Payment Service Licence in UK (API or SPI - EMI or SEMI)

A Payment Service Provider is any of the following persons when they carry out payment services:

1. Authorised payment institutions;
2. Small payment institutions;
3. Credit institutions;
4. Electronic money institutions;
5. The Post Office Limited (in UK);
6. The Bank of England; and
7. Government departments and local authorities, other than when carrying out functions of a public nature;

Once you are licensed by any European Financial Authority you can offer the following services:

1. Services enabling cash to be placed on a payment account and all of the operations required for operating a payment account; [capital requirement 125.000 euro]
2. Services enabling cash withdrawals from a payment account and all of the operations required for operating a payment account; [capital requirement 125.000 euro]
3. The execution of the following types of payment transaction: direct debits, including one-off direct debits; payment transactions executed through a payment card or a similar device; credit transfers, including standing orders; [capital requirement 125.000 euro]
4. The execution of the following types of payment transaction where the funds are covered by a credit line for the payment service user: direct debits, including one-off direct debits; payment transactions executed through a payment card or a similar device; credit transfers, including standing orders; [capital requirement 125.000 euro]
5. Issuing payment instruments or acquiring payment transactions; [capital requirement 125.000 euro]
6. Money remittance; [capital requirement 20.000 euro]
7. The execution of payment transactions where the consent of the payer to execute the payment transaction is given by means of any telecommunication, digital or IT device and the payment is made to the telecommunication, IT system or network operator acting only as an intermediary between the payment service user and the supplier of the goods or services. [capital requirement 50.000 euro]

The main difference between the two types of Payment Service Providers is that only Electronic Money Institutions can issue electronic money or digital currency such as a money balance recorded electronically on a stored-value card (prepaid card) or account (e-wallet) or other device. Electronic Money Institution can offer all the services an Authorised Payment Institution can offer. Capital requirement starts from 350.000 euro.

There are few similarities between Bitcoin and e-money other than both being in digital format, according to the report. While e-money is a mechanism for interacting with government-issued and regulated currencies such as dollars and euros, Bitcoin is a virtual currency that has no fiat currency counterpart. Bitcoin is based on a decentralized peer-to-peer network that can be transferred somewhat anonymously and can be highly volatile in terms of value. These characteristics of Bitcoin, while having some potential benefits, can pose considerable risks to consumers and make it a challenge for regulators. If you wish to offer crypto currency exchange and crypto e-wallets to your clients you may consider applying for a proper licence.

You can apply to become a Small Payment Institution (SPI), if you meet the following conditions:

1. Average monthly payment transactions in the preceding 12 months must not exceed €3 m
2. If you have not been providing payment services, or have been providing payment services for less than 12 months, projected average monthly payment transactions must not exceed €3m
3. Managers must not have been convicted of money laundering, terrorist financing or other financial crimes
4. Your head office and registered office (or place of residence for natural persons) must be in the UK;
5. If the applicant is a partnership, an unincorporated association or a corporation, anyone having a qualifying holding must be fit and proper for the sound and prudent conduct of a small PI, and
6. If the applicant is a corporation with close links to another person, the links mustn’t be likely to prevent our effective supervision of the business (if the link’s outside of the European Economic Area (EEA), foreign laws mustn’t prevent our effective supervision of the business).

The  regulator has a two tier structure for payment businesses, namely, small payment institutions and authorised payment institutions. The way to determine which option your firm falls under is to determine your average monthly turnover in transactions.

If your monthly turnover transactions are under 3m EUR you can become a small payment institution (SPI). If your monthly transaction amount exceeds this then you will have to apply as an authorised payment institution (API).

Furthermore, in the UK, you will be required to register with HMRC for money laundering and fit and proper purposes. 

Small Payment Institutions have no specific capital requirement, but generally speaking, smaller firms tend to struggle in getting a bank account opened.

You can apply to become a Small Electronic Money Institution, if you meet the following conditions:

1. Evidence that when you start trading, your e-money business will generate a monthly average outstanding electronic money of less than €5m
2. Evidence that, in the 12 months preceding the application, the monthly average of payment services transactions did not exceed €5m (this assessment can be based on projections if a firm have never traded before), and
3. A description of how you will safeguard the funds of e-money holders
4. Evidence that you meet your initial capital requirements

To be considered a small EMI, the maximum storage amount on the payment instrument of the customer where the electronic money is stored cannot exceed €250. A small EMI is required to hold initial capital at the time of authorisation. When the business activities of the EMI generate average outstanding electronic money less than €1,000,000, it shall hold initial capital equal to €50,000. When the business activities of the EMI generate average outstanding electronic money between €1,000,000 and €2,000,000, it shall hold initial capital of €100,000. Small EMIs must maintain at all times own funds, equal to or in excess of the applicable initial capital requirement. These parameters can change when you will discuss your business plan with FCA.

The  regulator has a two tier structure for payment businesses, namely, small electronic money institutions and electronic money institutions. The way to determine which option your firm falls under is to determine your average monthly turnover in transactions.

If your monthly turnover transactions are under 5m EUR you can become a small electronic money institution. If your monthly transaction amount exceeds this then you will have to apply as an electronic money institution.

Small Electronic Money Institutions have a specific capital requirement (usually from 50.000 euro), but generally speaking, smaller firms tend to struggle in getting a bank account opened.

The  regulator has a two tier structure for payment businesses, namely, small electronic money institutions and electronic money institutions. The way to determine which option your firm falls under is to determine your average monthly turnover in transactions.

If your monthly turnover transactions are under 5m EUR you can become a small electronic money institution. If your monthly transaction amount exceeds this then you will have to apply as an electronic money institution.

Small Electronic Money Institutions have a specific capital requirement (usually from 50.000 euro), but generally speaking, smaller firms tend to struggle in getting a bank account opened.