How to Register Payment Provider Business in Pakistan?

The payment provider industry in Pakistan has experienced significant growth in recent years. This sector encompasses businesses that facilitate electronic transactions, digital payments, and financial services. The State Bank of Pakistan (SBP) regulates this industry under the Payment Systems and Electronic Fund Transfers Act, 2007. The industry includes various players such as payment gateway providers, mobile wallet operators, and electronic money institutions. With the increasing adoption of digital payments, the sector offers substantial opportunities for entrepreneurs and investors.

Legal Requirements for Establishing a Payment Provider Business

Establishing a payment provider business in Pakistan requires compliance with specific legal requirements:

1. Company Registration: Register the business with the Securities and Exchange Commission of Pakistan (SECP)
2. SBP License: Obtain a license from the State Bank of Pakistan
3. Tax Registration: Register with the Federal Board of Revenue (FBR) for tax purposes
4. AML/CFT Compliance: Implement Anti-Money Laundering and Countering Financing of Terrorism measures
5. Data Protection: Comply with data protection and privacy regulations
6. Cybersecurity: Implement robust cybersecurity measures
7. Consumer Protection: Adhere to consumer protection guidelines

These requirements aim to maintain the integrity and security of the payment ecosystem in Pakistan.

Step-by-Step Guide to Registering a Payment Provider Company

1. Choose a unique company name and check its availability with SECP
2. Prepare and submit company incorporation documents to SECP
3. Obtain Digital Signature Certificates for company directors
4. Apply for National Tax Number (NTN) with FBR
5. Open a corporate bank account
6. Prepare and submit license application to SBP
7. Undergo SBP’s assessment and evaluation process
8. Implement required technical infrastructure and security measures
9. Obtain final approval and license from SBP
10. Register for Sales Tax (if applicable)
11. Comply with ongoing regulatory reporting requirements

This process requires meticulous attention to detail and adherence to regulatory guidelines.

Essential Documentation for Payment Provider Business Registration

• Memorandum and Articles of Association
• Form 1: Application for Company Incorporation
• Form 21: Declaration of Compliance
• Form 29: Particulars of Directors
• National Identity Cards of Directors and Shareholders
• Proof of Registered Office Address
• Bank Account Opening Documents
• Business Plan and Financial Projections
• IT Infrastructure and Security Policies
• AML/CFT Policies and Procedures
• Risk Management Framework
• Customer Due Diligence Procedures
• Dispute Resolution Mechanism

These documents form the foundation for regulatory compliance and operational readiness.

Expected Timeframe for Completing Registration Process

The registration process for a payment provider business in Pakistan typically takes 3-6 months. This timeline includes:

1. Company Registration with SECP: 1-2 weeks
2. Tax Registration with FBR: 1-2 weeks
3. Bank Account Opening: 1-2 weeks
4. SBP License Application Preparation: 2-4 weeks
5. SBP Assessment and Evaluation: 2-3 months
6. Implementation of Technical Infrastructure: 1-2 months
7. Final Approval and Licensing: 2-4 weeks

The actual duration may vary based on the completeness of documentation and the applicant’s responsiveness to regulatory queries.

Detailed Cost Analysis for Payment Provider Business Registration

The costs associated with registering a payment provider business in Pakistan include:

• SECP Company Registration Fee: PKR 1,000 – 10,000 (depending on authorized capital)
• Name Reservation Fee: PKR 200
• Digital Signature Certificates: PKR 1,500 – 2,500 per certificate
• Legal and Professional Fees: PKR 50,000 – 200,000
• SBP License Application Fee: PKR 500,000 (non-refundable)
• Minimum Paid-up Capital: PKR 200 million for EMIs
• IT Infrastructure Setup: Variable (depends on scale and complexity)
• Compliance and Security Implementation: Variable

These costs provide a general estimate and may vary based on specific business requirements and scale of operations.

