Small-scale electronic money issuers

Companies which are going to issue electronic money have an obligation to register into the register of small-scale electronic money issuers, or to obtain authorisation to perform the activities of an electronic money institution.

Typical issuers of electronic money are companies such as GOPAY s.r.o., IKORUNA Payment Systems, SE, Le Cheque Déjeuner s.r.o., or Prepaid Solutions a.s..

The registration or authorisation is issued by Czech National Bank (hereinafter „CNB“) and based on it the subject gains permission to issue electronic money and provide payment services further specified in Act No. 284/2009 Coll., on payment (hereinafter „ZoPS“).

This article intends to provide the reader with basic information about what exactly payment services and electronic money are, who can be considered a small-scale electronic money issuer and particularly to explain minimal requirements for registration of such issuers by CNB.

What are payment services, based on ZoPS?

Payment services are defined in § 3 paragraph 1 of ZoPS as:

  1. service enabling cash deposit on a payment account held by provider,
  2. service enabling cash withdrawal from a payment account held by provider,
  3. transfer of financial means from a payment account, ordered by the payer, beneficiary or payer through beneficiary, if the provider does not provide the financial means transferred by the user as credit,
  4. transfer of financial means from a payment account, ordered by the payer, beneficiary or payer through beneficiary, if the provider provides the transferred financial means as credit to the user,
  5. issuing and administering of means of payment a devices designed to accept means of payment,
  6. issuing and administering of means of payment a devices designed to accept means of payment,(money remittance)
  7. transfer of financial means provided by a provider of communication services, if the consent of payer with the transfer is given through an electronic communication device.

What is electronic money?

Electronic money is defined in § 4 of ZoPS, according to which, for the purposes of regulation, by electronic money is meant financial values which:

  1. represent a claim against the issuer,
  2. are stored electronically (in the sense of any electronic medium into which is electronic money directly stored and also electronic systems, where electronic money is stored on an account, to which the possessor has remote access),
  3. are issued against acceptance of financial means for the purpose of providing payment transactions (in other words – electronic money represents prepaid product, it is the same principle as in the case of for example a debit card) and
  4. are accepted by other persons than the issuer (for example if company which issues prepaid cards, with which its employees pay for food and drinks in the company cantina it does not issue electronic money).

Who are small-scale electronic money issuers?

A small-scale electronic money issuer (hereinafter „Issuer“) is, based on § 53 paragraph 1 of ZoPS, a legal person who is entitled, on the basis of registration into the register of small-scale electronic money issuers, to issue electronic money and provide payment services related to electronic money.

The Issuer is entitled to issue electronic money only if the monthly average of the amount of issued electronic money in circulation in the Czech Republic does not exceed an amount of money equal to 5 000 000 EUR. If the Issuer will also provide other payment services, which are not related to electronic money, he is limited in the same way as a small-scale payment service provider and the monthly average of provided payment services by him in the Czech Republic during last 12 months cannot exceed an amount of money equal to 3 000 000 EUR.

On 30. 3. 2016 CNB registered 8 such Issuers.

What activities can be performed by small-scale payment provider?

Issuer can perform activities specified in § 46 paragraph 2 of ZoPS:

  • issue electronic money,
  • provide payment services related to electronic money,
  • provide payment services which are not related to electronic money and are stated in his registration of small-scale electronic money issuer,
  • provide activities related to the activities mentioned in the previous three points, including granting credit,
  • provide payment systems with the exception of a payment system with the final entry into the accounts.

What are other requirements for registration into the register of small-scale electronic money issuer?

Registration of the Issuer is specified by ZoPS and subsequent decree No. 141/2011 Coll.1.

For a successful registration, the applicant has to submit an application to the register of small-scale electronic money issuers in accordance with § 54 of ZoPS and the subsequent decree2, which was amended by decree No. 233/2014 Coll.3, with effect from 1. 12. 2014, meet the following requirements:

  • be a legal entity
  • have his registered seat in a member country, in which he really carries on his business and a branch in the Czech Republic
  • submit his business plan4, which is in accordance with the conditions stipulated by law in § 53 paragraphs 2 and 3 of ZoPS
  • secure financial means, against which were issued electronic money or which were entrusted to him by the users to perform the payment transaction,
  • ensure that none of his senior officers have been condemned for a criminal offence against property, an economic criminal offence or a criminal offence in connection with financing of terrorism,
  • ensure that there are no facts which would consist of an impediment to engage in trade in accordance with the law regulating the business in trade,
  • submit his business licence,
  • submit his certificate of no criminal records issued by the foreign country of the applicant and also certificates of no criminal records and questionnaires for every senior officer,
  • enclose a description of the method of performing individual payment services and all activities associated, the selected method of protecting monetary funds and rules for the investments of funds.

If the applicant into the register of small-scale electronic money issuers is registered in the Register of Trades, it is deemed that there are no facts which would consist of an impediment to engage in trade in accordance with the law regulating the business in trade.

If the applicant meets all the above mentioned requirements, CNB will register him into the register of small-scale electronic money issuers within 1 month from delivering the application and will issue a certificate for him in the same period of time.

If the applicant does not provide evidence of fulfilling the requirements for the registration into the register of small-scale electronic money issuers, or if any doubt regarding the correctness or completeness of information contained in the application will rise, the CNB will initiate legal proceedings within 1 month from delivering the application and if he does not provide evidence of fulfilling the requirements during these proceedings the CNB will reject the application.

In a case when the Issuer decides to extend the scope of the payment services, which are not related to electronic money and to which his registration applies, he has to submit his business plan, which has to be based on real economic calculations and in accordance with the conditions stipulated by law in § 53 paragraph 2 a 3 ZoPS3, in the same manner as new applicants.

1 Decree No. 141/2011 Coll., on the pursuit of business of payment institutions, electronic money institutions, small-scale payment service providers and small-scale electronic money issuers.

2 Decree No. 141/2011 Coll., on the pursuit of business of payment institutions, electronic money institutions, small-scale payment service providers and small-scale electronic money issuers.

3 Decree 233/2014 Sb., which amends decree No. 141/2011 Coll., on the pursuit of business of payment institutions, electronic money institutions, small-scale payment service providers and small-scale electronic money issuers, as amended by decree No. 31/2014 Coll.

4 In accordance with Decree No. 141/2011 Coll., on the pursuit of business of payment institutions, electronic money institutions, small-scale payment service providers and small-scale electronic money issuers business plan means really intended entrepreneurial plan of the applicant for first three accounting periods compiled in the form of consolidated account statements in accordance with the law regulating accounting based on real economical calculations along with commentary, which consists of:

  1. intentions of the applicant regarding the scope and volume of provided payment services or issued electronic money and other activities based on the law and description of planned method how to achieve them, including characteristic of target group of clients and commercial network of the applicant,
  2. baselines and preconditions upon which the business plan is based along with justification of interconnectedness of the quantitative data of the plan and feasibility of the results of the planned activities.