While a money service operator (MSO) license is sufficient for operating any money service in Hong Kong, confusion arises as to whether applicants should also obtain a stored value facility (SVF) license if they wish to conduct their remittance or currency exchange service online using “e-wallets.” Terms like “e-wallets” can be especially confusing and potentially be problematic in obtaining a MSO license because it could also be considered as “stored value facility” under Hong Kong Monetary Authority's Payment Systems and Stored Value Facilities Ordinance, as in Chapter 584 of Hong Kong Legislation.
Under said Ordinance, Stored Value Facilities (SVF) generally refer to those payment products and services with stored value functionality, whether physical or electronic, which can be used as a means of payment for goods and services or for funds transfer between different parties. Further, under this Ordinance, any person who issues Stored Value Facilities in Hong Kong should hold a relevant license from the Hong Kong Monetary Authority.
Under the Stored Value Facility Ordinance (HKMA Chapter 584), the principal business of a stored value facility licensee must be issuing or facilitating the issuance of stored value facilities. Given that stored value facilities are sometimes bundled with cross-border remittance services, the Ordinance also states that if the stored value facilities licensee provides remittance services as ancillary or incidental services to its principal business, then the licensee may not be required to obtain an additional MSO license from the Custom and Excise Department, to avoid any regulatory overlap.
Examples of such stored value facilities licensees include WeChat Pay, Alipay Wallet, Octopus Cards, and TNG Wallet. TNG Wallet, in particular, provides a widely used e-wallet in Hong Kong, and also provides ancillary remittance services in addition to a variety of services.
Therefore, before deciding to apply for a stored value facility license, it may be important to first determine whether said license is necessary or applicable. If an applicant's principal business is issuing and facilitating a stored value facility, and offers money transfer service as its ancillary business, then only a stored value facility license may be necessary. On the other hand, if an applicant's principal business plan is to offer money service using an online platform, then only a MSO license may be needed.
Moreover, it should be noted that important differences exist in the application procedures for a SVF license and a MSO license. For example, the stored value facilities Ordinance requires that a stored value facilities licensee must have paid-up capital of no less than HK$ 25million. On the other hand, no such capital requirement exists for obtaining an MSO license. SVF application procedures also require reports of independent assessment on six key areas: (i) corporate governance and risk management; (ii) float management; (iii) anti-money laundering and counter-terrorist financing (AML/CFT) systems; (iv) technology risk management; (v) payment security management; and (vi) business continuity management.
Anderson & Anderson LLP is knowledgeable about the licensing system in Hong Kong, including the application procedure for a Hong Kong MSO license and SVF license. Please contact us if you have questions about the licensing system and procedure.