Payment services cover a wide range of services and can mean different things to different people depending on the business model their firm is involved with.
This post summarises the different types of payment services that are overseen by the UK Financial Conduct Authority (FCA) and the necessary licensing required to offer those services as a regulated firm.
There are two main types of payments services when it comes to regulatory approvals:
- Payments Institutions (PI): this includes payment services like cash withdrawl, money remittance, payments initiation service (e.g. merchant acquisition), processing direct debits/standing orders etc.; and
- Electronic Money Institutions (EMI): similar services to a payment institutions depnding on the permissions being sought but the key different is an EMI can store the funds for their customers in a segregated account with a banking partner.
There are varying degrees of permissions that can be applied for under each of these categories depending on the volume of transactions you are expecting to process each month.
|License Type||Transaction Volume|
|Small Payment Institution (SPI)||< €3m per month|
|Authorised Payment Institution (API)||> €3m per month|
|Small Electronic Money Institutions (SEMI)||< €5m* per month|
|Small Electronic Money Institutions (EMI)||> €5m* per month|
The different licensing options listed above offer a proportionate approach to regulatory licensing that considers the nature, scale and complexity of the business seeking permissions.
There are two other, softer, options that may be explored by new businesses particularly fintechs:
- Account Information Services (AIS) is an online service that provides consolidated information on one or more payment accounts. If your service aggregates customer balances across multiple accounts using open banking you will need to apply for an AIS. If you only intend to provide AIS services then you may want to consider registering as a Registered Account Information Service Provider (RAISP).
- Payment Initiation Service (PIS) is an online service to initiate a payment order for a customer with their existing payment provider. PIS provide an alternative to paying online using a credit card or debit card.
When selecting which license to apply for, consider the growth plans of your business and plan your licensing strategy accordingly, since each license type brings with it additional operational and compliance overheads that may distract your teams from other business development activities.
CoVi Analytics offers a range of support for businesses looking for one-off support with FCA licensing applications to ongoing compliance support through our Compliance as a Service (CaaS), A pragmatic and tech-enabled outsourced Risk & Compliance service that frees up precious business teams’ time to focus on their day jobs.