What is a Payment Institution (PI)?
A Payment Institution (PI) in the EU is a firm that has obtained an Authorised Payment Institution (API) License or a Small Payment Institution (SPI) License. With these licenses, the firm can provide various payment and financial services throughout the European Union. Since the EU comprises 26 countries, the scope of services that can be offered under a payment institution’s license is huge. However, the most common ones are as follows:
- Payment Initiation
- Place funds in a payment account and operate it
- Foreign remittance
- Withdraw cash from payment accounts
- Execution of various payment transactions which include, but are not limited to, money transfers, standing orders, direct debits etc, funded by a credit line or a payment account
- Acquire payment transactions
- Issue payment orders
- Provision of information about accounts
Types of Payment Institutions
Authorised Payment Institutions
An Authorised Payment Institution (API) is an institution that has obtained the API EU License and is thus allowed to provide payment and financial services across the European Union. These services vary from country to country, but the common ones have been mentioned above. In order to obtain an API License in the EU, the license application must be completed and submitted to the relevant financial regulatory body, along with the required documents. An API License is an ideal choice for a firm that has succeeded in the financial market so far and wishes to expand its operations.
Small Payment Institutions
A Small Payment Institution (SPI) is an institution that has obtained an SPI License in the EU. Through this license, the institution can provide various payment and financial services but under one main limitation: the average monthly turnover in payment transactions must be less than €3m. Applying for an SPI License is easier and cheaper than applying for an API License. Furthermore, an SPI License has no initial capital requirements, making it the ideal choice for businesses who want to enter the financial services market.
Difference between Authorised Payment Institutions and Small Payment Institutions
Both Small Payment Institutions and Authorised Payment Institutions are Payment Institutions, which allows them to provide Payment Services under the PSD2. However, the key difference is that of the initial capital requirements and the average monthly payment transactions. The table below shows these differences:
|Authorised Payment Institution||Small Payment Institution|
|Higher application fee: This varies from country to country but usually ranges between €500 to €15000. For some countries, this amount may be relatively higher.||Lower application fee: This varies from country to country but can range from €100 to €10000. For some countries, this amount may be relatively higher.|
|Initial capital requirement between €20,000 to €125,000||No initial capital requirement|
|No limit on average monthly turnover in payment transactions||Average monthly turnover in payment transactions must be less than €3m|
|Takes longer to be processed and obtained||Easier and quicker to obtain|
|Ideal choice for expanding your business||Ideal choice for setting up your business|
For more details about API and SPI licenses in the European Union, please contact us. We can help you with applying for and obtaining an SPI or an API license. Our licensing process is easy and hassle-free. Sign up now!
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This page was last updated on June 1, 2023.