Permission For Payment Services in Germany

What is considered a payment service in Germany?

BaFin monitors the compliance of payment institutions, payment service providers and e-money institutions (often referred to as payment service providers, PSPs) with the rules and requirements of the ZAG. This is done both during start-up and in the course of ongoing supervision.

Payment services are

• the deposit or withdrawal business,
• the payment business in the form of the direct debit business, the credit transfer business and the payment card business without granting of credit,
• payment transactions with the granting of credit,
• acquisition business,
• money transfer business,
• payment initiation services, and
• account information services.

High requirements for German payment service permission

Providers who want to offer payment services to their customers must meet numerous requirements:

• Depending on the planned activity, sufficient initial capital of between EUR 20,000 and EUR 125,000 is required.
• If, in addition to payment services, other activities are to be provided that require a license under the German Banking Act, the required initial capital may also be higher.
• Further, the company's managers and owners of significant shareholdings must be professionally suitable and reliable in view of the planned business.
• In addition, special equity requirements must be met and a suitable risk management system and internal control procedures must be in place.

Payment institutions therefore require detailed regulatory advice in German payment services law at an early stage, well before the start of business, and should be represented by our specialist lawyers for banking and capital markets law before the relevant regulatory authorities in the licensing procedure.

The intensity of ongoing supervision depends on the type and scope of business activity. The focus of supervision is on capital and liquidity requirements and the risk control mechanisms in place.

Easier access for payment service providers from EEA member states

Companies already holding a license for operating payment services in a member state of the European Economic Area may also provide payment services in Germany by using the European Banking Passport if certain minimum requirements are met. No German license application of its own is needed then. Rather, the homeland supervisory authority must be notified about the intention of providing payment services in Germany as well.

Payment services come in many forms

Non-banks can also offer payment services, sometimes unnoticed. In addition to traditional payment services such as

• deposit/withdrawal business, in which payment accounts are offered, or
• payment businesses, in which credit transfers, direct debit or payment card transactions are performed,

for example, the financial transfer business also includes activities that are subject to BaFin approval and involve the transfer of funds to a third party on behalf of the customer in cash or cash-free form.

The scope of application of the financial transfer business is quickly affected in three-person relationships if, for example, a broker or intermediary receives and forwards payments from the contracting parties brought together.

A famous example was the Lieferheld ruling of the Regional Court of Cologne of September 29, 2011, Case No. 81 O 91/11. In these cases, it should be checked whether a statutory exception is relevant or whether the operation of the financial transfer business can be circumvented by clever legal drafting.

Commission transactions may also require a ZAG license if the commission agent is also involved in the payment process of the contract because he receives the remuneration for the principal and forwards it to the principal. If there is no license in this case, the commission agent commits a criminal offense punishable by imprisonment for up to three years or a fine.