How To Start A Credit Card Processing Company

More purchases are being made online than ever before. With the rise of digital transactions, people are swapping cash for the convenience of credit cards, choosing to tap, swipe, and go. It’s no surprise - credit cards are easy to carry, quick to use, and widely accepted.

But behind every seamless transaction is a credit card processing company. As more businesses and consumers rely on card payments, the demand for secure, reliable processing services continues to grow.

If you’re considering launching your own credit card processing company, you could be tapping into a promising market. However, the legal foundations of your business are critical. From regulatory compliance to liability protections, strong legal preparation will play a key role in your company’s success.

What Is A Credit Card Processing Company?

A credit card processing company owns and operates the technology that enables businesses to accept card payments. Most businesses rely on these companies to process payments made with credit cards, but their services often extend to debit cards, gift cards, and even digital wallets.

Credit card processing companies facilitate transactions between businesses, customers, and banks, ensuring payments are processed securely and efficiently. Rather than developing their own internal systems, most businesses depend on credit card processing companies to handle transactions. As a result, consumers are likely to interact with credit card processing software whenever they shop - as long as they are using a card.

How Do I Start My Own Credit Credit Card Processing Company?

To start your own credit card processing company, you’ll need to officially register as a company. However, before beginning this process, it’s important to have all the necessary details outlined in a comprehensive business plan.

For instance, you’ll need to determine the type of software you’ll be using, your target audience, whether you’ll operate internationally or within New Zealand, your pricing model, and your public-facing assets - such as your company name and logo. These decisions should be made before officially registering your company to ensure you have a clear vision of the direction you want to take.

When it comes to critical choices - such as the type of company structure you’ll be registering - having a well-thought-out plan can make all the difference. Without proper planning and preparation, it’s easy for a company to lose focus or fall off track.

What Do I Need To Register A Company?

In New Zealand, every company must be registered with the New Zealand Companies Office. Registering a company with the Companies Office involves determining the type of company you want to register, selecting the appropriate application form, filling it out, and paying the registration fee. This process can be completed online, but before reaching that stage, there are a few key details you’ll need to have prepared to ensure a smooth application process.

When planning to register your company, it’s important to have the following details sorted:

• The details of all company shareholders
• Who the company directors will be
• How the company will be governed and whether it will have a company constitution
• Administrative details, such as the company address, phone number, and email

Registering your credit card processing company is a significant step, as it forms the foundation of your business. It’s important to get it right from the start, as mistakes made during registration can be difficult - if not impossible - to correct. Seeking guidance from a legal expert during this process can help ensure everything is set up in a way that benefits your company.

For more information on company registration, check out our article: Steps To Incorporate Your Small Business.

Do I Need Any Licences And Permits To Start A Credit Card Processing Company?

Yes, as a credit card processing company, you will need to obtain some licences and permits to legally start your business.

Financial Regulatory Compliance

Generally, any business involved with handling customer funds or financial transactions must comply with the relevant financial regulations. In New Zealand, while there is no direct equivalent to the Australian Financial Services Licence, you must ensure that your business meets the standards set out under the Financial Markets Conduct Act 2013 and related legislation. It is essential to obtain any necessary approvals from the relevant authorities before you start trading to avoid legal complications.

Bank And Card Network Permissions

While not technically a licence, you cannot simply launch a credit card processing company without obtaining the necessary permissions from banks and card networks. You’ll need to establish partnerships with acquiring banks and gain approval from card networks such as Mastercard and Visa to process transactions.

AML/CFT Registration

If your company is involved in handling or processing financial transactions, you may be required to register as a remittance service provider under the Anti-Money Laundering and Countering Financing of Terrorism Act 2009. In New Zealand, oversight is provided by the Financial Intelligence Unit, which helps ensure businesses implement measures to prevent financial crime.

Credit Services Licence

If your company offers merchant cash advances, lending, or other credit services, you may need to obtain a credit services licence under the relevant New Zealand legislation, such as provisions within the Credit Contracts and Consumer Finance Act 2003. This is applicable if you provide credit facilities or financial products.

Reserve Bank of New Zealand (RBNZ) Authorisation

If your business operates its own payment system (rather than acting solely as an intermediary or reseller), you may need approval from the Reserve Bank of New Zealand (RBNZ) under the applicable New Zealand legislation. This is particularly relevant if your company is developing a new payment network or settlement system.

Regulatory Approval for Holding Customer Funds

If your company will hold customer funds before transferring them, you may need to obtain approval from the Reserve Bank of New Zealand or comply with the relevant financial regulations governing deposit-taking institutions in New Zealand, or seek an exemption if applicable.

Local Council Permits

Before opening your credit card processing business, check whether local regulations or council requirements mandate any specific permits or licences for operating from your chosen location. These requirements can vary between different local councils in New Zealand.

Are There Any Laws My Credit Card Processing Company Will Need To Follow?

Your credit card processing company must comply with several financial and consumer protection laws in New Zealand. As a financial service provider, strict regulations govern how your business operates, handles transactions, protects customer data, and prevents fraud. Understanding and adhering to these regulations is essential to ensure legal compliance and avoid potential penalties.

