Small Payment Institution License UK (Small PI UK)
Similar to the Small Electronic Money Institution License UK (read more about Small EMI UK) regime, the Small Payment Institution License UK regime is a less burdensome version of other Payment Institution License and E-money license authorisation regimes under the Payment Services Directive II (PSD2) and its UK implementation the Payment Services Regulations 2017 (PSRs 2017). To accommodate certain smaller firms wishing to provide payment services exclusively in the UK, it was thought that these firms should not be subjected to the rigorous regime under the PRS 2017. Payment Service Providers that do not wish to get the Electronic Money License UK or a bank license can choose to be authorised either as a company with the Payment Institution License UK or registered as a company with the Small Payment Institution License UK.
Small Payment Institution definition
A Small Payment Institution (small PI or SPI) can be defined as a person that is registered in accordance with the procedure established in Regulation 14 of the PSRs 2017, which can provide certain payment services complying with the limitations on the monthly volume of transactions. The procedure to get the Small Payment Institution License UK is called registration rather than authorisation.
What kind of services can company with the Small Payment Institution License UK offer?
A company with Small Payment Institution License in the UK can offer the same services as a company with the Authorised Payment Institution License in the UK, with the exception of account information services and payment initiation services.
As such, it can offer services for enabling cash to be placed on a payment account as well as enabling all necessary operations for operating a payment account. Moreover, it can make cash withdrawals possible from the client payment account and execute payment transactions on a payment account. This includes direct debits, payments through a card or another type of payment device, as well as credit transfers. The transaction execution services also include instances where the funds are covered by way of a credit line for the payment user conducted through a payment device or card as well as credit transfers. Lastly, the Small Payment Institution License UK allows providing money remittance services and issue payment instruments or acquire payment transactions.
Most companies that have the Small Payment Institution License in the UK provide money remittance services.
Small Payment Institution capital requirements and safeguarding rules
One of the main regulatory differences between the Authorised Payment Institution License UK and the Small Payment Institution License UK is that the latter does not require to comply with initial capital requirements and ongoing capital requirements it is optional for such an institution to safeguard client funds.
What criteria must be met to become a Small PI UK?
The criteria for becoming a small PI are set out in PERG 15.4 of the FCA Handbook and in Regulation 14 of the Payment Services Regulations 2017. These criteria are as follows:
- the average payment transactions executed by a Small PI UK or agents of a Small PI UK must not be more than three million euro on a rolling 12-month basis. In case this amount is exceeded, the firm cannot be considered as a Small Payment Institution UK and must therefore become an Authorised Payment Institution UK and subject itself to capital requirements and PSR regulatory requirements for UK APIs;
- the business of a Small PI UK must not include payment initiation services or account information services;
- managers or individuals responsible for operating the business must be of good repute and must have not been convicted of money laundering, terrorist financing offences or any other financial crime;
- the Small Payment Institution UK must comply with the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations (2017);
- the head office, registered office or place of residence of a UK Small Payment Institution must be in the UK;
- for owners of a partnership, an unincorporated association, or a body corporate, evidence of qualifying holding in the business as well as of fitness and propriety of each owner must be provided;
- for a corporation with close ties to another person, such ties must not prevent the effective supervision of the business of the firm.
How to apply for a Small Payment Institution UK license? Small Payment Institution Application Form
Besides the fundamental details on the legal status of the firm, its business plan and programme of operations, the following information is deemed necessary for the application:
- Small Payment Institution application form;
- PSD individual forms with which the persons managing the firm are registered;
- In case they are applicable, the qualifying holdings forms for each person of the firm with holdings representing 10% or more of the capital or voting rights;
- The £500 non-refundable application fee is not refundable even if the application fails.
The application must be submitted via Connect and it is generally acknowledged by the FCA within 7 business days. Following acknowledgement, a case officer is assigned and the decision on your application is taken within 3 months if all the information and evidence needed has been provided and otherwise, 12 months. As an experienced consultancy firm, PSP Lab can tell you that registration within 3 months rarely happens due to poor quality of application documents (which can be fixed by hiring a consultant) and workload of the FCA.
What is the Small Payment Institution License?
To conclude, the Small Payment Institution License is a limited version of the Authorised Payment Institution License with fewer compliance requirements. Before Brexit, the difference was also in the access to the EU payments market, but after Brexit, both Licenses do not allow a company to easily access the EU market.
How can PSP Lab help?
PSP Lab is a consultancy with a clear focus on Electronic Money Institution and Payment Institution licensing in the UK and the EU. If you wish to become a Small Payment Institution UK (Small PI UK) or an Authorised Payment Institution, PSP Lab can support the entire application process with the FCA. This entails the preparation of the documentation and most importantly, it means building a strong application. If you want to know more about the authorisation process, check our website and don’t hesitate to ask any questions here.
We’ll be happy to address all of your concerns.