Embarking on the Journey to FCA Authorisation: Your Guide to E-Money and Payment Institution Licensing

In the dynamic world of financial services, becoming an authorised Electronic Money Institution (“EMI”) or Payment Institution (“PI”) is a transformative step for businesses aiming to grow and innovate. The Financial Conduct Authority (“FCA”), the UK’s financial regulatory watchdog, offers a clear pathway to authorisation, ensuring that firms meet the high standards required to operate in the financial market. Here is how Complyport can help navigate the application process with confidence and precision.

Understanding the Landscape

Before diving into the application process, it is essential to understand the types of institutions and the services being offered. EMIs are entities authorised to issue electronic money, which is digital cash stored electronically for the purpose of making payment transactions. PIs, on the other hand, provide payment services that facilitate the transfer of funds without issuing e-money. A common misunderstanding is the distinction between the Payment Services when applying for FCA authorisation. Selecting the correct services is an essential first step towards a successful outcome. Below is the list of all Payment Services:

  • Payment Services 1 and 2: Services enabling cash to be placed on / withdrawals from a payment account as well as all the operations required for operating a payment account via ATMs or over the counter.
  • Payment Service 3: Execution of payment transactions, including transfers of funds on a payment account with the user’s payment service provider or with another payment service provider:
  • execution of direct debits, including one-off direct debits,
  • execution of payment transactions through a payment card or a similar device, and
  • execution of credit transfers, including standing orders.
  • Payment Service 4: Similar to Payment Service 3 but with the involvement of a credit line
  • Payment Service 5: Issuing of payment instruments and/or acquiring of payment transactions
  • Payment Service 6: Money Remittance
  • Payment Service 7: Payment Initiation Services (“PIS”)
  • Payment Service 8: Account Information Services (“AIS”)

Choosing the Right License

Navigating the FCA’s licensing landscape requires a clear understanding the firm’s goals and capabilities. Whether the firm is an established player or a new entrant, choosing the right FCA license is a strategic decision that will shape its trajectory in the financial services industry. With careful planning and adherence to regulatory standards, a firm should secure the license that best fits its operational needs and consumer commitments.

AEMI: Authorised Electronic Money Institution

AEMIs are firms that have been granted permission by the FCA to issue electronic money (e-money). AEMIs are subject to stringent regulatory standards, in relation to the firm’s Operational Resilience, safeguarding of client money and ability to combat financial crime to ensure the safety and stability of the e-money they issue.

SEMI: Small Electronic Money Institution

SEMIs are similar to AEMIs but operate on a smaller scale. SEMIs are allowed to issue e-money up to a certain threshold of 5 million EUR and have a monthly transaction turnover below 3 million EUR. SEMIs are subject to a lighter regulatory regime compared to AEMIs. This option is suitable for firms with smaller operations that do not exceed the specified e-money limits. SEMIs are not permitted to provide PIS or AIS.

API: Authorised Payment Institution

APIs are firms authorised by the FCA to provide payment services. These services can range from executing payment transactions to money remittance. APIs are designed for firms that handle over 3 million EUR per month in transactions  for their payment services and are required to meet comprehensive regulatory requirements to ensure consumer protection and market integrity.

SPI: Small Payment Institution

SPIs are the counterpart to an API for smaller-scale operations. SPIs are allowed to provide payment services with maximum volume of transactions not exceeding 3 million EUR per month and are subject to fewer regulatory requirements than APIs. SPIs are not permitted to provide PIS or AIS.

The FCA’s Authorisation Process

The FCA’s authorisation process is meticulous and thorough, designed to assess an applicant’s ability to meet the regulatory requirements and to protect consumers. Here is what every applicant needs to know:

  1. Determine the Category: Whether an applicant is applying as an EMI or a PI, it must first determine if it needs to be authorised or registered. This depends on factors such as the services an applicant intends to provide and the scale of its operations.
  2. Prepare the Application: Gather all necessary information and documents, including details about an applicant’s business model, risk management processes and the individuals responsible for managing the firm’s regulated activities.
  3. Submit Through Connect: The FCA’s online system, Connect, is the portal for submitting the application. Ensure that all information is accurate and complete to avoid delays in the authorisation process.
  4. Meet the Conditions: Applicants must meet specific conditions, such as maintaining a certain level of financial resources and having robust governance arrangements in place.
  5. Register Key Individuals: All applicants need to register the members of your management board and other individuals responsible for your firm’s regulated activities with the FCA.

Conclusion

Achieving FCA authorisation is not just a regulatory requirement; it is a badge of honour that signifies trust, credibility and stability. It reassures the firm’s stakeholders that the firm adheres to the highest standards of safety and integrity in handling their funds and personal data.

The journey to becoming an FCA-authorised EMI or PI is rigorous but rewarding. It opens doors to new opportunities and cements a firm’s position as a reliable player in the financial services industry. With careful and timely preparation and a deep understanding of the FCA’s requirements, a firm can navigate the authorisation process successfully and reap the benefits of transacting in electronic money and payment services.

How Can Complyport Help?

The Authorisation process can be a challenging and time-consuming endeavour. At Complyport, our team has a wealth of experience in dealing with the regulator and their approach to authorisations. We will leverage this experience to provide the best advice and guidance to you throughout each stage of your application.

We offer a flexible approach to suit your needs, providing a fully project-managed service to review and provide feedback on draft applications prior to submission.

If your firm is seeking to acquire additional licensing to expand its business scope, we can also support you with other regulatory applications such as variations of permissions (VoP), change in control, and legal status. Please click here to learn how we can assist you.

Our fully project-managed authorisation service includes:

Pre-Application Consultancy

  • Our team works with you to understand your goals and activities.
  • We listen to your ideas for the future and ensure the correct regulatory permissions are applied for.
  • We identify and resolve potentially contentious issues before submission.

Construction of the FCA Application Pack

  • We provide support with drafting or reviewing your regulatory business plan and provide assistance with the preparation of relevant forms.
  • We lend our expertise in supporting the creation of financial projections and key assumptions including our templates.
  • Take advantage of our Template Compliance Monitoring Programme appropriately tailored to your business in the submission of your film’s application to the FCA.

Post Submission Queries

  • We will assist with post-submission issues or queries raised by the FCA.
  • We will advise on the best approach to take when dealing with the FCA.

Provision of Appropriate Compliance Documentation

  • We provide compliance documentation after your application is submitted to the FCA in order to ensure you are ready to meet your regulatory and compliance obligations.
  • The documentation includes compliance manuals, a tailored Compliance Monitoring Programme, registers and policies.

Ongoing Support

Many of the firms we help to get authorised go on to take up our ongoing support services to ensure they continue to meet their regulatory requirements, for more information please click here.

Interested in seeing how we can help you in seeking Authorisation?

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