PISP License in Europe
In the age of digital transformation, open banking is changing the way banks and other financial institutions build products and services, and consequently significantly improves customer experiences. Europe is at the forefront of this progress, offering financial licenses that ensure unhindered innovation and customer protection across the continent. One of these crucial licenses is a payment initiation service provider (PISP) license, designed to respond to the growing demand for innovative payment solutions and secure and streamlined financial services.
What is a PISP License?
As the name suggests, a payment initiation service provider (PISP) license is a type of financial license that allows a company to initiate payment transactions on behalf of a customer. PISP licensees include such examples as mobile payment apps, money transfer services, online marketplaces, and online loan providers. This license is associated with the EU market and the 2nd Payment Services Directive (PSD2), which aims to regulate and improve payment services within the EU.
As a PISP license holder, you would be able to engage in a variety of financial activities:
- Offer online payment initiation services, and this way allow customers to make purchases and payments on e-commerce websites and mobile apps
- Enable customers to pay their bills, such as utilities, rent, and subscriptions, directly from their bank accounts through secure payment initiation
- Facilitate domestic and cross-border money transfers on behalf of customers
- Provide platforms or services for peer-to-peer payments to allow individuals to send money to each other easily and securely
- Offer subscription-based services that allow customers to automate recurring payments, such as gym memberships, streaming services, and insurance premiums
- Aggregate multiple payment methods and offer a unified interface for customers to initiate payments from various accounts or sources
- Incorporate more additional financial technology services, such as budgeting tools, and financial management to improve customer experience
- Support businesses by offering B2B payment initiation services, and enable companies to pay suppliers and partners efficiently
- Collaborate with e-commerce platforms, retailers, and other businesses to provide frictionless and secure payment solutions for their customers
- Provide payment processing services to businesses, including payment gateway services, to facilitate online and point-of-sale transactions
- Offer currency exchange services 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 offers numerous advantages that can positively impact your business scale, build customer trust, position your company as the leader in the rapidly evolving European fintech environment, and prepare you for global expansion. You’ll be given an opportunity to drive innovation, offer alternative but better payment methods and financial services, and encourage competition in the financial industry.
By holding a European PISP license you can enjoy a variety of advantages:
- Become a reputable licensee under the PSD2 framework for open banking in Europe which promotes innovation and growth in the financial industry by allowing PISPs to leverage established APIs and partner with traditional banks
- Gain access to the Single Euro Payments Area (SEPA), a unified euro payments area that covers 36 European countries which makes it easier and more cost-effective for businesses and consumers to transact within the Eurozone
- Avail of the EU passporting system which will enable you to provide your services throughout the entire EEA under a single license from an EU country
- Since you’ll be able to offer customers the convenience of a seamless and secure payment experience by initiating payments directly from their bank accounts, you can expect increased customer loyalty and satisfaction
- Meet the needs of the price-sensitive European market and further create loyalty by offering more cost-effective payment processing solutions compared to traditional methods, reducing transaction fees for both businesses and consumers
- Gain access to transaction data, subject to customer consent, which will allow you to offer data-driven financial services, including personalized financial advice, budgeting tools, and insights into spending patterns, all of which can be tailored to the specific needs and preferences of EU customers
- Since you’ll be able to provide online merchants and e-commerce platforms with a secure and convenient way to accept payments, you’ll meet the needs of the growing e-commerce market in Europe, and enable your business to grow along with it
- Broaden your customer base by helping small and medium enterprises (SMEs) access more efficient and cost-effective payment solutions
- 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
PISP regulations in Europe are primarily shaped by the PSD2, the aforementioned regulatory framework established by the EU to promote competition, innovation, and security in the payment services industry across the member countries. The EU framework has also been forged by employing such key regulatory pieces as the General Data Protection Regulation (GDPR) and the 1-6th EU Anti-Money Laundering Directives (AMLDs). Overall, by operating under this regulatory framework, you’re demonstrating your company’s capability to hold itself accountable to the highest standards of operations which is the way to attract and retain a large number of European customers and reputable business partners.
