When you need FCA status
If your firm provides payment services in the United Kingdom by way of business, you must be authorised as a payment institution or registered as a small payment institution by the Financial Conduct Authority (FCA) before you start, under the Payment Services Regulations 2017. If your firm issues electronic money, you must hold e-money institution status under the Electronic Money Regulations 2011. Banks, building societies and some other firms are treated differently because they already hold the necessary permissions.
This guide explains which status you need and the obligations that come with it. Work through it before you build your product, because the regime you fall into shapes your capital, safeguarding and reporting from day one.
Providing payment services or issuing e-money without status is a criminal offence
Step 1: Work out which status you need
Your starting point is the activity. If you provide one or more of the payment services listed in Schedule 1 to the Payment Services Regulations 2017, you need payment institution status. If you also issue electronic money, a stored monetary value held electronically and accepted by parties other than the issuer, you need e-money institution status, which also lets you provide related payment services.
Each regime has a full and a small version. The full version applies by default; the small version is a lighter-touch registration open only to firms whose activity stays below the volume limits set in the Regulations. Small institutions face reduced requirements and must stay within those limits. The snippet below sets out the thresholds that separate full from small status for both payment institutions and e-money institutions, so you can place your firm accurately.
The small institution regimes are an entry route, not a permanent category. If you expect to grow past the volume limits, plan for full authorisation from the outset to avoid having to re-apply once you scale. Note that authorisation under these Regulations gives you UK status only: since the United Kingdom left the European Union, UK payment and e-money institutions can no longer passport into the European Economic Area, and providing services in an EEA state requires separate authorisation there.
Step 2: Plan your safeguarding and capital
Safeguarding protects customer money if your firm fails. A full payment institution and a full e-money institution must safeguard the relevant funds they hold for users, typically by segregating those funds in a separate account at an authorised credit institution, or by holding them under an insurance policy or comparable guarantee. The FCA expects clear records and reconciliation so safeguarded funds can be identified and returned. Small institutions are subject to a lighter regime but must still meet their registration conditions.
You must also hold and maintain capital. Full institutions need initial capital and ongoing own funds, the amount of which depends on the services you provide and your volumes. Describe your safeguarding method and capital plan in your application; the snippet below sets out how the capital requirement varies by service type.
Step 3: Apply to the FCA
You apply through the FCA Connect portal. You register your firm, complete the question set for the status you are seeking, and submit a regulatory business plan, financial projections, your safeguarding arrangements, your governance and compliance arrangements, and details of the people running the firm. The FCA assesses whether you meet the conditions for authorisation or registration, including that your directors and managers are of good repute and have the knowledge and experience to run the firm prudently.
The FCA determines a complete application within the statutory period set by the Regulations; an incomplete application takes longer. Submit a full, well-evidenced application the first time, and book a free pre-application conversation with the FCA if your model is novel or you are unsure which status fits.
Step 4: Put your anti-money laundering controls in place
Payment and e-money firms are within scope of the money laundering regime, and the FCA will expect your controls to be operational from authorisation. You must carry out a money laundering risk assessment, apply customer due diligence, appoint a Money Laundering Reporting Officer, monitor transactions and report suspicious activity. Build these systems as part of your application, not afterwards. The snippet below sets out what the regime requires.
What happens after you get your status
Authorisation or registration is the start of ongoing supervision. From the effective date you must keep meeting the conditions of your status, safeguard relevant funds, maintain your capital, treat customers fairly, submit regulatory returns, pay your periodic fee, and notify the FCA of material changes such as new services, a change of control, or growth past the small institution limits. If your activities change, apply to vary your status before you make the change. Keep your safeguarding and anti-money laundering arrangements under regular review as your business grows.
Apply and read the rules on the FCA website
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FCA Connect — apply for authorisation or registration (opens in a new tab)
The portal for new payment institution and e-money institution applications.
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FCA — Payment services and electronic money (opens in a new tab)
FCA guidance on authorisation, registration, safeguarding and capital.
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Payment Services Regulations 2017 (opens in a new tab)
The Regulations governing payment institutions, including the payment services in Schedule 1.
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Electronic Money Regulations 2011 (opens in a new tab)
The Regulations governing the issuing of electronic money and e-money institutions.