Planning

Business planning & Establishment of corporate structure

Preparation

Preparation of documentation for PI or EMI license application

Authorisation

Procurement of licenses

There is no single license for payment FinTech companies as it is a broad term that encompasses a variety of businesses and applications. Financial Stability Board defines FinTech as “technology-enabled innovation in financial services that could result in new business models, applications, processes or products with an associated material effect on the provision of financial services.” The term is quite broad, and some of the companies engaged in the provision of FinTech services may not even require licensing. They instead would simply facilitate the provision of services by authorised institutions with the help of technology or use such technology as the blockchain which is not fully regulated in many jurisdictions. There are various types of FinTech licenses discussed at the EU level (see reports of ESMA, EBA) as well as at national levels (e.g., see UK EMI license and Lithuania approach for crowdfunding). While PSP Lab works with all FinTech businesses, our primary focus is on assistance with procurement of Payment Service Provider (PSP) licenses and authorisations.

If you want to establish and operate a FinTech business engaged in the provision of payment services, you are usually required to procure an authorisation in a suitable jurisdiction. PSP Lab can help your business by facilitating the acquisition of the necessary licenses to give a head start for the implementation of your idea. We pride ourselves for knowing the peculiarities of the industry and can assist with the adjustments which are required to make any FinTech company successful.

Types of licenses and authorisations

Currently, the most popular types of licenses for payment FinTech companies in the European Union are one of the two authorisation types: Payment Institution (PI or API) and Electronic Money Institution (E-money Institution, E-money or Electronic Money License). Both licenses permit to engage in the provision of core payment services that allow serving a wide variety of businesses. Nevertheless, there are more types of licenses and authorisations. There are Small Payment Institutions (SPI) and Small E-money Institution (SEMI) that are allowed to provide payment services only in the country of registration (e.g., FCA registration).

Moreover, authorisation and operational requirements differ depending on the type of services that the company is engaged in. Finally, Payment Service Directive (PSD2) introduced new types of licenses for companies that do not wish themselves to handle client funds: Payment Initiation Service Provider (PISP), and Registered Account Information Service Provider (RAISP). The lastly mentioned licenses are part of the initiative of the Open Banking in the EU which aims to help customers and small to medium-sized businesses to get a better deal through expanding the choice of products and services.

PSP Lab can help you to determine what kind of license is the most suitable for your business. As a first step, we have prepared a comparative table based on the PSD 2 and requirements present in the UK and Lithuania. It briefly outlines the type of services which can be offered by the abovementioned institutions.

Fintech License Authorisation
Small APIAPISmall EMIEMIPISPRAISP
Payment services under PSDIIYes(1)YesYesYesNoNo
Electronic money issuanceNoNoYes(2)YesNoNo
EU passport for cross border servicesNoYesNoYesYesYes
Payment Initiation ServiceNoYes(3)NoYes(3)Yes(3)No
Account information Service
NoYes(3)NoYes(3)NoYes(3)
Safeguarding requirementNoYesNoYesNoNo
1 Average monthly payments volume can not exceed EUR3,000,000 equivalent
2 Average outstanding electronic money can not exceed €500,000 (UK), €900,000 (Lithuania)
3 If PIS and/or AIS provided, indemnity insurance is required

If you want to understand whether you need Electronic Money Institution License (EMI license) or Payment Institution License (PI license) you can read our article discussing the difference between e-money wallet and payment account.

FinTech (PI and EMI) licenses

The life cycle of any start-up FinTech company depends significantly on how reliable was the foundation it is built upon. Some start-ups may survive and prosper, but most will not see the growth stage. To be one of the former, you must take all steps in a calculated manner. Such an approach will help you to achieve success and grow your business exponentially.

Obtaining a license is a crucial step in establishing your FinTech company, providing payment or financial services. PSP Lab will guide you through the whole process, prepare necessary documents, forms and applications, assist you in communication with the relevant authorities. From our side, we will manage and provide you with:

  • Assistance with the development of a business plan
  • Preparation of document required for the application (financial projections, policies & procedures, terms & conditions, authorisation forms, etc)
  • Choosing a third-party software provider and/or software development team
  • Setting-up a company
  • Finding office
  • Opening of a safeguarding account
  • Communication with regulatory authority during the application phase

How do we work?

Regardless of the jurisdiction, the process of provision of services required for obtaining any license(e.g., EMI license) is usually the same and involves three steps: 1. Assessment, 2. Preparation, 3. Application. Furthermore, PSP Lab provides ongoing support to its clients even after the license is acquired, so you can be sure that the qualified advice will be always within the reach. The whole process is summarised below with a brief description of each step in more detail.

EMI license Authorisation process

How PSP Lab can help?

