Payment Institution License

The market for payment services is experiencing rapid development. The race for innovation, speed, and convenience in online payments allows fintech companies to offer customers convenient services and a wide range of financial services. The security of payment solutions is ensured through mandatory licensing.

In this material, we will examine several types of licenses for payment institutions.

What is a Payment Institution License

In the modern world of fintech, almost instantaneous money transactions are considered commonplace. However, in addition to transaction speed, the quality of the operator’s services and the security of personal funds are of utmost importance. Therefore, licenses for payment institutions are a guarantee of reliability and a key element for legal operations in the financial services market.

A Payment Institution License is permission from a regulatory authority that allows providers of payment services to legally offer various payment services. In the European Union and the European Economic Area, the Payment Services Directive (PSD2) regulates the market for payment services and providers. In Europe, it is possible to obtain different licenses — EMI, PI, sPI, PISP, AISP. In other jurisdictions, the names of licenses, their functionality, and requirements for obtaining them may differ. 

What you need to know before getting a PI License 

PI (Payment Institution) License is a license for payment institutions in the EU that allows internet projects to provide financial intermediary services, such as depositing funds in customer accounts, conducting payment operations, and offering money withdrawal services.

Regulators issue both a full payment institution license and a small payment license (Small PI). There are slight differences between them. Thus, when obtaining a Small PI there are no capital requirements, but there are limits for the average monthly number of transactions in payment services (€3 million). Also, the Small PI license does not allow passing the passporting procedure.

Types of activities PI License is suitable for

PI license is equivalent to a PSP (Payment Service Provider). The Payment Institution license allows you to legally provide various financial intermediary services:

• act as an intermediary between the user and the service provider;
• open and close accounts;
• provide financial transactions between clients’ accounts;
• withdraw money from the accounts of individuals and legal entities;
• carry out money transfers;
• debit funds from customers’ accounts without their authorization, including one-off transactions and credit payments;
• use proprietary and third-party payment instruments.

Many European countries issue PI and EMI licenses with restrictions, as indicated by the prefixes “restricted” or “specialized”. It also indicates that the company provides a limited set of services and has limits on the average monthly number of transactions.

What requirements must be met to obtain a PI license

Several conditions must be met to obtain a PI license.

Such requirements include:

• a package of documents (description of AML and KYC policies);
• a physical office in the country of registration [consider that the virtual office is not enough];
• statutory capital ranging from €20,000 to €125,000 (depending on the payment service a company intends to provide);
• information about beneficial owners.

Among the mandatory requirements: developed software, prepared internal policies and procedures, an open account to hold client money or professional liability insurance. Management positions should be filled by professionals with experience and a good reputation. The company must also employ local staff.

SBSB experts provide clients with comprehensive legal support on a turnkey basis. This means that we take care of all stages of obtaining a license – from choosing the best jurisdiction and preparing a package of documents to registering the project, obtaining a license, optimizing the tax burden, accounting, and financial reporting after the project is launched.

Countries where you can obtain PI license

SBSB specialists work with many jurisdictions. We provide our clients with the opportunity to obtain PI licenses in Lithuania, Spain, and the UK. Our experts can help you get a Small PI license in different countries, including Lithuania, Spain, and the UK, as well as a payment intermediary license in Mauritius.

By obtaining PI/PSP licenses in a European jurisdiction, the licensee gains access to the entire EU market without additional bureaucratic procedures. Payment service providers can expand their geographical footprint through the passporting process.

Cost of PI license

Obtaining a PI payment license is easier and cheaper compared to EMI. The cost of each project is calculated individually after reviewing your project and examining all the details. 

For precise information on the cost of each license, you can consult with SBSB experts.

If you need to get your project up and running quickly and efficiently, address SBSB. A team of experienced lawyers will take over the licensing process and provide full legal support for your project before and after licensing.