Daily Online E-Mail : How to become PSP or a payment service provider or Online Payment Transfer Company like Pay Pal in Pakistan?

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Client Question : We want to open Online payment Transfer Company in Pakistan, like Pay Pal, we need information relative license and cost and legal structure detail for making the company

Your wish to register, as an online payment transfer company in Pakistan is known as a request to become a PSP or a payment service provider under the current law. The email below is hoped to be of help for your understanding.Basically, Pakistan has rather stringent rules and regulations for the setting up of Internet payment PayPal-type solutions in Pakistan, and the facilitating rules have just appeared in the recent years. If you establish this however you can benefit by:

  • Facilitating E-commerce payments within Pakistan
  • Facilitating Foreign Remittances being sent to Pakistan.

Later, in October 2014, the SBP released Rules for Payment System Operators (PSOs) and Payment Service Providers (PSPs) allowing any applicant to become a licensed operator in Pakistan for payment systems.

As per PSD Circular No. 03 of 2014, payment system operators (PSOs) and payment service providers (PSPs) can include the following:

i: Electronic payment gateway service providers to perform routing and switching of payment transactions/messages to facilitate: e-commerce, remittances, point of sale (PoS) network.

ii: Clearing houses to provide payment-related clearing services.

iii: ATM switch operators to provide routing of ATM transactions through inter-connectivity between the participants of the network.

iv: Any other payment system operator or payment service provider (PSP) as may be permitted by the SBP.

The SBP has fixed the minimum paid-up capital requirement for the PSOs and PSPs (where applicable, free of losses) of Rs200 million or any other amount as may be prescribed by the bank from time to time, for each PSO or PSP-related business application, an additional 25 percent of the capital requirement, they will maintain at all times at least 10 percent of the required capital or any other amount prescribed by the bank as security deposit at SBP Banking Service Corporation (BSC) Office.

Five percent of the security deposit will be kept in a non-remunerative current account with the SBP-BSC Office and five percent in the form of government security to be kept under lien at the SBP-BSC Office.

Globally, the PSPs rarely have to get licensed as they use the mechanism of the existing licensed entities, such as money transmitters and banks, to handle their transaction processing. As a PSP’s , your business model hinges on having a transaction solution, that is, by creating alliances with local banks, if you wish to avoid the complications above.

However if you register as a proper PSP you can essentially become a full-stack operator acquiring relationships with the card schemes; it works with money transmitters for purposes of stored value or across-state-lines transactions and is even allowed to handle e-money (for example, digital money, provided commingling of funds is not done and a licensed banking financial institution provides it with depository and transaction banking services).

Hence, if you, as an aspiring PSP itself cannot find a method to partner with a licensed entity, it will go and obtain a money transmitter license itself.

Summing up the situation, easy Internet payment solutions are necessary for the growth of e-commerce in Pakistan for which regulators need to adopt a modern approach towards regulations instead of sticking to the conservative ones. Other than this, both services providers and regulators need to create users’ trust that their plastic money details are secured when they shop in ‘cloud’. The two steps are required for which some easy guidelines and opening up of the financial sector for new entrants through relaxed rules and regulations are vital.

The rules issued by the SBP on Oct 23, 2014 i.e. Rules for Payment System Operators (PSOs) and Payment Service Providers (PSPs) are still very much new and we will have to make quite a bit of an effort to have this sorted out for you.

By your email I am assuming that you wish to operate as a PSOs and/or a PSP that is, as payment intermediaries, which will perform the role of providing, preparing, routing, switching and clearing of electronic and paper-based financial transactions under various business applications such as internet payment gateways, ATM switch operators, POS network gateways, e-commerce payment and remittance gateway, domestic payment schemes etc.; thereby facilitating banks and consumers of banking services.”

This, we believe can assist you in having a PayPal-like interface for facilitating e-commerce transactions in Pakistan and from Abroad to Pakistan.

There is about to be a lot of competition here, as a number of companies are now in the process of getting approval and establishing payment systems-related businesses (including Paypal-like interfaces) under these rules. You should let us know how soon you would like us to start the process for you.

We do believe that the first step for you will be company incorporation.

If you wish, we can opt for an approach, which will ensure that all the work is done in phases.


Can you clear about Capital and % that Government and want to take. And how we will be Facilitating Foreign Remittances being sent to Pakistan and from Pakistan to Abroad?

Paid up capital is a sum on paper only, you really do not need to pay 200MIllion PKR to the government for registering a company.High paid up capitals have a purpose, i.e. if such a company is liquidated at some point due to problems there will be a basis for the government to compensate the investors.So you really do not have to worry here about this amount.

Can we just can open bank account with our foreign company name or maybe locale branch just with local tax normal pay and without license can work?

You cannot do this, as then the banks will refuse to co-operate with you.In order to operate here you will need to register a new company here or you can register a branch of your foreign company.

What’s the percentage we have to pay of capital that minimum is recurred. None of this money actually has to be paid up at the time of registration. This amount merely signifies the statutory required worth of your company.

What the other TAX we have to pay yearly. As a locally registered company or a foreign branch you will be issued a National Tax Number as well.You will be paying corporate taxes on the income you make from your business in Pakistan.

Legal process for license (We can only explain this as a part of a paid consultation)

Company Registration Costs :Starting from 250USD but we will need to look at the work involved here to quote our legal fees, the government fees also depend upon the nature of the company. We cannot really send you a proper proposal unless you ask for a formal quotation and are willing to pay for basic consultation, so we are able to assess the work involved.As an estimate, to begin work in Pakistan, you should be looking at a realistic basic expenditure of 10,000-20,000 USD minimum. You will also need to look into a proper place of work, like a registered office etc. Again we need more details on your business and would advise you to hire a financial expert.


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