PISP License in Europe

Open banking, in the era of digital transformation, remolds the way banks and other financial institutions build their product and service offerings to improve the customer experience by leaps and bounds. Europe leads the way in this progress, offering financial licenses that guarantee unhindered innovation and protection for customers throughout the continent. Of these necessary licenses, one will be the PISP license, as it will be set up to meet emerging demand both for novel payment solutions and secure, fluent financial services.

What is a PISP License?

The Payment Initiation Service Provider, or PISP license, is a financial license allowing any company to initiate payment transactions on behalf of a customer, as the name suggests. Examples of PISP licensees include mobile phone payment apps, money transfer services, online marketplaces, and online loan providers. The license is associated with the EU market and so-called 2nd Payment Services Directive, or PSD2, targeting EU regulations and improvements within the realm of payment services.

With a PISP license, you could conduct various activities in the field of finance, such as online payment initiation service provision and thus enable customers to make purchases and to pay on e-commerce websites and mobile applications;

• Enable customers to pay their bills, like utilities, rent, and subscriptions, directly from bank accounts with secure payment initiation.
• Enable domestic and cross-border money transfers on behalf of the customers
• Provision of platforms or services for peer-to-peer payments that enable individuals to transfer cash to other people easily and securely
• Subscription-based services that allow customers to automate recurring payments for services such as gym membership and streaming services, insurance premium payments
• Aggregating a multitude of payment methods and providing a unified interface through which the customer can initiate a payment from diverse accounts or sources
• Integrate more value-added financial technology services, such as budgeting and financial management, in pursuit of higher customer experience
• Provide initiation services for B2B payments, letting companies efficiently pay their suppliers and partners alike
• Partner with various e-commerce platforms, retailers, and other merchants to offer the customer frictionless and secure ways of paying
• Business payment processing: sell a suite of payment gateway services, enabling online and point-of-sale transactions
• Currency Exchange: the possibility of offering currency exchange for cross-border transactions, allowing customers to pay in the currency of their choice

Advantages of holding a PISP license in Europe

Holding a PISP license in one of the EU member countries has quite a good number of advantages that can positively affect your business scaling, building of customer trust, positioning of your company as a leader in this rapidly changing European fintech environment, and preparing it for going international. You will be given an opportunity to drive innovation, offer alternative but better payment methods and financial services, and encourage competition in the financial industry.

With a European PISP license, you will be entitled to the following advantages, among others:

• Be one of the licensed players in the PSD2 open banking regime in Europe, which is promoting innovation and fast-tracking growth in the financial sector by allowing PISPs to leverage existing infrastructure in the form of APIs and collaborative arrangements with incumbent banks
• Tap into the Single Euro Payments Area, a single euro payments area encompassing 36 European countries that would ease and make more economical various transactions for both enterprises and consumers within the Eurozone. It saves time and money, and has expanded to over 36 European countries
• Get a passporting system from the EU, enabling you to operate your services across the whole EEA on the basis of a single license obtained from any EU country
• Customer loyalty and satisfaction will increase, as you can offer customers the convenience and security of a truly frictionless payment experience that will be initiated directly from their bank account
• Offer more cost-effective solutions for the price-conscious European market in payment processing than traditional means of payments to further drive loyalty by reducing transaction fees for both businesses and consumers
• Access transaction data-if agreed upon by the customer-that will allow you to offer data-driven financial services: personalized advice on finances, budgeting tools, and spending insights that you can tailor to specific needs and preferences of EU customers
• By offering e-merchants and e-commerce sites a convenient and secure way of accepting your payment, you shall be fulfilling a growing need in the e-commerce market in Europe today, allowing your business to scale up the growth of that very market
• You can also extend your customer base by allowing SMEs to access more effective and efficient expenditure methods concerning payments
• With access to customer transaction data, you can also explore cross-selling opportunities, offering related financial products and services that can be a valuable revenue stream for you

PISP Regulations in Europe

The current PISP regime in Europe has mainly been dictated by the PSD2, or the Payment Services Directive set out by the EU to introduce more competition, innovation, and security into the sector of payment services in member countries. The EU framework has also been forged by using such key regulatory pieces as the General Data Protection Regulation and the 1-6th EU Anti-Money Laundering Directives. Overall, by operating under this regulatory framework, you’re showing your company is capable of holding itself accountable to the highest standard of operations, and that’s one surefire way to win and retain a large number of European customers and reputable business partners alike.

