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Payment institutions and e-money institutions

Pursuant to section 8 (1) of the Payment Services Oversight Act (Zahlungsdiensteaufsichtsgesetz, ZAG), an institution wishing to provide payment services as a payment institution in Germany, commercially or on a scale which requires a commercially organised business undertaking, needs written authorisation from the Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, or BaFin).

Pursuant to section 1 (2) of the ZAG, payment services comprise:

  • deposit and withdrawal transactions
  • Payment transactions in the form of direct debits, credit transfers and card payments excluding the granting of credit
  • payment transactions involving the granting of credit
  • payment authentication transactions
  • digital payment transactions
  • money transmission services

The same applies to e-money institutions pursuant to section 8a of the ZAG. E-money business is the issuance of e-money, which is defined as any electronically stored unit of monetary value in the form of a claim on the issuer, issued against payment of a cash amount, in order to carry out payment transactions and also accepted by parties other than the issuer. The provision of payment services is included in the licence to conduct e-money business.

In addition, the ZAG defines exceptional cases in which payment services are not rendered.

As part of the licencing procedure, both groups of institutions are required to submit, inter alia, a business model, a business plan with a budget plan for the first three financial years and a description of the measures required to fulfil the security requirements of section 13 of the ZAG. Payment institutions and e-money institutions are subject to different requirements, for instance for initial capital.