The main provisions of the PSD2 which you should take into account:
- It establishes licensing requirements and processes for PISPs in the EU which essentially means you’ll have to obtain a license from one of the EU countries to open a legitimate PISP business
- It stipulates rules for strong customer authentication (SCA) for customer-initiated electronic payment transactions
- It outlines obligations to obtain clear and explicit consent from the customer before initiating any payments or accessing their account information
- It also includes principles for reporting fraudulent transactions and incidents to the relevant authorities and cooperating with banks and law enforcement agencies in fraud prevention and detection
- It obligates banks to provide PISPs with access to their payment systems, APIs, or dedicated interfaces on a non-discriminatory basis, ensuring a level playing field for all service providers
The key relevant provisions of the GDPR:
- PISPs must have a lawful basis for processing personal data (this is often based on the necessity of processing for the performance of a contract or compliance with a legal obligation)
- PISPs should collect and process only the personal data that are necessary for the purposes for which it is being processed
- The regulation grants customers and users various rights, including the right to access, rectify, erase, or port their data, and PISPs must be prepared to facilitate these rights when requested
- 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 establish processes for record-keeping and reporting to appropriate authorities
- It’s also important to note the provisions for internal controls and compliance programs to prevent money laundering and terrorist financing, including regular staff training and timely updates of policies and procedures
While the EU directives and regulations are usually transposed into national legislation of each EU member country, their national frameworks can still differ to some extent and therefore we strongly advise you to consult our experienced team of lawyers who specialize in business formation and financial licensing in Europe. We can analyze your unique business case in the context of the concrete framework or a few of them and offer a realistic plan for obtaining a PISP license in Europe.
Top 3 EU Jurisdictions for PISP License
In Europe, you can find many favorable jurisdictions offering generally supportive environments for fintech businesses. To choose the most suitable one, you should delve into the specific conditions for forming a company, obtaining a PISP license, and finally running a sustainable business. Their suitability will also depend on such factors as your business model, financial resources, target market, and regulatory preferences.
PISP License in Lithuania
Throughout the years, Lithuania has actively taken measures to draw in fintech businesses, including PISPs, by providing a welcoming regulatory environment, partnerships and support opportunities, an appealing taxation framework, and a first-class business infrastructure. The Bank of Lithuania, the regulatory authority of the Lithuanian financial market, is known for its openness to innovation, streamlined licensing processes, and responsiveness to the needs of fintech businesses. For Lithuanian PISP license applicants, the minimum capital requirements are 20,000-125,000 EUR depending on the intended financial activities, and the state fee for the application review is only 898 EUR. If your application is successful, you’ll be granted a PISP license within three months which is extraordinarily efficient.
PISP License in Estonia
Estonia has also gained popularity as a fintech-friendly destination in the EU due to such factors as advanced digital infrastructure and e-government services, a clear and consistent regulatory framework, a competitive corporate tax system, and its famous e-residency program that allows non-residents to establish and manage Estonian companies online. Moreover, Estonia has a growing fintech ecosystem, with numerous support organizations, accelerators, and networking opportunities for fintech entrepreneurs which can meaningfully help you build your PISP business. The required minimum capital starts only from 20,000 EUR but can increase substantially for more complex business activities. The application fee is 3,300 EUR. If your application is successful, you’ll become a PISP license holder within 6-12 months, mainly depending on the quality of your application.
PISP License in the Netherlands
The Netherlands boasts a robust and thriving fintech ecosystem that positions it as a viable choice for PISPs seeking a favorable regulatory environment and access to the European market. Moreover, the country is known for its international trade and commerce and its PISP license can serve as a gateway to the global market. The booming fintech industry is regulated and supported by the Dutch Authority for the Financial Markets (AFM) and De Nederlandsche Bank (DNB) which together strive to promote innovation and ensure transparency, security, and uncompromised compliance. The minimum capital requirement varies depending on the nature and scale of the PISP’s activities but you can generally expect to prepare around 125,000 EUR. Additionally, you’ll have to pay the application fee of 6,800 EUR, and if your application is successful, you’ll be granted a PISP license within 6-9 months which is quite efficient.
Requirements for PISP License Applicants
To apply for a PISP license in one of the European jurisdictions, you’ll most likely have to start with the formation of a local company in the jurisdiction where you’re seeking to obtain a PISP license. Some countries permit only specific legal structures for payment service providers, and you should consult with our lawyers prior to deciding what structure suits your business model and goals best.
