License as a Service: Access Regulated Payment Infrastructure Without Holding Your Own License

License as a Service (LaaS) is one of the most practical innovations in the regulated payments industry. It allows businesses that need regulated payment or financial services infrastructure to access it through an existing license holder, without spending years and hundreds of thousands of dollars obtaining their own license. License as a Service LaaS arrangements cover everything from operating as an authorized delegate under a US money transmitter license to becoming an EMD under a UK EMI or an authorized agent of an EU payment institution. Faisal Khan LLC connects businesses to LaaS providers across jurisdictions and advises on how to structure these arrangements to be legally compliant, commercially fair, and strategically sound.

What Is License as a Service?

License as a Service is not a formal regulatory term. It is a commercial model. The concept is simple: a company that holds a payment, money transmission, EMI, or similar financial services license makes that license available to other businesses on a sponsored or agent basis, in exchange for a commercial arrangement (revenue share, flat fee, volume-based fee, or some combination).

The business that "rents" the license operates within the regulatory perimeter of the license holder. The license holder remains responsible for the sponsored entity's compliance. The sponsored entity gets access to regulated infrastructure without holding its own license.

This is not a workaround or a gray area. It is a formally recognized regulatory structure in the UK (authorized agent of an API or EMI, e-money distributor), EU (authorized agent of a payment institution under PSD2), and US (authorized delegate of a licensed money transmitter). Regulators know about it. They regulate it. Doing it properly, through a reputable license holder with appropriate compliance oversight, is the right way to access regulated payment infrastructure quickly.

How LaaS Works in Practice

The mechanics vary by jurisdiction, but the core structure is consistent:

Step 1: The license holder assesses you. LaaS providers do not accept everyone. They perform compliance due diligence on potential sponsored entities because they are taking on regulatory responsibility for your compliance. They will review your AML policy, your ownership structure, your business model, and your financial standing.

Step 2: A commercial agreement is signed. This defines the services you will provide, the revenue share or fee structure, the compliance obligations on both sides, and the conditions under which the arrangement can be terminated.

Step 3: Regulatory registration (where required). In the UK and EU, the license holder formally registers you as their agent or distributor with the relevant regulator. In the US, the licensed money transmitter typically files authorized delegate records with states that require it.

Step 4: You operate. You provide payment services, money transmission, e-money distribution, or whatever the arrangement covers, within the boundaries set by the license holder's compliance program.

Step 5: Oversight and monitoring. The license holder monitors your compliance on an ongoing basis. You report to them. They remain accountable to the regulator for your activity.

Agent-Based vs. Non-Agent-Based LaaS

This distinction matters enormously for your business model, your risk profile, and your banking infrastructure requirements.

Agent-based LaaS (you are in the flow of funds):
You handle actual money movement. Customer funds pass through your accounts or your custody. You are fully embedded in the transaction chain. This is the model for correspondent agent networks, payment aggregators, and white-label payment companies that want to process real transactions.

Implications:

• You need banking infrastructure of your own to handle the funds that flow through you

• Your AML/KYC obligations are active, not passive

• You take on greater operational responsibility

• You may earn more per transaction because you are doing more of the work

Non-agent-based LaaS (you are not in the flow of funds):
You refer customers, provide technology, or deliver a service layer on top of the license holder's infrastructure. Funds flow directly to and from the license holder. You do not touch money. You earn a service or referral fee.

Implications:

• You do not need specialized banking infrastructure for fund flows

• Your AML obligations are lighter (though you still have customer identification responsibilities in some structures)

• You are further from the regulatory risk

• This model suits SaaS platforms, marketplaces, and technology companies that want to offer payment features without handling money

We advise on which model is appropriate for your business and structure the arrangement accordingly.

LaaS by Jurisdiction

United States: Authorized Delegate Model

Licensed US money transmitters can appoint authorized delegates. The delegate operates under the MTO's license and compliance umbrella. Most state MTL frameworks recognize authorized delegates. The licensed MTO files delegate disclosures with state regulators as required. The MTO remains responsible for the delegate's compliance with money transmission laws.

United Kingdom: EMD and Authorized Agent Model

FCA-authorized EMIs can appoint E-Money Distributors (EMDs). FCA-authorized APIs and EMIs can appoint authorized payment agents. In both cases, the principal registers the entity with the FCA. The principal is responsible for the distributor's or agent's compliance with the relevant regulations.

European Union: PSD2 Authorized Agent Model

EU-authorized payment institutions and EMIs can appoint authorized agents across EU member states. The agent is registered with the home state competent authority of the principal and can operate across the EU within the principal's license perimeter. This is a powerful LaaS model for EU market access without obtaining your own EU authorization.

Doing Your Own License Application in Parallel

The most strategic use of LaaS is as a bridge, not a permanent solution. Many businesses use a LaaS arrangement to:

• Get to market quickly while their own license application progresses (which can take 12 to 36 months)

• Test their business model in a regulated environment before committing to full licensing infrastructure

• Build a compliance track record that strengthens their own license application

We advise on running both tracks in parallel: finding the right LaaS provider for immediate market access while simultaneously progressing your own license application. This maximizes your speed to market while building toward long-term regulatory independence.

Frequently Asked Questions

Is License as a Service legal?

Yes. The underlying structure, operating as an authorized agent, authorized delegate, or EMD, is explicitly recognized in the regulatory frameworks of the US, UK, and EU. What matters is that it is done properly: through a reputable license holder, with appropriate compliance oversight, and with regulatory registration where required.

What does a LaaS provider charge?

Commercial terms vary widely. Revenue share arrangements typically range from 10% to 40% of transaction revenue depending on the jurisdiction, the services covered, and the operational responsibilities on each side. Flat monthly fees are also common for non-agent-based arrangements. Volume-based fees can be structured where volumes are predictable. We advise clients on what reasonable commercial terms look like for their specific situation.

Can I do LaaS in multiple jurisdictions simultaneously?

Yes, but you need a different LaaS arrangement in each jurisdiction, because the underlying regulatory structure varies. We help clients identify and manage LaaS arrangements across multiple jurisdictions where multi-market access is needed.

What happens if the LaaS provider's license is revoked?

This is a real risk. If your LaaS provider loses its license, your ability to operate under their umbrella ends immediately. This is one of the reasons that pursuing your own license in parallel is prudent. We assess the regulatory standing and compliance quality of potential LaaS providers before making introductions.

Get Connected to the Right License as a Service LaaS Provider

License as a Service LaaS is the fastest compliant route to regulated payment market access in the US, UK, and EU. Whether you are a startup that cannot wait 24 months for your own license, a platform that wants to offer payment features without becoming a regulated entity yourself, or a business entering a new market quickly, a well-structured LaaS arrangement delivers compliant market access in weeks. Faisal Khan LLC does not hold licenses or provide LaaS directly. We connect businesses to reputable license holders in the relevant jurisdictions, advise on structuring agent-based and non-agent-based arrangements, and help you run your own license application in parallel so you are building toward independence from day one.