to determine the eligibility for a PSP license in the UAE.

• Legal entity requirements: Businesses must first create a legal corporation in the UAE to obtain a PSP license. Mainland UAE jurisdiction empowers PSP companies to effectively serve the whole country, but they are subject to stringent financial rules. PSP businesses in the free zones like DIFC and ADGM avail more fintech-friendly regulatory frameworks.
• Minimum capital requirements: Depending on the company model and regulatory body, PSPs have to follow different capital requirements. ADGM and DIFC may have broader capital criteria than the CBUAE, which requires AED 2 million to AED 10 million. PSPs that handle digital wallets, remittances, or high-risk financial transactions typically need a larger capital reserve.
• Foreign ownership and local sponsorship: Free zone entities allow 100% foreign ownership, making them attractive for international fintech firms. Many types of PSP licenses in the UAE mainland enable full-time foreign ownership. Nevertheless, some specific onshore PSP activities may need local sponsorship (UAE national or entity), depending on the business structure.

Process of registering a PSP license in the UAE

The upcoming PSP firms need to follow this step-by-step procedure to register for payment service provider license in the UAE.

• Choose company and trade name: Come up with a memorable business name that adhere to the UAE’s corporate naming guidelines. Also, your trade name must connects with your brand and objectives. In case, you are introducing a new financial technology, then trademark it to save yourself from copyright infringement.
• Finalize corporate structure: Settle on a legal structure, either LLC, or whatever is suitable for your corporate filing.
• Select right jurisdiction: Decide appropriate legal jurisdiction for PSP company from the UAE mainland or the free zones. PSP firms in Dubai can pick Dubai International Financial Center (DIFC). Otherwise, financial companies can move to Abu Dhabi Global Market (ADGM).
• Follow your regulatory authority: PSP businesses in the mainland UAE have to get the PSP license from the CBUAE (Central Bank of the UAE). Whereas, financial firms in the DIFC (Dubai International Financial Center) require PSP license from the DFSA (Dubai Financial Services Authority). Similarly, PSP companies in the ADGM (Abu Dhabi Global Market) need PSP license from the FSRA (Financial Services Regulatory Authority).
• Get initial approval: PSP companies in the UAE must obtain an initial approval in the form of a no-objection certificate (NOC). Financial firms in the UAE mainland have to acquire the NOC from the Department of Economic Development (DED). Whereas, PSP businesses taking interest in free zones can fetch an NOC from DFSA or ADGM.
• Submit legal documentation: Collect the necessary legal paperwork comprising these documents and submit to the financial regulators in the UAE.
  • PSP license application that includes information about the applicant’s financial services
  • A thorough business plan
  • Undertaking of following compliance protocols for anti-money laundering (AML) regulations
  • Capital adequacy statements and financial reports
  • Proof of the payment of the PSP licensing fees and other regulatory costs
  • Compliance with the UAE’s financial risk management framework
  • Proof of the fulfillment of the jurisdiction-specific minimum capital requirements
• Obtain the PSP license after approval: Regulators carry out a thorough examination that includes security audits, financial evaluations, and compliance checks. After the final authorization and approval, the applicable UAE regulatory body grants the PSP license. Afterwards, PSP companies have to file financial reports, maintain continuous compliance, and go through audits on a regular basis.

Conclusion

Following regulatory procedures, and fulfilling financial responsibilities is essential to obtain a payment service provider license in the UAE. Full adherence to cybersecurity, AML, and financial reporting standards is necessary as well. Important actions include choosing the right regulatory body, getting paperwork ready, and going through a stringent approval process.

PSP businesses in the UAE must draft correct legal documentation with financial preparedness for a successful application. The UAE’s financial market and payment services sector is set for growth in the future. Developments in AI-driven fraud detection, blockchain, and cross-border payment solutions are driving the further expansion of the industry.

Do you want to start a payment service provider company in the UAE? Foreign financial firms can establish PSPs in the vibrant market of Dubai and Abu Dhabi. Efficiently go through the licensing with the help of financial consultants at KWS Middle East right now.

FAQs about payment service provider license in the UAE

These are the answers to the common questions regarding the PSP licensing in the UAE.