Enabling you to gain access to 512 million consumers across Europe and offering payment services, including, payment accounts, payment processing, merchant acquiring and money transfer services.
Payment Institution (PI)
If you wish to become an authorised payment institution in Germany, then you will need to apply to the German regulator BaFin for authorisation as an authorised payment institution. Below you will find key information and requirements to become an authorised payment institution in Germany.
Payments regulation is changing in Europe. With this change, it is creating new opportunities for payment service providers. The second payment service directive (PSD2) responds to the evolving demands of customers.
The European payments market size is substantial and growing continually. The total amount of non-cash payments in Europe increased to over 122 billion in 2016. The total number of payment cards grew to over 1.5 billion in 2016. In relation to card transactions, in 2017, the 45 largest merchant acquirers in Europe processed 67.5 billion payments, from 10 million merchants, valued at €2.4 trillion.
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Services provided by an Authorised Payment Institution License in Germany
An Authorised Payment Institution license in Germany enables the license holder to offer a number of services:
- services enabling cash to be placed on a payment account and all the operations required for operating a payment account;
- services enabling cash withdrawals from a payment account and all the operations required for operating a payment account;
- the execution of payment transactions, including transfers of funds on a payment account with the user’s payment service provider or with another payment service provider, including, execution of direct debits, including one-off direct debits; execution of payment transactions through a payment card or a similar device; execution of credit transfers, including standing orders;
- the execution of payment transactions where the funds are covered by a credit line for a payment service user, including, execution of direct debits, including one-off direct debits; execution of payment transactions through a payment card or a similar device; (iii)execution of credit transfers, including standing orders;
- issuing payment instruments or acquiring payment transactions;
- money remittance;
- payment initiation services;
- account information services.
The German regulator for Authorised Payment Institutions
BaFin regulates firms that provide regulated services, including, consumer credit, payment services, e-money, lending, insurance and investment services.
The Payment Services Supervision Act (ZAG) regulates the supervision of payment services in Germany.
If you wish to provide payment services in Germany, such as payment accounts, payment processing and money remittance, you will require an Authorised Payment Institution license from the German regulator, namely, BaFin.
Advantages of obtaining an Authorised Payment Institution license in Germany:
- The largest economy in Europe and 4th strongest in the world.
- Ranked 15 according to market size, business sophistication, innovation and financial development.
- Online and e-commerce sales valued at €60 billion.
- Strong regulatory environment
Key features of the Authorised Payment Institution license in Germany
- A license issued in Germany is recognised in all other EEA (European Economic Area) member states. Through ‘passporting’, this enables the payment institution to operate across all EEA countries with a single license.
- Issue payment accounts with IBAN codes, across Europe.
- Join payment schemes such as SEPA.
- Issue Visa or Mastercard payment cards for both individual and business users.
The regulations for Authorised Payment Institutions in Germany
The Payment Service Directive 2 or PSD2 for short, is an EU Directive (Directive 2015/2366) which sets requirements for businesses wishing to provide payment services in European countries, including Germany. It applies to banks, building societies, payment institutions, e-money institutions and their customers.
The PSD2 directive aims to promote innovation within the payments sector and improve protection for consumers, whilst making payments both safer and more secure. The PSD2 directive came into force on 13 January 2018.
The key objectives of the PSD2 directive are to:
- Contribute to a more integrated and efficient European payments market
- Improve the level playing field for payment service providers (including new players)
- Make payments safer and more secure
- Protect consumers
Key requirements to become an Authorised Payment Institution in Germany
- A minimum capital requirement from €20,000 to establish an Authorised Payment Institution business.
- The requirement to safeguard client funds either with a segregated client bank account with a credit institution or with an insurance policy.
- The management body of the payment institution must be of good repute and possess the relevant qualifications and experience to perform their duties.
- Establish local mind and management.
- Both agents and distributors of payment service firms must also abide by the laws relating to money laundering as stipulated in the German Money Laundering Act (Geldwäschegesetz – GwG). They must ensure that their contracting parties and beneficial owners are identified.