Payment Systems Oversight

In New Zealand, the Reserve Bank of New Zealand (RBNZ) and other relevant authorities oversee the stability and security of payment systems. As a credit card processing company, you must understand your obligations under the applicable payment systems oversight framework, which may include:

• Ensuring secure and transparent transaction processing.
• Complying with any standards or regulations issued by the Reserve Bank of New Zealand or other relevant authorities related to payment systems.
• Providing fair access to payment processing services.

Why it matters: This framework ensures New Zealand’s payment systems remain stable, secure, and competitive.

AML/CFT (Anti-Money Laundering & Countering Financing of Terrorism) Act 2009

New Zealand has strict anti-money laundering (AML) and countering financing of terrorism (CFT) laws to prevent financial crimes. As a payment processor, you may be required to:

• Register as a remittance service provider under the AML/CFT Act 2009.
• Implement a risk-based AML/CFT programme to detect and prevent fraudulent activity.
• Conduct Know Your Customer (KYC) checks to verify merchant identities.
• Report suspicious transactions to the appropriate authority, such as the Financial Intelligence Unit.

Why it matters: Failure to comply with AML/CFT laws can result in severe penalties, including fines and loss of your business licence.

Data & Privacy Protection (Privacy Act 2020 & New Zealand Privacy Principles)

As a credit card processing company, you will have access to sensitive financial data, including customer and merchant information. Under the Privacy Act 2020, you must:

• Securely collect, store, and process personal data.
• Comply with the New Zealand Privacy Principles (NZPPs), which set out how businesses should handle personal information.
• Maintain a clear privacy policy outlining how customer data is used and protected.
• Report data breaches to the Office of the Privacy Commissioner as required under the breach notification rules.

Additionally, compliance with the Payment Card Industry Data Security Standard (PCI DSS) is mandatory for any business handling credit card data. Non-compliance can result in:

• Financial penalties from Visa, Mastercard, and other card networks.
• Increased risk of data breaches and fraud.
• Loss of payment processing capabilities or termination of merchant accounts.

Why it matters: Non-compliance with privacy laws and security standards can lead to heavy fines, reputational damage, and potential legal consequences.

New Zealand Consumer Law

Under New Zealand consumer law, which includes provisions from the Consumer Guarantees Act 1993 and the Fair Trading Act 1986, businesses must protect customers from misleading conduct and unfair business practices. As a credit card processing company, your obligations include:

• Providing accurate pricing and fee disclosures.
• Ensuring transparent and fair contracts for merchants using your services.
• Offering secure and reliable payment processing to prevent financial loss.

Why it matters: Breaches of New Zealand consumer law can lead to legal action and fines from the Commerce Commission.

Electronic Payments Code

While New Zealand does not have a statutory ePayments Code, many businesses in the electronic payments sector adhere to industry best practices that set standards for:

• Transparent fee disclosures for transactions.
• Consumer protection measures (e.g., handling disputed transactions).
• Clear chargeback and refund policies.

Why it matters: If your credit card processing service involves handling customer transactions directly, adhering to industry best practices for electronic payments can help protect your business and your customers.

Note: We’ve listed a number of the key areas that are likely to apply to your credit card processing company. However, as each company is different, it’s always best to chat with a legal expert and get advice that’s tailored specifically to your situation.

Will I Need Any Legal Agreements To Start A Credit Card Processing Company?

Legal agreements help keep your company on the right track, reduce the risk of disputes, and protect your company’s rights. However, for legal agreements to work the way you intend, they need to be professionally drafted and tailored to meet your credit card processing company’s needs.

Here are a few legal agreements you may want to consider:

• Shareholders Agreement
• Company Constitution
• Privacy Policy
• Cookie Policy
• Website Terms & Conditions
• Employment Agreement
• Workplace Policy

Ensuring your legal agreements are properly structured can save your business from future legal complications. If you need assistance, our legal experts can help draft agreements that align with your business goals and regulatory requirements.

Key Takeaways

To start a credit card processing company, there are several legal considerations you will need to adhere to. Seeking expert legal guidance can help you navigate this process with ease.

To summarise what we’ve discussed:

• A credit card processing company enables businesses to accept payments via credit cards, debit cards, and digital wallets, acting as an intermediary between merchants, customers, and banks.
• To start your own credit card processing company, you need a clear business plan, including software choices, target audience, pricing model, and branding, before officially registering with the New Zealand Companies Office.
• Licences and approvals are required, including adherence to financial regulatory compliance, AML/CFT registration, bank and card network permissions, and potentially a credit services licence or Reserve Bank of New Zealand (RBNZ) authorisation depending on your operations.
• Compliance with financial regulations such as the applicable payment systems oversight framework, AML/CFT Act, Privacy Act 2020, New Zealand consumer law, and adherence to industry best practices for electronic payments is crucial to avoid legal and financial penalties.
• Data protection and security are essential; businesses must comply with the Privacy Act 2020 and PCI DSS standards to safeguard customer financial information and avoid reputational and legal risks.
• Legal agreements such as a Shareholders Agreement, Privacy Policy, Website Terms & Conditions, and Employment Agreements are key to protecting business interests and ensuring smooth operations.
• Given the complexity of financial regulations and legal requirements, seeking advice from legal experts can help ensure your business is set up correctly and fully compliant from the start.

If you would like a consultation on starting a credit card company, you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.