Public Advisory for Money Transfer Licensing in the UK
The Financial Conduct Authority (FCA) in the UK has implemented a stringent and restrictive approach to licensing, resulting in significant delays and a sharp decrease in approval rates. Entrepreneurs seeking licenses must carefully consider the challenges and requirements before proceeding. Read more here.
The process for applying for a Small Payment Institution (SPI) license is fairly straightforward, but it does require that businesses fulfill certain requirements. A completed application form along with the necessary supporting documentation must be submitted to the Financial Conduct Authority (FCA), who will then assess the application and render a decision within a six-month time frame.
Let’s break down the key elements of an SPI license: its main prerequisites, requirements, and other essential information relevant to the application process.
What is an SPI license?
An SPI license authorizes businesses to provide payment services within the UK. This includes processing credit and debit card transactions, managing electronic money, and facilitating money transfers.
Who is eligible for an SPI license?
Any business wishing to provide payment services in the UK can apply. However, they must meet certain criteria, including:
- Incorporation within the UK.
- Possessing a minimum of £50,000 in share capital.
- Having a board of directors with at least two members.
- Appointing a compliance officer to oversee the adherence to all relevant laws and regulations.
What are the prerequisites and requirements for an SPI license?
Beyond the above requirements, businesses must also:
- Present a viable business plan.
- Demonstrate adequate financial resources.
- Have a competent management team.
- Implement a comprehensive compliance program.
What additional information is required for an SPI license application?
Along with information about the business, applicants must also provide details about:
- The types of payment services they will provide.
- Their target market.
- Their risk management procedures.
- Their compliance program.
More information on SPI licenses, including a guide to the licensing process and a checklist of required information, can be found on the FCA’s website.
Benefits of an SPI license
Having an SPI license allows businesses to:
- Provide payment services in the UK.
- Access the UK’s payment systems.
- Build trust with customers and partners.
- Mitigate the risk of financial crime.
Risks of not having an SPI license
Without an SPI license, a business cannot provide payment services in the UK, access the UK’s payment systems, or effectively build trust with customers and partners. It also increases the business’s risk of involvement in financial crime.
Once an SPI license is granted, businesses must comply with ongoing requirements such as managing financial crime risks, reporting suspicious activity to the FCA, and maintaining records of payment transactions. SPI licenses are valid for five years and can be renewed.
The FCA may request further information or documentation during the application process, conduct a site visit, and refuse the license if the business does not meet the necessary standards. Therefore, consulting with a financial services lawyer or consultant is highly recommended to ensure a successful application.
Costs Associated with the Application Process
First-time applicants often underestimate or overlook the significant costs involved in the application process. These costs are related to the various areas the FCA requires applicants to demonstrate proficiency in. For more detailed information on these costs, please visit the provided URL: FCA SPI UK License Costs
Securing an SPI license involves more than just an application fee. There are many requirements to fulfill before a license can be granted. Presently, obtaining an SPI license has become more challenging due to the FCA’s stringent standards. In 2022, only around 8-9 SPI licenses were approved, a significant decrease from the over 150 applications approved in 2020/21.
The FCA has raised its standards due to a rise in applicants who lack the necessary business experience or understanding of licensing and compliance requirements. Now, only well-funded applicants with a strong knowledge base, teamwork capabilities, a robust business plan, and comprehensive compliance measures stand a chance of progressing to the screening/interview stage.
This page was last updated on May 30, 2023.