The key requirements that your company will have to meet:
- Have a registered office in the chosen jurisdiction
- Possess the required initial capital, and meet other capital adequacy requirements
- Possess the required amount for the application processing fee
- Have a secure and reliable technology infrastructure to facilitate payment initiation and protect customer data, including encryption, secure access controls, and disaster recovery plans
- Have well-defined AML/CFT procedures for customer onboarding and transaction monitoring
- Have robust risk management policies and procedures in place to identify and mitigate operational, financial, and compliance risks
- Have clear data protection and privacy policies, such as GDPR-regulated policies in the EU
- Individuals involved in a PISP applying for a license should ideally 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
As an applicant for a European PISP license, you’ll have to prepare a variety of documents:
- A certificate of company registration
- Articles of Association
- A business plan detailing the nature of your services, target market, financial projections, and other crucial information concerning your business
- Financial statements, including balance sheets, income statements, and cash flow statements
- Company’s policies and procedures for ensuring compliance with AML/CFT regulations
- Documentation explaining the technical and security measures you have in place to protect customer data and transactions, including encryption, access controls, and data security protocols
- A certificate of solvency or a letter from your bank indicating that you have adequate funds to operate as a PISP
- Proof of adequate insurance coverage, such as professional liability insurance, in place
- CVs of your company directors and other key personnel, along with evidence of their financial qualifications and relevant experience
- Copies of passports of your senior management team and shareholders
- Proof of no criminal record of each shareholder, director, and other key members of staff
- Business continuity and disaster recovery plan to ensure uninterrupted PISP operations
- Proof of paid application fees
Meeting all the legal requirements and preparing the required documents demand in-depth knowledge of applicable regulations and legislation of your chosen jurisdiction. None of the above lists are exhaustive, and you should seek personalized guidance to enter a specific jurisdiction. We urge you to speak with our legal team here at Regulated United Europe who can skillfully guide you through the process of satisfying relevant requirements ensuring that you avoid unnecessary errors that might delay the receipt of your PISP license.
How to Apply for a PISP License in a European Country?
Applying for a PISP license involves several general but crucial steps, although the specific application stages and procedures vary from jurisdiction to jurisdiction. Be prepared to submit the most accurate information with the applicable regulations in mind, cooperate with the regulatory authority in order to guarantee the best quality of your application, and avoid any delays or rejections.
To apply for a PISP license, you’ll most likely have to take the following steps:
- Gather, draft and if needed translate the required documentation
- Fill out a formal online application form provided by the regulatory authority
- Pay the required application fee
- Submit the electronic application form along with the documents to the regulatory authority
- Your company’s management team and shareholders will have to undergo a fit and proper assessment, to prove their integrity, competence, and experience in the financial services industry
- You may be requested to provide additional information, clarifications, or modifications to your submitted application
- The authority may conduct an onsite inspection of your operations to assess your compliance and risk management practices
If you wish to obtain a PISP license in Europe, our team here at Regulated United Europe will be delighted to support you in incorporating a company and applying for a license in a European jurisdiction that resonates with your business goals. Our dedicated specialists can also guide you through the acquisition of a ready-made company with an existing PISP license. With experienced lawyers, business development professionals, and financial accountants at your side, you will find the processes of starting a PISP business easy, seamless, and transparent. Contact us now to schedule a personalized consultation and set the stage for long-lasting success.
FREQUENTLY ASKED QUESTIONS
A Payment Initiation Service Provider (PISP) license in Europe is a financial license granted to companies that enables them to initiate payment transactions on behalf of customers. This license falls under the regulatory framework of the 2nd Payment Services Directive (PSD2), designed to enhance competition, innovation, and security in the European payment services industry.
A PISP license holder has the authority to engage in a variety of financial activities, including:
- Offering online payment initiation services for purchases on e-commerce websites and mobile apps;
- Enabling customers to pay bills (utilities, rent, subscriptions) directly from their bank accounts through secure payment initiation;
- Facilitating domestic and cross-border money transfers on behalf of customers;
- Providing platforms for peer-to-peer payments;
- Offering subscription-based services for automated recurring payments;
- Aggregating multiple payment methods and providing a unified interface for customers;
- Incorporating additional financial technology services, such as budgeting tools.
