Ukraine drafts law to open its payment market

Monday 30 November 2020 09:35 CET | News

The Ukrainian Parliament has registered a draft payment services law that aims to open the Ukrainian payment market.

The effort was coordinated by the Ukrainian Central Bank (NBU) with the aim to fully replace the existing regulatory framework for the payments business in Ukraine. The drafted law seeks to remove certain regulatory barriers to entry to the payments market and implement certain EU laws applicable to payment services, such as Directive 2015/2366 (PSD2) and Directive 2009/110/EC (Second E-Money Directive).

According to financial Institutions Hub, the drafted law primarily replicates the PSD2 model in terms of the regulated services that will become available in Ukraine and it contemplates regulating several ancillary services.

The draft law forbids both payment institutions and e-money institutions from engaging in other activities except for ancillary services; limited payment services; FX transactions pertaining to the payment services; other financial services in cases envisaged under legislation; and other activities envisaged under applicable legislation. The draft excludes payments collected by mobile carriers in the context of a charitable activity.

When it comes to payments market participants, these have been allocated into four separate groups. The first one is comprised by banks (which may provide any payment service based on their banking license) and other financial institutions (e.g., insurance companies), which are entitled to provide money remittance and acquiring services.

The second group is made by various financial infrastructure entities, such as payment and e-money institutions, postal operators, and providers of non-financial payment services. The third is composed of the regulator and competent authorities. The last group is formed by providers of limited payment services.

The draft law makes also reference to legislation applied to ‘one leg’ transactions, i.e., those that are either initiated or received in Ukraine. Thus, to evaluate whether any type of activity could be caught under the new regime, a foreign PSP may need to carry out an impact assessment regarding its exposure to a transaction that may qualify as having been ‘carried out in Ukraine’. Nevertheless, the draft provides an exhaustive list of entities eligible to render payment services in Ukraine.

Still, this innovative market access regime is subject to a very strict conditionality procedure. Given the current pace of European integration activities carried out by the Ukrainian government, this is not likely to happen soon, the online publication concluded.
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Keywords: banking, fintech, PSD2, Ukraine, payments , remittances, e-money, PSPs, banks, payments providers, Ukrainian Central Bank, FX transactions, acquiring services
Categories: Banking & Fintech
Countries: Ukraine
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Banking & Fintech