Payment institution licence and payment services routes
A Payment Institution (PI) authorisation permits execution of payment transactions, money remittance, and payment initiation services. It is distinct from an e-money licence and does not authorise deposit-taking or issuance of stored-value instruments.
What a PI authorisation covers
A PI licence issued under PSD2 (or an equivalent national framework outside the EEA) authorises a specific set of payment services. The scope is set at the time of authorisation and does not expand automatically.
- Execution of credit transfers, direct debits, and payment transactions through a payment account.
- Money remittance — receiving funds from a payer and transmitting the equivalent amount to a payee.
- Payment initiation services (PIS) — initiating a transaction from the user's account at another PSP.
- Account information services (AIS) — aggregating account data from one or more ASPSPs.
- Acquiring payment transactions, including through a payment card scheme.
- Issuing payment instruments (cards, tokens) where these are tied to a payment account, not a stored-value pool.
A PI is not permitted to issue e-money, hold deposits, or offer credit beyond transaction-linked overdraft. If your model involves storing value that can be redeemed as cash, you require an EMI authorisation.
Scope boundaries — read before proceeding
The following are firm regulatory boundaries that apply to all PI authorisations. Misclassifying your activity may result in operating without the required licence.
- PI does not authorise the issuance of e-money. A payment account under PSD2 is not an e-money account.
- PI does not authorise deposit-taking. PI clients' funds must be safeguarded, not held as deposits.
- PI does not confer banking privileges. A PI cannot describe itself as a bank or offer banking products.
- Passporting requires formal notification via the home-state NCA — it is not automatic upon authorisation.
PI vs EMI vs Banking — decision matrix
Use this matrix to determine which authorisation route matches your business model before beginning the application process.
| Criteria | PIPayment Institution | EMIE-Money Institution | BankCredit Institution |
|---|---|---|---|
| Execute credit transfers | |||
| Issue e-money / stored value | |||
| Accept deposits | |||
| Money remittance | |||
| Payment initiation (PIS) | |||
| Account information (AIS) | |||
| Issue payment cards | |||
| EEA passport under PSD2 | |||
| Minimum own funds | €20k–€125k | €350k | €5m+ |
| Safeguarding obligation |
Is a PI licence right for your project?
PI authorisation suits a narrow but well-defined category of payment service providers. Assess your model against both columns before committing to an application.
Best for
- Payment processors facilitating card-not-present transactions for merchants.
- Remittance operators sending cross-border transfers on behalf of consumers or SMEs.
- Open banking aggregators offering payment initiation or account information services.
- Corporate treasury platforms executing payment instructions without holding balances.
- Payroll and payables platforms that move funds but do not store them.
Not for
- Businesses issuing prepaid cards or wallets that hold a redeemable balance — those require EMI.
- Lenders offering consumer credit — credit institutions or lending-specific authorisations apply.
- Deposit-taking businesses of any kind.
- Businesses that want to call themselves a 'bank' or offer banking-brand products.
- Crypto-asset service providers — VASP or MiCA authorisation applies instead.
Safeguarding & agent-distributor obligations
PIs operating in the EEA must safeguard client funds received in the course of providing payment services. Two methods are available; the chosen method must be documented in the PI's internal policy and disclosed to the NCA.
Client funds are placed in a designated account at a credit institution or invested in secure, liquid, low-risk assets. Funds must not be co-mingled with own funds.
Client funds are covered by an insurance policy or comparable guarantee from an authorised insurer or credit institution for at least the equivalent amount.
A PI may distribute payment services through agents or distributors. Agents must be registered with the home-state NCA and are included in the PI's EEA-wide passport.
The PI must reconcile safeguarded amounts daily and maintain records demonstrating that safeguarding requirements are met at all times.
Safeguarded funds are ring-fenced from the PI's estate in insolvency. This is the primary consumer-protection purpose of the safeguarding requirement.
Safeguarding requirements apply from day one of authorisation. Regulators may request evidence of segregation at any time during the supervision cycle.
Agent and distributor model
PIs may distribute payment services through third parties (agents) without requiring those parties to hold their own authorisation. The PI remains fully responsible for the agent's conduct and must register each agent with the home-state NCA.
How the model works
- 1
Appoint an agent or distributor
The PI enters a written contract with a third party that will distribute payment services (e.g., remittance points, payment terminals) on its behalf. The agent acts under the PI's authorisation — not independently.
- 2
Register with the home-state NCA
The PI notifies the home-state National Competent Authority (NCA) of the agent, providing the required identification and fit-and-proper information. Registration must be complete before the agent commences activities.
- 3
Agent included in EEA passport
Once registered, the agent is automatically included in the PI's EEA-wide passport. The agent may operate in any member state covered by the PI's passport notification without separate authorisation.
- 4
Ongoing oversight and compliance
The PI must monitor agent activity continuously, apply AML and safeguarding controls to the agent's operations, and ensure the agent remains fit and proper. The PI is liable for any regulatory breach by the agent.
PI obligations toward agents
- Maintain a current register of all agents and distributors.
- Apply equivalent AML and KYC controls to agent-originated transactions.
- Ensure agents are trained on the PI's safeguarding and compliance policies.
- Notify the NCA within required timescales of any material change to agent status.
- Terminate agent arrangements that present unacceptable compliance or reputational risk.
- Include agent activity in the PI's regulatory reporting submissions.
The PI bears full regulatory liability for its agents' conduct. Regulators may take enforcement action against the PI — including licence revocation — for systematic failures by its agent network.
Related authorisation routes
If your model does not fit the PI scope, one of the following routes may apply.
Issuers of prepaid cards, digital wallets, and stored-value instruments that can be redeemed as cash.
EMI requires higher minimum own funds (€350k) and a more complex application.
Businesses that need to accept deposits, offer overdrafts, or operate as a full-service bank.
Capital requirements typically start at €5m and supervisory timelines are 12–24 months.
Remittance operators targeting jurisdictions outside the EEA where PSD2 does not apply.
Frequently asked questions
A PI may hold client funds received in the course of a payment transaction for up to the end of the following business day. Funds held beyond this period must be safeguarded under the applicable method. PIs do not hold deposits.
No. Crypto-asset services are regulated separately under MiCA in the EU or equivalent national frameworks. A PI authorisation does not permit the execution of crypto-asset transactions or the custody of digital assets.
Yes, subject to formal notification to the home-state NCA and, in some cases, the host-state NCA. The passport does not take effect automatically upon authorisation — the notification process must be completed for each additional member state.
Small Payment Institutions (Small PIs) operate under a lighter-touch regime with lower capital requirements but cannot passport and face volume limits. Full authorisation is required for cross-border or high-volume operations.
Lithuania, Ireland, the Netherlands, and Malta are frequently selected for EEA PI authorisations due to regulatory predictability and processing timelines. The right jurisdiction depends on target markets, substance requirements, and banking access — a specialist assessment is recommended.
These answers are informational only. Regulatory requirements vary by jurisdiction and change over time. Consult a licenced adviser before making application decisions.