FCA Payment Institution UK

Some financial activities, when carried out as a regular occupation or business activity, are considered payment services by the Payment Services Regulations 2009 (PSRs).

The Payment Services Regulations 2009 (PSRs) implement the Payment Services Directive in the UK. The purpose of the directive is to open up the payment services market across the European Economic Area (EEA) and to establish the same set of rules for payment services across all of the EEA.

These activities, when carried out as a regular occupation or business activity, are considered payment services and are in scope:

• cash Placements & Withdrawals
• execution of Transactions
• payments Covered by a Credit Line
• issue/acquire Instruments
• money Remittance
• telecoms Consent

Some types of payment do not come within the scope of PSRs:

• pure cash transactions directly between the payer and payee;
• transactions based on cheques and paper instruments;
• store cards that can only be used on the issuer’s premises;
• payment instruments that can only buy a limited range of goods or services;
• supermarket cashback; and
• independent ATM providers.

In April 2015, the Financial Conduct Authority (FCA) created a separate body, the Payment Systems Regulator (PSR). Any UK firm that provides payment services other than a bank, building society or e-money issuer, needs to apply to PSR to become either:

• an authorised payment institution (API); or
• registered as a small payment institution (SPI).

To apply to become an API you must provide information to satisfy PSR that it has, for example: robust governance arrangements in place; experienced directors of good repute to manage the PI; the required amount of initial capital; appropriate arrangements in place for safeguarding; and its head office or its registered office in the UK.

Being a SPI is an option available to businesses whose average turnover in payment transactions is not projected to exceed EUR 3 million per month. There are no capital requirements and there is no requirement to safeguard customer funds, although the SPI can choose to do so.

Under the PSRs, APIs are required to hold a minimum amount of capital. The ongoing capital held must not fall below the level of the initial capital requirement for the services provided. APIs can passport their services to other EEA states. SPIs are not allowed to passport.

A firm may provide payment services as an agent of another firm. The principal firm must register details of all its agents with PSR and is responsible for their compliance with the PSRs.

A firm can be either authorised or registered as a PI in respect of its own business, and also act as an agent for another firm.