The United Kingdom has been the European center for the fintech industry for the past several years. In 2020, the UK issued licenses to 52 Payment Institutions (PIs) and 38 Electronic Money Institutions (EMIs). There are also over 400 PIs conducting financial transactions in the UK. The UK will likely continue to be the center of the fintech industry because of its regulatory approach that encourages innovations in financial services.
EMI and PI Licenses in the United Kingdom
After the UK left the European Union, the Financial Conduct Authority (FCA) became the primary financial conduct regulator of financial service institutions and financial markets in the UK. These regulated financial services include payments, e-money, consumer credit, insurance, investments, and lending. The FCA regulates the conduct of over 51,000 businesses, supervises around 49,000 firms, and sets specific standards for approximately 18,000 institutions. Any PI or EMI needs a Payment Institution license or an Electronic Money Institution license from the FCA to operate in the UK.
PIs and EMIs need to meet FCA requirements before applying for a license to provide regulated financial services. The FCA will review their business plans, budgets, risks, financial resources, monitoring systems, quality control systems, and business executive qualifications for license eligibility.
Advantages of Having a PI or an EMI License in the UK
Financial institutions affect the lives of everyone in the UK, and these institutions employ over a million people. The financial markets have a fundamental impact on everybody, so these markets need to work well in a competitive environment to benefit the customers, all financial institutions, and shareholders fairly.
The PI license or EMI license helps ensure that the UK can maintain the confidence of financial institutions as a central global financial hub. It also helps to ensure that new PIs and EMIs can gain equal access to the financial services market.
There are many other advantages to having a PI or EMI license in the UK. These include:
- Many PI and EMI customers live in the UK
- The FCA has years of experience, stability, and expertise within the industry
- Nearly half of all issued PI and EMI licenses are in the UK
- English is the primary communication and documentation language in the industry
Main Requirements to Apply for PI and EMI Licenses in the UK
A PI or EMI must meet several requirements for a UK license. The financial institution must have its headquarters in the UK. Its management team must reside in the UK. The financial institution must also have a functioning IT system on its first day of operations. Other requirements include:
- Submitting documents that outline policies and procedures that address and meet critical aspects of the regulatory licensing conditions.
- Having sufficient financial resources, management residency, and IT systems in place before issuing a UK license.
- Having plans in place to mitigate operational, security, money laundering, and other risks.
The FCA will acknowledge the acceptance of a PI or EMI license application within 7 business days. A case officer will be assigned to assess the information on the application to determine if the PI or EMI is eligible for a license. Suppose the PI or EMI is eligible for a license,FCA will make a licensing decision within 3 months if they have all the information they need or within 12 months if the application is incomplete.
Authorized PIs and EMIs must pay a licensing registration fee to provide services:
- The registration fee for PIs in the UK is GBP 1,500 or GBP 5,000.
- The licensing fee for PIs who provide money remittance, payment initiation services, or account information services is EUR 1,500.
- The registration fee for an EMI license in the UK is GBP 5,000.
- The UK’s licensing registration fee for small PIs or EMIs is GBP 500.
There are numerous documents that a PI or EMI must submit as a part of the license application. Some of the documents a financial institution must submit as a part of the application include:
- A list of payment services
- A business plan and operating procedures
- A description of the organizational structure
- Evidence of initial capital that the regulations require
- Documentation on plans for safeguarding account funds
- Documentation on procedures regarding handling, monitoring, and managing security issues and customer complaints
These documents must be specific to each PI or EMI.
European Merchant Bank is a fintech friendly bank that supports PIs and EMIs at their establishment stage by providing them accumulative, business and safeguard accounts.
How Can EMBank Help?
Established in Lithuania and licensed by the European Central Bank, European Merchant Bank (EMBank) is a fintech-friendly bank that supports PIs and EMIs at their establishment stage by providing them Safeguarding Account, Business Account, and Accumulative Account. EMBank also provides a Banking as a Service offering, as well as payment options through SEPA, Swift, and Target2.
Please keep in mind that the above information has been prepared or assembled by the EMBank and is intended for informational purposes only. Some of the information may be dated and may not reflect the most current legal developments.
Contact EMBank today, and one of our Relationship Managers will guide you through getting your Payment Institution license or Electronic Money Institution license in the UK.
Please send an email to [email protected] to arrange a telephone call.