Passporting is a regulatory mechanism that allows financial services firms that are authorized to operate in one European Union (EU) member state to conduct business in other EU member states without having to obtain additional authorization. Passporting allows firms to “passport” their authorization from one EU member state to another, enabling them to offer their services across the EU without facing the burden of obtaining separate authorization in each individual country. The passporting system is designed to facilitate the free movement of goods and services within the EU, and to make it easier for firms to do business across national borders. Passporting is only available to firms that are authorized to operate in an EU member state and that meet certain criteria, such as being subject to prudential regulation and supervision in their home country. Passporting is not available to firms that are based outside the EU.
So, if you had a license from, let’s say, UK you could go and passport it to other countries like Germany, like Netherlands, like Belgium, and Spain and so forth. And you could pick up customers from those countries without actually being licensed in that country.
A passport, like in the physical sense, allows you to go to other places, to travel to other places. In the payments world, a passport will allow you to pick up transactions from other countries. Very simply put, passporting is a mechanism by which you extend the reach of your license to other countries.
This page was last updated on January 4, 2023.