The main provisions of the PSD2 that you should consider are as follows:

• It introduces licensing requirements and procedures for PISPs in the EU-meaning, basically, you will need to obtain a license from one of the EU countries to open a legitimate business in the frame of PISP
• It introduces rules on strong customer authentication (SCA) for customer-initiated electronic payment transactions
• It outlines the responsibilities that concern obtaining the customer’s express and explicit consent prior to any account debit and access to account information
• Also included herein are guiding principles on the reporting of fraudulent transactions and cases to appropriate authorities and cooperation with banks and law enforcement agencies in the prevention and detection of fraud
• It compels banks to provide access to their payment systems, APIs, or dedicated interfaces to PISPs on a non-discriminatory basis, offering equal opportunities for all service providers

Strong GDPR relevant provisions are:

• PISPs should have a lawful basis for processing personal data. Often, this is based on the necessity of the processing for the performance of a contract or compliance with a legal obligation
• PISPs should not collect and process personal data beyond what is necessary for the purposes for which it is being processed. The underlying regulation provides customers and users with a number of rights, including the right to access, rectify, erase, or port data, and PISPs should be prepared to comply with such requests when these rights are invoked
• PISPs are obligated to implement appropriate technical and organizational measures to protect personal data from breaches and unauthorized access, including encryption, access controls, and regular security assessments

The key relevant provisions of the AMLDs:

• The directives provide rules for customer identification, and PISPs are obligated to implement robust customer due diligence (CDD) and know-your-customer (KYC) measures to verify the identity of their customers
• The directives also lay down procedures regarding record-keeping and reporting to competent authorities
• Other important aspects are the provisions regarding internal controls and compliance programs against money laundering and financing of terrorism, including training of the staff on a regular basis and updating the policy and procedures on time

Although the EU directives and regulations are usually transposed into national legislation in each country being an EU member, their national frameworks can be from time to time different; therefore, we strongly advise you to consult our experienced team of lawyers who specialize in business formation and financial licensing in Europe. We will be happy to go over your specific business case in the context of the concrete framework or a few of them and suggest a workable plan for getting a PISP license in Europe.

Top 3 EU Jurisdictions for PISP License

You could find quite a lot of favorable jurisdictions in Europe offering generally supportive environments for fintech businesses. You should look into the particular conditions in all of them in respect of company formation, followed by obtaining a license of PISP and finally running a sustainable business. The suitability will be depending on your business model, financial resources, target market, and regulatory preferences, too.

PISP License in Lithuania

During the years, Lithuania has been taking active steps towards attracting the interest of fintech companies, PISPs included, by offering a friendly regulatory environment, partnership and support opportunities, an attractive taxation regime, and top-notch business infrastructure. The Bank of Lithuania is the Lithuanian financial market regulatory authority, famous for its openness to innovation, smooth licensing procedures, and meeting the needs of the fintech business. For applicants of the Lithuanian PISP license, the minimum capital required ranges from 20,000 to 125,000 EUR depending on the type of financial activity, while the state fee for the review of the application amounts to only 898 EUR. In the event of a successful application, one can obtain a PISP license in less than three months, which is very efficient.

PISP License in Estonia

It goes on to state that such factors as its far-reaching digital infrastructure, e-government services, a clear and consistent regulatory environment, competitive corporate taxation, and, of course, its renowned e-residency program allowing non-residents to establish and manage Estonian companies remotely, have made Estonia one of the EU’s hotspots for fintech also. Besides, there is an Estonian growing FinTech ecosystem with several support organizations, accelerators, and networking opportunities for FinTech entrepreneurs that can significantly help you in developing your business as a PISP. Minimum required capital: starting from only 20,000 EUR, yet may be radically higher in the case of more sophisticated business activity. Application Fee is 3,300 EUR. In the case of a successful application, you will become a PISP license holder in 6-12 months, which greatly depends on the quality of your application.

PISP License in the Netherlands

The Netherlands have a strong and vibrant fintech scene, making it a good alternative for PISPs in search of a friendly regulatory regime with easy access to the European market. The country is famous for its international trade and commerce, too, and the PISP license can serve as some kind of ‘gateway’ to the global market. The fully ‘blossoming’ FinTech industry is overseen and underpinned by the Dutch Authority for the Financial Markets- AFM and De Nederlandsche Bank-DNB, two organizations that develop and endeavor for a more innovative business environment with total transparency, safety, and uncompromised compliance. The minimum capital requirement will vary according to the nature and scale of the PISP’s activities, but generally, you may expect to prepare something around 125,000 EUR. Moreover, you have to pay the application fee, which is 6,800 EUR, and in case of a successful application, you can be granted a license for PISP within 6-9 months, which is quite good.

