How to apply for the UK Payment Institution license




This article looks at obtaining a Payment Institution license in the UK. If you are planning upon offering payment services such as issuing debit cards, money transfer services or merchant services, you will need to apply with the UK regulator, the Financial Conduct Authority and obtain the payment institution license in the UK.


1. Regulatory framework for UK Payment Institutions

PSD2, or the Payment Service Directive 2, is an EU Directive (Directive 2015/2366) which sets requirements, including for UK payment institutions that provide payment services. It applies to banks, building societies, payment institutions, e-money institutions and their customers.

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.

The PSD2 directive came into force on 13 January 2018.

The following regulations are also applicable for payment institutions:


- Revised Payment Services Directive (PSD2)

- Payment Accounts Directive

- Credit transfers and direct debits in euro (SEPA)

- The Payments in Euro (Credit Transfers and Direct Debits) Regulations 2012

- Data Protection Act 2018

- Guide to the UK General Data Protection Regulation (UK GDPR)

- Proceeds of Crime Act 2002 (POCA)

- Terrorism Act 2000

- Money Laundering, Terrorist Financing and Transfer of Funds 2017

- Regulation on interchange fees for card-based payment transactions (EU) 2015/751

- The Money Laundering and Terrorist Financing Regulations 2019

2. Payment Services for the UK Payment Institution license

By obtaining the Payment Institution license in the UK, a license holder is able to provide the following payment services:

(a) services enabling cash to be placed on a payment account and all of the operations required for operating a payment account;

(b) services enabling cash withdrawals from a payment account and all of the operations required for operating a payment account;

(c) 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—

(i) execution of direct debits, including one-off direct debits;

(ii) execution of payment transactions through a payment card or a similar device;

(iii) execution of credit transfers, including standing orders;

(d) the execution of payment transactions where the funds are covered by a credit line for a payment service user—

(i) execution of direct debits, including one-off direct debits;

(ii) execution of payment transactions through a payment card or a similar device;

(iii) execution of credit transfers, including standing orders;

(e) issuing payment instruments or acquiring payment transactions;

(f) money remittance;

(g) payment initiation services;

(h) account information services.

3. UK Payment Institution payment service examples

A UK Payment Institution is able to offer the following payment services.

1. Payment accounts. Examples of a payment account include debit cards and payment cards. The user is able to place and withdraw cash on such accounts as well as use the account card to make a payment transaction, using the card to buy goods and services. Users are also able to set up direct debits standing orders as well as transferring funds.

2. Merchant services. Holders of the payment institution license are able to provide merchant services. This can include acting as a master merchant and offering merchants the ability to accept card payments.

3. Money remittance. Money remittance or transfer is another service payment institutions are able to offer. This service enables the payment service provider to enable users to make cross border payments, internationally.

​4. Payment initiation services. Under this model, an initiator I.e. as a payment service provider under the payment institution license, subject to the user's consent, is able to initiate payments directly from the user's bank account and transfer the amount directly to the merchant retailer’s bank account, removing the Visa and Mastercard networks from the payment process.

​5. Account information services. Under this permission, subject to the user's consent, a payment service provider is able to provide access to a user’s accounts and enable them to view consolidated account information in one place.

4. How to prepare a strong UK Payment Institution license application

You will need to demonstrate that you have your mind and management as well as operational setup and presence in the European country in which you are applying for the license, such as the UK. This means establishing a physical base, including a physical office.

​Furthermore, you must have adequate resources in place. This includes financial resources, i.e. possessing sufficient funds to manage and operate the business. You will be required to demonstrate that you 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.

You must ensure that their business plan describes your payment activities and market plan and its execution. Your firm’s financial statements must adequately address your business lines of income, calculations of initial and on-going capital requirements and provide financial forecasts for the first three years.

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


5. How long it takes to obtain a UK Payment Institution license

The FCA must make a decision within three months of receiving a complete application. In reality, it takes around 4-5 months for an application to be assessed and completed.



6. Initial capital requirement for the UK Payment Institution license


The following will apply with regards to the initial capital for a payment institution license in the UK.


- Payment accounts i.e. debit cards - €125,000

- Merchant acquiring/payment processing - €125,000

- Money remittance - €20,000



7. Types of UK Payment Institution licenses



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 you with licencing, compliance, operational setup and related services, including, obtaining banking facilities. For more information, visit our website on www.buckinghamcapitalconsulting.com

Call us today on 02078662512 or 442078662512 if you are calling from abroad. Alternatively, please 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.

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