Applying to Become an Authorised Payment Institution in Germany
As part of an Authorised Payment Institution license application in Germany, the following information must be prepared and submitted to the regulator:
- programme of operations
- business plan
- a description of your business’s organisation structure
- evidence of your initial capital
- measures to safeguard funds of your users
- compliance & governance arrangements and internal controls
- procedure for monitoring, handling, and following up on security incidents and security-related customer complaints
- processes for filing, monitoring, tracking and restricting access to sensitive payment data
- business continuity measures
- the principles and definitions applicable to the collection of statistical data on performance, transaction and fraud
- security policy
- internal control mechanisms to comply with obligations in relation to money laundering and terrorist financing (AML/CTF obligations)
- details of qualifying holdings (shareholders)
1. Expertise and Specialism within Payments
Payments is a specialist field, requiring prior expertise, knowledge and a specialist focus. You should ensure that your consultant specialises in this area as opposed to generalising in it. They should be comfortable explaining the technical aspects of this field, such as providing technical and regulatory requirements for license authorisation, particularly in Germany. The financial regulator will have conditions and expectations regarding different aspects of the application. For example, shareholders and management should be fit & proper, of good repute and have relevant experience and knowledge. A good consultant should be able to advise you on the regulatory requirements early-on in order to manage your time effectively and minimise any delays or wrong decisions. It should your consultant’s role to guide and advise you on best practices and the regulatory requirements. For example, we spend time advising clients from an early stage, in fact during the initial meeting and prior to taking on their application, of such requirements so that they can make an informed decision before investing their time.
2. Ability to access banking products and services
Setting up a payment institution goes beyond the scope of obtaining a license. You will require specialist banking facilities, such as, client safeguarding accounts, and access to payment systems, such as SEPA and Swift. Furthermore, you will require systems and software to manage your business. It is therefore important that your consulting partner has a strong network of connections with banks, technology partners and regulators. For example, by working closely with partners, such as Visa, Mastercard, Wirecard, and central banks, we are able to help clients by arranging banking facilities, such as safeguarding accounts, issuing cards, and access to payment infrastructures, such as SWIFT and SEPA.
Communication between a consultant and their client is key. Your consultant should be open to meet with you if required or to discuss your project during an initial meeting and thereafter have regular conversations with their clients. For example, we have at least a weekly telephone or conference call with our clients to discuss the progress of their license authorisation application or related project. This helps the client to understand the progress on their application and being able to report key information and developments to their management team or board. At the same time, it enables us to understand how the client is coming along in developing the operational aspect of their business.
4. International approach
Payments are international in their very nature. As our clients grow internationally their needs change. Firms, therefore, require licenses, banking facilities, infrastructure and partners in international markets. We often find firms working with multiple legal, accounting and related firms. This can be challenging for such firms and often slows down their international and growth. Furthermore, firms then must work with multiple partners within each country to manage different requirements e.g. company formation, accounting, legal, systems & IT, banks, and software vendors. This is further problematic when entering new markets. To manage these problems, our services are offered on an international level with offices strategically located in key jurisdictions across Europe and Asia. Our clients enjoy one point of contact for all their national and international requirements. This helps to remove any language barriers which they would otherwise face. Our services include accounting, legal, administrative and banking, which means that our clients can centralise their requirements with us.
5. Prior authorisation applications experience and success rate
Firm should ensure that their consulting partner has good knowledge and experience within banking, e-money and payment services. They should be able to demonstrate strong knowledge and experience within this area and be comfortable with explaining the legal and regulatory framework concerning banking, payment services, and electronic money. Your consulting partner should be able to share a client reference or provide client testimonials for similar past successful projects. For example, our website provides details of our recent work as well as names of some of our clients.
What our clients say
"Buckingham Capital Consulting has been a reliable and trusted partner. They spent time understanding our business, people and processes and worked closely with us throughout the process. They completed our licensing application to a high standard and in a timely and efficient manner. We were delighted with how smooth the entire process was from the application preparation and submission but also with the case officer at the FCA. Buckingham Capital Consulting ensured that our licence was obtained in an efficient and smooth manner. The value and expertise they provide became obvious early on in the process. We highly recommend Buckingham Capital Consulting."