Requirements for PISP License Applicants

Basically, to apply for a PISP license in one of the European jurisdictions, you will probably be starting with the incorporation of a local company in the jurisdiction where you will seek a PISP license. Some countries allow only certain legal forms of entities to become payment service providers, so you are encouraged to consult our lawyers before determining what structure best fits your business model and goals.

The key requirements your company will need to satisfy:

• It should be registered and have an office in that jurisdiction.
• It needs to have the minimum own funds/initial capital, satisfying other conditions that are presupposed by the capital adequacy requirement.
• Application processing fee: It has to have the amount required for the processing fee of an application.
• It should have technology that is robust, enabling the process of payment initiation and keeping customer data safe: encryption, secure access controls, and disaster recovery.
• Clearly articulate AML/CFT procedures regarding customer onboarding and monitoring of transactions.
• Have adequate risk management policies and procedures to identify and mitigate operational, financial, and compliance risks.
• To clearly have in place data protection/privacy policies under relevant jurisdiction, such as GDPR-regulated policies in the EU.
• Individuals involved with a PISP applying for licensure should preferably have relevant industry qualifications and experience in the financial or payment services sector, including demonstrable risk management experience, and a strong educational background in finance, economics, or other relevant fields.
• Business Plan: A description of the nature of your services, target market, financial projections, and any other necessary information about your business.
• Financial Statements: Balance Sheets, Income Statements, and Cash Flow Statements are some of them.
• The policies and procedures of the company concerning compliance with AML/CFT.
• Documentation of technical and security measures you have in place to safeguard customer data and transactions, including encryption, controls around access, and data security protocols.
• A Certificate of Solvency or a letter from your bank stating that you have enough funds to operate as a PISP.
• Proof that you have adequate insurance in force, including professional liability insurance.
• CVs of your company directors and other key personnel along with supporting evidence for their financial qualifications and relevant experience.
• Copies of passports of your senior management team and your shareholders.
• Proof of no criminal record for every shareholder, director, and other key members of staff.
• Business continuity and disaster recovery plan that would ensure the continuation of PISP’s operations without interruptions.
• Proof of application fees paid.

Therefore, following all the legal requirements and preparing the due documentation require profound knowledge of the applicable regulations and legislation of your selected jurisdiction. None of the above lists is an exhaustive list, and you should consult personalized guidance to enter a specific jurisdiction. We invite you to reach out for an advice from our legal team here at Regulated United Europe, who can skillfully guide you through the process of satisfying the relevant requirements in a way that you avoid unnecessary errors that might delay receipt of your PISP license.

How to Apply for a PISP License in a European Country?

The application process for a PISP license takes several general but important steps. The difference is that specific stages and procedures of the application process vary country by country. Be prepared to submit the most accurate information with the applicable regulations in mind, cooperate with the regulatory authority for the best quality of the application against any delays or rejections.

To apply for the PISP license, it is expected that you would want to carry out these steps:

• Draft and translate, if necessary, the required paperwork;
• Fill out an official online application form via the regulatory body;
• Pay the applicable fee for the application;
• Submit electronic application form with documents to the regulatory authority;
• Your company’s management team and shareholders will be required to go through the fit and proper test with the view to show their integrity, competence, and experience in the financial service industry;
• You might be asked for more information, clarification, or changes in the application you submit.
• On-site inspection of the applicant’s operation by the authority may be arranged to evaluate compliance and risk management practices of the Applicant.

If you want to obtain a PISP license in Europe, our team here at Regulated United Europe will be pleased to assist you with establishing your company and applying for a license in a European jurisdiction that fits your business goals. Our seasoned experts can also assist you with buying a ready company already holding a obtained PISP license. Having practiced lawyers, business development professionals, and financial accountants by your side, all the processes of starting a PISP business can be found quite smooth, seamless, and transparent. Please do not hesitate to reach out to us today for a custom consultation and set the stage to win for life.

Also, lawyers from Regulated United Europe provide legal services for obtaining a crypto license in Europe.