Payment Services and E-money Business
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Payment Institutions as Payment Service Providers

Formerly, the provision of payment services according to the provisions of the German Banking Act (Kreditwesengesetz) was reserved for credit institutions and financial service providers. Since the coming into force of the German “Law about Payment Services” (henceforth: ZAG) payment services may also be provided by so called payment institutions. 

Simply put, payment institutions are all nonbanks which provide payment services on a commercial basis. 

Due to this very broad definition many companies, which are not from the financial sector, are within the scope of the provisions of ZAG. For example, the online food-ordering company “Lieferheld” was judged by the Cologne District Court (Landgericht Köln, Urteil vom 29.09.2011, Az. 81 O 91/11) as a payment institution. The Cologne District Court ruled that „Lieferheld“ provided the payment service “money remittance business” by accepting payment for the clients’ food for the purpose of forwarding it to the gastronomes and restaurants. 

Acting as a payment institution requires a licence. Such a licence is granted by the German financial supervisory authority BaFin if the necessary conditions are met.