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High level summary of payments regulation

High level summary of payments regulation

1 June 2015

The table below sets out a summary of the relative levels of European regulation that currently apply to banks, firms issuing e-money and payment services institutions. The distinction between these levels of regulation is likely to be of interest to fintech companies developing new payment methods and we also note that the European payment services regime is likely to change (and extend in scope) in the next couple of years.

At the top of the table are the more onerous regulations. Once authorised, a bank does not need to obtain a separate payment services or e-money licence, although if it does carry out such activities, it will need to comply with the appropriate conduct of business rules. Similarly, a fintech company issuing e-money does not need a separate payment services licence if it offers payment services, but will need to comply with the payment services conduct of business rules if it does so.

 


Type of institution
 

Authorisation
 

Examples of services
 

Implications (non-exhaustive)
 
 

Banks
 

Banking
licence
 
► Accepting deposits from individuals 
and corporates 
► Accessing payment systems 
► Issuing cards 
► Lending
► Full gamut of onerous regulatory provisions 
► However, able to provide wide,range of services (if authorised to do so)
► Change in control regime
► Passport into rest of EU
 

E-money issuer (EMI)
 

Authorised as an EMI

Authorisation is not required if the entity is an
authorised bank 

There
is a category of small EMI, subject to less onerous requirements
 

Must be authorised if entity is issuing e-money.

E-money means:
1. electronically
stored monetary value, represented as a claim on the issuer;
2. issued on receipt of funds for the purposes of making
payment transactions; and
3. accepted by someone other than the issuer.
 
► Minimum capital requirements 
► Conduct of business requirements,apply to all institutions providing e-money services
► Change in control regime
► Safeguarding funds requirements
► Can use authorisation to passport into the rest of the EU (not available for small EMIs)

Payment services institution (PSI)
 

Authorised as a PSI

Authorisation is not required if the entity is an
authorised bank or EMI

There
is a category of small PSI, subject to less onerous requirements
 
► Moneyremittance,
► Issuingor acquiring of payment instructions,
► Execution of payment transactions,
► Execution through mobile device where the telecommunication, IT system or networkoperator is only acting as an intermediary

Note – the second Payment Services Directive(PSD2) is under discussion at the EUlevel.
► Minimum capital requirements 
► Conduct,of business requirements apply to all,institutions providing payment services (including credit institutions and EMIs),
► Change in control regime (in UK1),
► Can use authorisation to passport into,the rest of the EU (not,available for small PSIs)

 

 

1. http://www.fca.org.uk/firms/firm-types/payment-services-institutions/Change-in-qualifying-holding