The process of registration or authorisation as can be tedious without proper knowledge and industry insights. PSP Lab may assist you with a timely procurement of authorisation and establishment of a solid framework for operating your business. Typical services for obtaining a FinTech license offered by PSP Lab consists of:

Preparation of documents

  • Business Plan, including market research, plan of operations, marketing plan, etc;
  • Financial projection (3 years) including Profit/Loss Statement, Balance Sheet, Cash Flow Statement, sensitivity tests and capital adequacy assessment and fully automated financial model in Excel;
  • CDD, AML, CFT Policy and Procedures with appendixes (country risk scoring, lists of accredited AML solution providers, corporate forms, etc.);
  • PEP Risk Management Policy and Procedures;
  • IT and Electronic Payments Risk Management Policy and Procedures;
  • Underwriting and Risk Management (Acquiring) Policy and Procedures;
  • Foreign Exchange Risk Policy and Procedures;
  • Liquidity Risk Policy and Procedures required to have PI or EMI license;
  • Operational Risks Policies:
    • Settlement, and Safeguarding Accounts Risk Management Policy and Procedures;
    • Counterparty Risk Management Policy and Procedures;
    • Agent Appointment Policy and Procedures;
    • Financial Crime Risk Management Policy and Procedures;
    • Data Protection Policy and Procedures;
    • Incident Reporting Policy and Procedures;
    • Complaints Handling Policy;
  • Customer service Terms and Conditions:
    • Payments Business Line;
    • Acquiring Business Line;
    • Privacy Notice;
  • Business Continuity/Disaster Recovery Plan;
  • Incident Reporting and Statistical Data Collection Policy and Procedures;
  • Internal audit plan;
  • Authorisation forms for company and individuals.

Preparation of corporate structure

  • Selecting company name;
  • Finding and registering office;
  • Registering company;
  • Drafting shareholder agreement;
  • Registering Trademark with EUIPO or national office;
  • Registering domain names.

Preparation and submission of forms and documents to regulatory authority

  • Corporate controllers:
    • Full set of corporate documents;
    • Financial statements, audit letters (if available);
    • Corporate structure diagram;
    • Certified register of shareholders and directors;
  • Corporate Form;
  • Private controllers and directors:
    • Copy of the passports, drivers license, or national ID cards;
    • CV, copies of diplomas, certificates;
    • Proof of address, reference letters (if any);
  • Individual Form to apply for PI or EMI license.

Other services which are included

  • Advice on a third-party software provider (Core Software, Gateway, AML/KYC) and/or software development team;
  • Communications with a regulator during the application phase (if necessary);
  • Help with the opening of one safeguarding account.

Other services that can be included

  • Translation of documents to any language other than the language of the application;
  • HR recruitment, employees recruitment;
  • Legal support in negotiating agreements;
  • Assistance with opening of additional safeguarding accounts;
  • Post-authorisation support (subsequently to authorisation we will provide you with an offer).

Jurisdictions we cover

Each jurisdiction in the European Union can issue licenses in accordance with the European legislation, but each of them has its own specific rules related to the authorisation process and operation of companies. For example, limits for Small Payment Institutions may differ from jurisdiction to jurisdiction. Another example can be found in Estonia, where only those Payment Institutions that provide money remittance, payment initiation, account information services can be private limited companies, while for all other payment services (e.g., services requiring EMI License) the legal entity must be established as a public limited company. Therefore, before you apply for authorisation in a particular jurisdiction it is wise to seek a qualified advice to familiarise yourself with the twists and turns present in different countries.

PSP Lab consultants know in practice, not in theory, all of the specifics of EU member states’ regulations and procedures that must be followed. We can advise you on the timeframes, difficulties that can be potentially encountered during the authorisation process, and even on the strictness of the regulatory oversight post-authorisation. Thus, PSP Lab can assist you with choosing the most suitable jurisdiction and type of license required for your FinTech business. We encourage you to reach out to us and learn more about the process, preliminary timelines, and the required amount of work.

While we are mainly focused on the UK and Lithuania (as the most desired destinations for licensing as a FinTech business offering payment services) we can, as well, help our clients with other jurisdictions and other types of licenses. We have experience with authorisation in other EU member states, licenses in the US, and even banking licenses.

Depending on the type of license and jurisdiction where you wish to obtain such, you can learn more by following the links below. They outline some of the peculiarities present in specific jurisdictions and reveal how PSP Lab can assist you with authorisation in general:

Payment Institution License in the UK

Electronic Money Institution License in the UK

Payment Institution License in Lithuania

Electronic Money Institution License in Lithuania

To help us understand your needs and ascertain that we are the right FinTech consulting firm for you, we offer an initial 15-minute consultation free of charge. Reach out to us in order to learn how we can assist you in establishing and growing your business.

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