Outsourcing Requirements for Payment & E-money Electronic Money Institutions


This article assesses the regulatory requirements and recommendations for payment institutions and electronic money institutions in terms of their outsourcing arrangements. It looks at how such firms looking to enter into outsourcing arrangements should supervise, arrange and manage their arrangements with such arrangements.

Directive 2013/36/EU – Capital Requirements Directive provides the requirements for firms with regards to their governance arrangements. Outsourcing is one of the aspects of falling under governance arrangements.

We look at which arrangements with third parties should be considered as outsourcing and assess the criteria for identifying critical or important functions, as such functions have stricter requirements with regards to their outsourcing.

Definitions of key terms

First, let's look at the definitions of some of the key terms.

Outsourcing is an arrangement between a firm and a service provider for the performance of a process, service, or activity that would otherwise be undertaken by the firm themselves. A function can be a process, service or activity. A critical or important function is a function considered as critical or important to the operation of the firm. A service provider is a third party providing the outsourced functions, service, or arrangement.

Assessing critical or important functions

In order to assess whether a function is deemed critical or important, firms are required to pay particular attention to:

a. where a defect or failure in its performance would materially impair:

i. compliance with the firm’s regulatory licence conditions and obligations under Directive 2013/36/EU, Regulation (EU) No 57/2013, Directive 2014/65/EU, Directive (EU)