Government Fees and Charges for Payment Provider Businesses

Government fees for payment provider businesses include:

• Annual License Fee: PKR 1,000,000
• Transaction-based Charges: As per SBP guidelines
• Regulatory Reporting Fees: Variable
• Audit and Inspection Charges: As incurred
• Renewal Fees: As prescribed by SBP
• Penalties for Non-compliance: Variable

These fees contribute to the regulatory oversight and maintenance of the payment systems infrastructure in Pakistan.

Comprehensive Checklist for Payment Provider Business Registration

1. Finalize business plan and financial projections
2. Choose company name and structure
3. Prepare incorporation documents
4. Register company with SECP
5. Obtain Digital Signature Certificates
6. Register for taxes with FBR
7. Open corporate bank account
8. Prepare SBP license application
9. Develop IT infrastructure and security policies
10. Implement AML/CFT measures
11. Establish risk management framework
12. Create customer due diligence procedures
13. Design dispute resolution mechanism
14. Submit license application to SBP
15. Undergo SBP assessment and evaluation
16. Implement required technical measures
17. Obtain final approval and license
18. Register for additional permits (if required)
19. Set up operational systems and procedures
20. Train staff on compliance and operations

This checklist provides a comprehensive overview of the steps required for successful registration and setup of a payment provider business in Pakistan.

Relevant Laws and Regulations for Payment Services Industry

The payment services industry in Pakistan is governed by several laws and regulations:

1. Payment Systems and Electronic Fund Transfers Act, 2007
2. Electronic Money Institutions Regulations, 2019
3. Payment System Operators and Payment Service Providers Rules, 2014
4. Branchless Banking Regulations
5. Anti-Money Laundering Act, 2010
6. Prevention of Electronic Crimes Act, 2016
7. Foreign Exchange Regulation Act, 1947
8. Companies Act, 2017
9. Consumer Protection Laws
10. Data Protection Laws (upcoming)

These laws establish the regulatory framework for payment providers, ensuring consumer protection, financial stability, and market integrity.

Key Authorities Involved in Payment Provider Registration Process

The primary authorities involved in the registration process are:

1. Securities and Exchange Commission of Pakistan (SECP)
2. State Bank of Pakistan (SBP)
3. Federal Board of Revenue (FBR)
4. Financial Monitoring Unit (FMU)
5. Ministry of Information Technology and Telecommunication
6. Pakistan Telecommunication Authority (PTA)
7. National Database and Registration Authority (NADRA)

These authorities play crucial roles in regulating, supervising, and facilitating the operation of payment provider businesses in Pakistan.

Read More:

• How to Register Ed-Tech Business in Pakistan
• How to Register Car Business in Pakistan
• How to Register Printing Business in Pakistan

Professional Services Available for Registration Assistance

Several professional services can assist in the registration process:

• Legal Consultants: Provide guidance on regulatory compliance and documentation
• Financial Advisors: Assist with financial projections and capital requirements
• IT Consultants: Help design and implement technical infrastructure
• Compliance Specialists: Develop AML/CFT and risk management frameworks
• Tax Consultants: Advise on tax implications and compliance
• Business Consultants: Assist with business planning and strategy
• Licensing Specialists: Guide through the SBP licensing process

These professionals can significantly streamline the registration process and enhance the chances of successful approval.

Choosing the Ideal Business Structure for Payment Providers

The choice of business structure for payment providers in Pakistan typically includes:

1. Private Limited Company: Most common structure, offering limited liability
2. Public Limited Company: Suitable for larger operations with public shareholding
3. Limited Liability Partnership: Combines partnership flexibility with limited liability

Factors to consider when choosing a structure:

• Regulatory requirements
• Capital needs
• Ownership structure
• Tax implications
• Operational flexibility
• Future growth plans

The private limited company structure is often preferred due to its balance of liability protection and regulatory compliance.

