Payment Institution PI: Getting Licensed, Sponsored, or Acquiring Access in the UK and EU
A Payment Institution PI license is the core regulatory authorization for companies that provide payment services in the UK and European Union. If you process payments, initiate transfers, provide merchant acquiring, or execute payment transactions for others, a Payment Institution PI license is almost certainly the authorization you need. Faisal Khan LLC helps businesses understand the PI licensing pathway, access PI infrastructure through sponsorship arrangements, and evaluate acquisitions of existing licensed entities. This page explains everything you need to know in plain language.
What Is a Payment Institution
A Payment Institution is a company authorized by a financial regulator to provide payment services. In the UK, the FCA (Financial Conduct Authority) grants this authorization under the Payment Services Regulations 2017. In the EU, national regulators authorize payment institutions under the Payment Services Directive 2 (PSD2).
A PI license covers a defined set of payment services, including:
Executing payment transactions (credit transfers, direct debits)
Issuing payment instruments (cards, payment accounts)
Acquiring payment transactions (merchant acquiring)
Payment initiation services
Account information services
Money remittance
What a PI license does NOT cover: issuing electronic money. If your business model requires holding customer funds in e-money accounts or issuing stored value products, you need an Electronic Money Institution (EMI) license instead.
A PI license is the right authorization for companies that facilitate payments and execute transactions without issuing e-money.
Authorized Payment Institution vs. Small Payment Institution
There are two levels of payment institution registration in the UK. Understanding which one you need before you apply saves significant time and resources.
Authorized Payment Institution (API): Full authorization with no transaction volume limits. Can appoint authorized agents. Theoretically able to passport services (though UK-EU passporting is now limited post-Brexit). Requires higher capital and a more comprehensive application.
Small Payment Institution (SPI): Lighter-touch registration for businesses whose monthly payment transactions average below GBP 3 million over the preceding 12 months. Lower capital requirements, simpler application process, but cannot passport or appoint as many authorized agents.
We assess your projected volumes and business model to determine which category is appropriate before you invest time in an application.
The Three Ways to Access a Payment Institution PI License
Path 1: Apply for Your Own PI Authorization
Applying for a Payment Institution PI license is a regulated process requiring you to demonstrate to the FCA (or EU regulator) that your business is competent, compliant, and financially sound.
Core requirements for FCA PI authorization include:
Minimum initial capital: EUR 20,000 (money remittance only) to EUR 125,000 (most other payment services)
A written AML/KYC policy and governance framework
Operational resilience plans and business continuity documentation
Fit and proper assessments on all directors, managers, and significant shareholders
Safeguarding arrangements if you hold customer funds in transit
Business plan with detailed flow of funds documentation
A compliance monitoring program
EU PI authorization follows a broadly similar framework under PSD2. Lithuania, the Netherlands, Ireland, and Cyprus are among the most active EU jurisdictions for PI applications. Each has its own processing times, local language requirements, and regulatory culture.
Timeframe: 6 to 18 months for FCA. 6 to 24 months for EU depending on jurisdiction.
A well-prepared application moves faster. The most common reasons for delays are incomplete governance documentation, inadequate AML policy quality, and insufficient evidence of operational readiness. We help clients get the application package right before submission.
Path 2: Operate as an Authorized Agent of a Licensed PI
A licensed Payment Institution can appoint your company as an authorized agent to provide payment services on its behalf. As an agent, you operate within the PI's regulatory perimeter. The PI remains responsible for your compliance. You provide the services. They hold the license.
Agent-based arrangements (you are in the flow of funds): You handle customer interactions, initiate transactions, and in some cases collect funds. You are operationally embedded in the payment flow. This is the model for most agent-based payment networks and white-label payment service arrangements.
Non-agent-based arrangements (you are not in the flow of funds): You provide technology, referrals, or a service layer on top of the PI's infrastructure. You do not touch funds directly. This is appropriate for software companies or platforms that want to offer payment features without direct regulatory responsibility for fund movement.
Timeframe: Weeks to a few months, depending on the PI's due diligence and onboarding process.
Operating as an authorized agent is the fastest legal route to providing payment services in the UK or EU without a license of your own. Many businesses use this route while their own PI or EMI application is in progress, then transition to their own authorization once approved.
We connect you to authorized PIs and EMIs willing to take on agents, and help you structure the commercial and compliance terms of the arrangement appropriately.
Path 3: Acquire a Company That Holds a PI License
The PI license belongs to the legal entity that holds it. Acquiring that entity gives you control of the license, subject to the regulator's approval of the change of control. This route is faster than a new application when a suitable acquisition target is available and your timeline is tight.
What this involves:
Identifying a licensed PI in the target jurisdiction that is available for acquisition
Regulatory due diligence on the license, compliance record, and any outstanding regulatory matters
Structuring the acquisition with appropriate regulatory conditions
Filing change of control notifications with the FCA or national competent authority
Obtaining regulatory approval before the transaction completes
FCA change of control assessments typically take 60 to 90 working days. EU timelines vary by jurisdiction and authority.
We source licensed PI entities available for acquisition in the UK and across EU jurisdictions, advise on regulatory due diligence, and connect you to M&A counsel with direct experience in payment services license transfers.
Safeguarding Requirements for Payment Institutions
If your PI business model involves holding customer funds (even briefly, while a payment is processing), you must safeguard those funds. This means holding them in segregated accounts at credit institutions, separate from your own operating money.
Safeguarding is an FCA and PSD2 requirement. It is not optional and it is not satisfied by simply opening a separate bank account. The account must be at a credit institution, must be clearly titled as a client money or safeguarding account, and the bank must acknowledge the safeguarding purpose in writing.
Getting a bank to open a safeguarding account for a payment institution is itself a challenge. Most banks are reluctant to serve PI clients. We help with both: the license application and the banking infrastructure to support it.
Frequently Asked Questions
Can I provide payment services in the EU with a UK PI license post-Brexit?
No. UK PI authorization no longer passports into the EU following Brexit. If you want to provide regulated payment services in EU member states, you need a separate EU PI or EMI authorization from an EU-based regulator. We advise on the most efficient structure for businesses needing both UK and EU coverage.
What is the minimum capital requirement for a Payment Institution license?
It depends on the services you provide. Money remittance only: EUR 20,000. Most other payment services: EUR 125,000. If you also provide card acquiring: EUR 125,000. These are initial capital requirements. You must also meet ongoing capital requirements based on your payment volumes.
Can a Payment Institution issue prepaid cards or e-money wallets?
No. Prepaid cards and e-money wallets require an Electronic Money Institution (EMI) license. A PI executes payment transactions but does not issue stored value. If your product roadmap includes a wallet or prepaid card, plan for an EMI authorization rather than a PI.
How long does it take to become an authorized agent of an existing PI?
With a well-prepared due diligence file and a responsive PI, agent registration can be completed in 4 to 12 weeks. The PI registers you with the FCA as their agent, which involves its own verification and compliance process on their side.
Get Your Payment Institution PI License, Sponsorship, or Acquisition Done
A Payment Institution PI license is the operating foundation for any serious UK or EU payment business. Whether you want to apply for your own authorization, operate as an authorized agent under an established PI while your application runs in parallel, or acquire a licensed entity to skip the queue entirely, all three paths are realistic and we have experience with each. Faisal Khan LLC does not hold or issue PI licenses. We advise on strategy, connect you to specialist regulatory counsel, and introduce you to PIs willing to take on agents or to licensed entities available for acquisition.