The modern world economy cannot exist without Payment Service Providers (PSPs), whose role is to facilitate seamless and secure cross-border transactions. PSPs are at the heart of digital wallet solutions, remittance services and payment settlements within the ambit of GIFT IFSC. This enables companies to function smoothly across different geographies. With the solid regulatory framework of the International Financial Services Centres Authority (IFSCA) in place, GIFT IFSC is positioning itself to be a global hub for online PSPs and a formidable competitive advantage in the global financial market.

PSPs or Payment Service Providers are entities that offer payment services in terms of payment account, money transfer (especially across countries), and provision of e-money. PSPs simplify the process of transferring money between buyers and sellers and are often involved in cross-border transactions and e-commerce. Some examples of Payment service providers are Amazon Pay, PayPal Braintree, Razor pay, PayU, etc.

Main functions of Payment Service Providers include:

• Payment processing which allows businesses and merchants to receive both credit and debit card payments from their customers.
• Enabling safe, efficient, and economical global financial transactions, making GIFT City Gujarat a strong and lucrative fintech hub.
• Giving consumers prepaid cards or digital wallets with which they may carry, send, and spend virtual money.

Pre-requisites for PSPs in GIFT IFSC

Before making an application to the GIFT City authorities, following requirements should be taken care of:
1. Possess the necessary infrastructure, including adequate office space, equipment, and communication facilities in GIFT City Investment zone.
2. Satisfy the net worth requirement.
3. Financial soundness of the applicant and fit and proper requirements.
4. The applicant or its group entities must not have been refused authorization by the authority in the past.
5. Relevant persons of the Applicant possess adequate experience, including an existing authorisation to provide similar services.

Persons exempted from Authorisation Process

The following categories of entities are not required to obtain authorization from IFSCA:
1. An IFSC Banking Company (IBC) or an IFSC Banking Unit (IBU) licensed or permissioned in IFSC GIFT City.
2. A person licensed to carry on the business of issuing credit cards in GIFT IFSC.
3. Any other person or class of persons, as may be specified by the Authority.

Restricted Activities

1. Agent-Led Payments: Payments made by an agent during the sale, or purchase of goods or services are excluded—they are part of the transaction process.

2. Paper-Based Methods: Transactions involving cheques, demand drafts, and postal orders are not considered payment services.

3. Settlement Systems: Payments made between Payment Service Providers, clearing houses, and central banks within payment or securities settlement systems are excluded.

4. Securities Payments: Transactions related to securities asset servicing—like dividends and redemptions—do not count as payment services.

5. Intra-Group Transactions: Payments between a holding company and its subsidiaries, or between subsidiaries without third-party involvement, are not classified as payment services.

6. Currency Transport: Services that transport, collect, and deliver cash are excluded from the payment services definition.

7. Technical Support Services: Entities providing support for payment services, such as data processing and authentication, without handling funds, are not classified as payment service providers.

8. Limited Use Payment Instruments: Instruments that can only be used in specific locations or for a narrow range of goods and services (like store gift cards) are not considered payment services.

9. Payments Between PSPs: Transactions carried out between Payment Service Providers or their agents for their own accounts are excluded.

Types of Payment Service Providers (PSPs)

Significant Payment Service Providers (SPSPs)

Significant payment service providers are providers deemed crucial due to their size, scale, or operational impact. These entities are subject to stricter compliance and oversight standards. Regular PSPs become significant if they meet certain thresholds or conditions, which are detailed the table below:

Conditions for PSPs to be designated as a Significant PSPs:

Criteria Condition Threshold
1. Payment Services The Regular Payment Service Provider must provide one or more payment services (excluding e-money account issuance service) mentioned in Part A of this schedule. ·         $2 million (or equivalent in Specified Foreign Currency) for any one service.

·         $4 million (or equivalent in Specified Foreign Currency) for two or more services.
2. E-money Account Issuance Service If the provider intends to carry on or is carrying on a business of providing an e-money account issuance service. ·         Average daily value over a calendar year of all e-money stored must exceed $3 million (or equivalent in a specified foreign currency).
3. E-money Issuance Service If the applicant or Regular Payment Service Provider carries on a business of providing an e-money issuance service. ·         Average daily value over a calendar year of total value in one day of all e-money intended to be issued or issued must exceed $3 million (or equivalent in a specified foreign currency).


Note:
• All thresholds are measured as averages over a calendar year.
• Equivalent values are based on Specified Foreign Currency.

Regular Payment Service Providers (RPSPs)

These are payment service providers that offer designated payment services but do not meet the criteria for being classified as significant.

Eligible activities

1. Account issuance service (including e-money account issuance service)
2. E-money issuance service
3. Escrow service
4. Cross border money transfer service
5. Merchant acquisition service

Process flow for setting up as PSPs in GIFT IFSC

Minimum Net Worth Requirements

Category Minimum Net Worth Requirement Timeline
Regular Payment Service Provider – USD 100,000 (on commencement)
– USD 200,000 (by end of the third financial year)		 – At start of operations
– By March 31 (third year)
Significant Payment Service Provider – USD 250,000 (within 90 days of designation)
– USD 500,000 (by end of the third financial year)		 – Within 90 days
– By March 31 (third year)

 

Regulatory Fees for PSPs Entities in GIFT IFSC

  1. IFSCA Fees
Particulars Regular Payment Service Provider Significant Payment Service Provider
Application Fees (One-Time) $1,000 $1,000
Authorization Fees (One-Time) $25,000 $25,000
Recurring Fees $5,000 $10,000

 

  1. SEZ authorities’ Fees
Particulars Amount (in INR)
Application Fees (one-time)  5,000
Registration fees (one-time) 25,000
Recurring fees (Annual) 5,000

 

Conclusion

With a robust regulatory structure and a clear framework for PSP operations, GIFT IFSC presents a compelling opportunity for global payment service providers. As digital transactions continue to evolve, establishing a presence in GIFT City could be a strategic move for PSPs seeking international reach and regulatory clarity.
Our team at InCorp has the expertise to offer comprehensive assistance throughout the entire process of incorporating a Payment Service Provider entity in GIFT City, Gandhinagar. Listed below are the key services offerings:

  • Assistance in structuring the entity as per the regulatory requirement
  • Providing advisory services on regulation and its taxation angle to ensure compliance and optimal structure
  • Assistance in preparing necessary documentation required and representation before regulatory authorities for incorporation and licensing entities in GIFT IFSC
  • Assistance in setting up PSP entities and post-setup requirements and compliance, if any required.

Authored by:
Kritika Raj Singh | GIFT City Service


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