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Buckingham Capital Consulting Ltd  |   One Kingdom Street, London, W2 6BD  |  Telephone: 0800 689 0501  |   Email: Info@buckinghamcapitalconsulting.co.uk

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Payment Accounts

Offer your own branded payment accounts to your customers, issued by Visa or Mastercard

Payment Accounts

What is a payment account?

A payment account is an account in which a customer can place funds, withdraw cash, execute and receive payments. It excludes savings accounts and credit cards. For example, a debit card is a form of payment account. 

What is a payment account psd2?

A payment account is an account in which a customer can place funds, withdraw cash, execute and receive payments to and from third parties. It excludes savings accounts and credit cards. 

How do I issue own branded payment accounts?

Once you become authorised or registered as a payment institution, you can then issue your own branded payment accounts. You can then approach the likes of Visa or Mastercard and become their principal member before issuing cards.

What is PSD2?

PSD2, or the Payment Service Directive 2, is an EU Directive which sets requirements for businesses that provide payment services. It applies to banks, building societies, payment institutions, e-money institutions and their customers.

What is the aim of the PSD2 Directive?

PSD aims to promote innovation within the payments sector. Furthermore, it aims to improve protection for consumers and make payments both safer and more secure.

When did PSD2 come into force?

The PSD2 directive came into force on 13 January 2018.

What the FCA or other European regulators wants to see in your payment institution application

The FCA wants to ensure that an applicant demonstrates that they have their mind and management as well as operational setup in the UK. This means establishing a physical base in the UK with a physical office to operate from. Virtual offices are not an adequate type of office. Furthermore, firms must have adequate resources in place. This includes financial resources, i.e. possessing sufficient funds to manage and operate the businesses.

 

Applicant firms must also demonstrate that they have suitable and experienced management and employees to manage the business. Firms must also demonstrate that they adequate IT systems and internal controls to ensure the safety of payments and manage fraud adequately and effectively. The regulator will want to see evidence that the firm conducts itself appropriately. It also wants to ensure that senior management has implemented an appropriate culture, led from the top.

How to prepare a strong API or payment institution application

An applicant demonstrates that they have their mind and management as well as operational setup in the UK. This means establishing a physical base in the UK with local physical presence to operate from.

Furthermore, firms must have adequate resources in place. This includes financial resources, i.e. possessing sufficient funds to manage and operate the businesses. Applicant firms must also demonstrate that they have suitable and experienced management and employees to manage the business. Firms must also demonstrate that they adequate IT systems and internal controls to ensure the safety of payments and manage fraud adequately and effectively.

Firms must ensure that their business plan describes their payment activities and their market plan and execution. Their financial statements must adequately address their lines of income, calculations of initial and ingoing capital requirements and provide financial forecasts for three years. 

Firms must provide policies and procedural documents that clearly demonstrate that they understand their risks. Firms should prepare a risk framework and address how they will mitigate their risks, including operational, security and money laundering risks. 

What is an API licence?

If a business wishes to provide payment services, such as payment accounts, merchant services or money remittance, it must become authorised by the FCA or another EEA regulator as an authorised payment institution. 

Conditions that must be met before applying for an API licence

Firms must ensure that:

 - you a body corporate i.e. a limited company or a partnership

 - you will adequately safeguard your user funds

 - if you are going to provide AIS or PIS you hold adequate indemnity cover

 - your directors and managers are of good repute with appropriate skills to provide the payment services

 - your managers have not been convicted of money laundering, terrorist financial or any other financial crimes

 - your head office and registered offices are in the UK

 - your shareholders are fit and proper

Information to be prepared and submitted when applying for an API licence application

The following information must be included within an authorised payment institution application:​

1.  A programme of operations.

2.  A business plan including a forecast budget calculation for the first three financial years.

3.  Evidence that you hold initial capital.

4.  A description of the measures taken for safeguarding payment service users’ funds.

5.  A description of the governance arrangements and internal control mechanisms, including risk management and accounting procedures.

6.  A description of the procedure for monitoring, handling and following up security incidents and security-related customer complaints, including an incidents reporting mechanism which takes account of the notification obligations.

7.  A description of the process for filing, monitoring, tracking and restricting access to sensitive payment data.

8.  A description of the business continuity arrangements, including a clear identification of the critical operations, effective contingency plans, and a procedure for regular testing and reviewing of the adequacy and efficiency of such plans.

9.  A description of the principles and definitions used by the applicant in collecting statistical data on performance, transactions and fraud.

10.  A security policy.

11.  A money laundering and countering terrorism financing policy.

12.  A description of the structural organisation, including, agents, branches, and outsourcing. 

13.  Details of shareholders and their qualifying holding.

14.  Details of directors and persons who are or will be responsible for the management of the company.

15.  The legal structure of the company. 

16.  The address of the head office of the applicant.

How long does it take to become an authorised payment institution?

Regulators usually take 3 months to make a decision on an application. However, it can take longer than and so it can take 4-5 months, especially if the regulator has further questions on any aspect of the submitted application.

What is SPI registration?

The Financial Conduct Authority, in accordance with Payment Services Regulations, defines a small payment institution as being any person, including a corporate entity, registered as a payment institution and included by the Financial Conduct Authority in the Financial Services Register as a small payment institution. 

What is a small payment institution?

The Financial Conduct Authority, in accordance with Payment Services Regulations, defines a small payment institution as being any person, including a corporate entity, registered as a payment institution and included by the Financial Conduct Authority in the Financial Services Register as a small payment institution. 

What condition must be met under a small payment institution?

The following conditions must be met under a small payment institution:

 - the directors and managers must be of good repute with appropriate skills to provide the payment services

 - your average monthly payment transactions must not exceed €3m in the preceding 12 months

 - your project average monthly payment transactions must not exceed €3m

 - your managers must not have been convicted of money laundering, terrorist financial or any other financial crimes

 - your head office and registered offices must be in the UK

 - your shareholders must be fit and proper

 

What are the differences between an SPI and API?

 - An API licence enables you to provide your payment across all EEA countries through passporting

 - An API will have an initial capital requirement

 - Firms with an API licence must safeguard their users' funds in a segregated account.

 - An SPI registered firm can only provide its payment services in the UK and not across the EEA

 - An SPI registered firm is not subject to an initial capital

 - Safeguarding user funds into a segregated account is optional for SPI registered firms

What is an authorised payment institution?

If a business wishes to provide payment services, such as payment accounts, merchant services or money remittance, it must become authorised by the FCA as an authorised payment institution. 

What is the initial capital requirement under an authorised payment institution?

This depends on the payment service you wish to provide. If you wish to provide payment accounts or merchant services, the initial capital will be €125,000, for money remittance the initial capital amount is €20,000.

What is the initial capital requirement under a small payment institution?

No initial capital is applicable under a small payment institution.

Next Steps

Buckingham Capital Consulting is a leading international consulting firm, specialising in payment services, electronic money, banking and investment services. We are able to advise you on the best course of action and strategy based upon your business plan and financial product or service. We can help you with licencing, compliance, operational setup and related services, including, obtaining banking facilities.

 

Call us today on 02078662512 or 442078662512 if you are calling from abroad. You can send an email to info@buckinghamcapitalconsulting.co.uk to arrange a telephone call or to discuss your requirements and plan. We are also able to arrange calls or conference calls using Skype. Our Skype ID is BCC54321. If you wish, we can arrange a meeting at one of our offices. 

Get in touch

Please provide your details below or alternatively, call us on 0207 866 2512 or email us at info@buckinghamcapitalconsulting.co.uk