Landslide changes in the Ukrainian regulation of payment services
On 31 July 2021 the Law of Ukraine “On Payment Services” (the “Law“), aiming at implementing the EU PSD2 and EMD Directives, was published. The Law shall drastically change the Ukrainian payment services market by introducing into it new concepts, new types of its participants (including foreign companies) and services to be provided, as well as different approach to the regulation and supervision of the market and its participants by the state regulator, the National Bank of Ukraine (the “NBU“).
The most crucial novelties to be introduced by the Law as compared to the existing regulatory framework of payment services are:
- open banking – a payment services provider will be entitled to receive get access to clients’ accounts with another payment services provider in connection with the provision of payment services
- new types of payment services, including rules of combining thereof, and new types of payment services providers such as, in particular, payment institutions and small payment institutions, financial institutions providing certain payment services, state and municipal authorities providing certain payment services within their competence
- new and explicit classification of payment services:
* financial payment services, provision of which requires a licence, will include: services related to crediting funds to a user’s account, as well as opening, maintaining and closing accounts; services related to withdrawal of funds from a user’s account, as well as opening, maintaining, and closing accounts; servicing payment transactions on account out of the user’s own funds; servicing payment transactions on account out of funds provided to the user as a loan; issuance of payment instruments and/or acquiring; money transfers without account opening; issuance of electronic money and servicing transactions therewith, including maintenance of e-wallets.
* non-financial payment services will include initiation of a payment transaction and provision of information on account.
* supporting services, such as services of technical nature related to provision of payment services; services of a payment system operator; services of a technological operator; other services which may be defined as supporting by the laws.
* limited payment services will include crediting funds to accounts under cash-collection services provided on the basis of the relevant license; processing of certain types of payments by telecom providers; other services which may be determined by the NBU as limited payment services.
- straightforward registration and licensing requirements applicable to payment services providers. In particular, the Law deletes the existing multilayer registration and licensing process applicable to non-banking financial institutions. Instead, it introduces a one-step licensing procedure, which shall be performed by way of enrolment of information about a financial payment services provider into the Register of Payment Infrastructure under the requirements determined in the Law. Other types of payment services providers shall be enrolled into this register under the procedure and subject to requirements to be approved by the NBU. As to banks, they shall continue operating on the payment services market on the basis of a banking license only.
- payment institutions licensed for providing payment services in a jurisdiction of their incorporation shall have the right to provide payment services in the territory of Ukraine through their affiliates established and licensed in Ukraine.
- clear delimitation of a technological operator function comprising processing, clearing or operational, information and other technological functions in connection with payment services but without attraction of funds under such payment transactions to own account of the technological operator and establishment of requirements thereto.
- new types of client accounts to be maintained by payment services providers other than banks – so called “payment account”, which, however, shall have a limited regime as compared to bank accounts maintained by banks.
- removal of the requirement to make all money transfers through payment systems registered in Ukraine.
- removal of the exclusive right of banks to maintain accounts, issue payment means, issue electronic money, and service transactions therewith.
- Ukrainian residents shall obtain the right to receive and use e-money issued abroad and nominated in foreign currency subject to compliance with the Ukrainian currency control regime. Rules for using e-money nominated in foreign currency shall be set forth by the NBU.
- creation of a special regulatory platform for testing innovative products, services, and instruments at payment services market where an eligible person may test its innovative payment services/products and continue providing thereof on a general basis after following a simplified licensing procedure.
At the same time, the Law introduces requirements to the financial status and reputation of a payment services provider and its owners similar to the banking market. These include verification of the origin of owners’ funds used as contribution to a payment services provider charter capital, conformity of a payment services provider ownership structure with statutory requirements (including obtainment of a prior approval of the NBU for acquisition of ownership in it) and adherence to the corporate governance requirements.
Although the Law is rather voluminous, it only establishes basic concepts, principle rules and general guidelines, while the right to determine detailed rules and procedures is granted to the NBU. The NBU shall adopt its underlying regulations by not later than 30 days prior to the day of the Law enactment.
The Law shall be enacted in a year, on 2 August 2022, except for the open banking regime, which shall become operational in four years, thus permitting the NBU and all participants of the payment services market to get prepared to the completely new environment of payment services.
During a transition period of six months following enactment of the Law:
- financial institutions currently holding a license for money transfers without account opening shall apply to the NBU for issuance of the relevant license under the new requirements. The existing licences shall be considered as revoked after the expiration of such six months transition period.
- payment organisations of currently registered payment systems shall notify the NBU about their intention to continue operating payment systems under the Law, in which case they shall bring their activity in line with new requirements.
- infrastructure services providers duly registered as of the day of the Law enactment may continue carrying out the activity of technical operator without any notifications/re-registrations.