An authorised payment institution or API, is a designation by license across Europe which enables a company to offer payment services within a specified region. These payment services can include payment accounts, processing payments, merchant services, and payment transfers. An important distinction between authorised payment institutions and legacy banks is that banks are able to accept deposits, while APIs are strictly for payment services.
API licenses are applied for and then granted by a regulating authority. For example, to apply for an API license in the UK, the company must apply to the Financial Conduct Authority (FCA). In the European Union, companies apply to the European Banking Authority (EBA). The involvement of these authorities increases transparency amongst businesses and ensures a higher level of protection for consumers.