Obtaining Necessary Licenses and Permits for Operations

Payment providers in Pakistan require several licenses and permits:

1. SBP License for Payment System Operator/Provider
2. Electronic Money Institution License (for e-money services)
3. Branchless Banking License (if applicable)
4. Foreign Exchange Dealer License (for cross-border transactions)
5. ISO 27001 Certification for Information Security
6. PCI DSS Compliance (for card payments)
7. Telecom Service Provider License (if offering mobile-based services)

The specific licenses required depend on the scope of services offered by the payment provider.

Tax Registration and Compliance for Payment Provider Businesses

Tax registration and compliance for payment providers involve:

1. Obtaining National Tax Number (NTN) from FBR
2. Registering for Sales Tax (if applicable)
3. Filing monthly withholding tax statements
4. Submitting annual income tax returns
5. Maintaining proper books of accounts
6. Conducting annual financial audits
7. Complying with transfer pricing regulations (for international transactions)
8. Adhering to tax reporting requirements for digital transactions

Proper tax compliance is essential for maintaining good standing with regulatory authorities and avoiding penalties.

Post-Registration Responsibilities for Payment Provider Business Owners

After registration, payment provider business owners must:

1. Maintain compliance with SBP regulations and guidelines
2. Submit regular reports to SBP on transactions and operations
3. Conduct periodic internal and external audits
4. Update AML/CFT policies and procedures regularly
5. Implement ongoing staff training programs
6. Monitor and report suspicious transactions
7. Maintain minimum capital requirements
8. Ensure data protection and cybersecurity measures
9. Manage customer complaints and disputes effectively
10. Keep licenses and permits up to date
11. Adapt to evolving regulatory requirements
12. Participate in industry forums and consultations

These responsibilities ensure ongoing compliance and contribute to the overall stability of the payment ecosystem in Pakistan.

FAQs

1. What are the minimum capital requirements for a payment provider business?

The minimum paid-up capital requirement for Electronic Money Institutions (EMIs) in Pakistan is PKR 200 million. For other types of payment providers, the capital requirements may vary based on the scope of services and are determined by the State Bank of Pakistan on a case-by-case basis.

2. Do I need a special license from the State Bank of Pakistan?

Yes, payment provider businesses in Pakistan require a specific license from the State Bank of Pakistan. The type of license depends on the nature of services offered, such as Payment System Operator/Provider License or Electronic Money Institution License.

3. How long does it take to get approval for a payment provider business?

The approval process for a payment provider business typically takes 3-6 months. This timeline includes company registration, SBP license application, assessment, and final approval. The actual duration may vary based on the completeness of documentation and responsiveness to regulatory queries.

4. Can foreign companies operate payment provider businesses in Pakistan?

Foreign companies can operate payment provider businesses in Pakistan, subject to specific regulations. They must establish a local subsidiary or branch office and comply with foreign investment regulations. Additional approvals may be required from relevant authorities, including the Board of Investment.

5. What type of security measures are required for payment provider businesses?

Payment provider businesses in Pakistan must implement robust security measures, including:

• ISO 27001 certified information security management system
• PCI DSS compliance for card payments
• End-to-end encryption for data transmission
• Multi-factor authentication for user access
• Regular security audits and penetration testing
• Disaster recovery and business continuity plans

6. Is it mandatory to have a physical office for a payment provider business?

Yes, payment provider businesses in Pakistan are required to have a physical office. The registered office address must be provided during company registration and license application. The office should be suitable for conducting business operations and accessible for regulatory inspections.

7. What are the tax implications for payment provider businesses in Pakistan?

Payment provider businesses in Pakistan are subject to various taxes, including:

• Corporate Income Tax: Currently 29% of taxable income
• Sales Tax: 16% on taxable services (may vary by province)
• Withholding Tax: On various transactions as per FBR guidelines
• Workers’ Welfare Fund: 2% of taxable income
• Workers’ Profit Participation Fund: 5% of profits

Additionally, specific tax regulations may apply to digital transactions and cross-border payments. Consultation with a tax professional is advisable for comprehensive tax planning.