Holding a PISP license in Europe offers several advantages:
- Being a licensee under the PSD2 framework positions the business as an innovative player in the European fintech landscape;
- The license provides access to the Single Euro Payments Area (SEPA), covering 36 European countries, facilitating cost-effective transactions;
- It allows businesses to provide services throughout the European Economic Area (EEA) under a single license from an EU country;
- Offering seamless and secure payment experiences can lead to increased customer loyalty and satisfaction;
- Businesses can offer more cost-effective payment processing solutions compared to traditional methods, in turn reducing transaction fees.
Under the PSD2 framework, a European PISP license provides the following advantages:
- API Integration: leverage established APIs and partner with traditional banks for collaboration;
- Competition Promotion: contribute to the promotion of competition, innovation, and growth in the financial industry;
- Customer Authentication: adhere to rules for strong customer authentication in electronic payment transactions;
- Access to SEPA: gain access to SEPA, enhancing efficiency for businesses and consumers within the Eurozone;
- EU Passporting: utilize the EU passporting system to provide services across the entire EEA.
The EU passporting system is a regulatory mechanism that allows a business holding a financial license in one EU member country to provide its services across the entire European Economic Area (EEA) without needing separate licenses from each EEA country. For PISP license holders, this means the ability to operate seamlessly across multiple European countries under a single license obtained from an EU member state.
What are the advantages of offering seamless and secure payment experiences as a PISP license holder?
Offering seamless and secure payment experiences provides the following advantages:
- Enhanced customer trust by ensuring that payment transactions are secure and reliable;
- Convenient payment experience by initiating payments directly from the users’ bank accounts;
- Competitive edge by providing a superior payment experience;
- Increased customer loyalty and satisfaction.
Holding a PISP license enables businesses to provide more cost-effective payment solutions in Europe through:
- Reduced transaction fees compared to traditional methods;
- Efficiency due to streamlined processes for payment initiation;
- Competitive pricing.
PISP license holders, with customer consent, can offer a range of data-driven financial services, including personalized financial advice, budgeting tools, and insights into spending patterns.
PISPs can comply with GDPR by:
- Ensuring that there is a lawful basis for processing personal data, often based on the necessity of processing for the performance of a contract or compliance with a legal obligation;
- Collecting and processing only the personal data necessary for the specified purposes;
- Respecting customer rights, including the right to access, rectify, erase, or port their data;
- Implementing appropriate technical and organizational measures to protect personal data from breaches and unauthorized access.
The key relevant provisions of AMLDs for PISPs include customer identification, record-keeping and internal controls aimed at preventing money laundering and terrorist financing.
Lithuania offers advantages for PISP license applicants, including:
- A welcoming regulatory environment with streamlined licensing processes;
- Opportunities for partnerships and support, fostering a conducive atmosphere for fintech businesses;
- An appealing taxation framework;
- Efficient approval processes, with PISP licenses typically granted within three months.
Estonia is considered favorable for PISP licenses due to:
- An advanced digital infrastructure and e-government services;
- A clear and consistent regulatory framework;
- A competitive corporate tax system;
- A growing fintech ecosystem with support organizations, accelerators, and networking opportunities.
The Netherlands is attractive for PISP license applicants due to:
- A robust and thriving fintech ecosystem;
- Regulation and support from the Dutch Authority for the Financial Markets (AFM) and De Nederlandsche Bank (DNB);
- Its position as a gateway to the global market;
- Efficient processing, with licenses typically granted within 6-9 months.
Key requirements for PISP license applicants include:
- Having a registered office in the chosen jurisdiction;
- Meeting required initial capital and capital adequacy requirements;
- Possessing the required amount for the application processing fee;
- Having a secure and reliable technology infrastructure for payment initiation and data protection;
- Implementing robust anti-money laundering (AML) and counter-terrorist financing (CFT) procedures;
- Having robust risk management policies to identify and mitigate operational, financial, and compliance risks;
- Having clear data protection and privacy policies that align with GDPR regulations in the EU;
- Individuals involved should have relevant qualifications and experience in the financial or payment services sector.
General steps for applying for a PISP license include company formation, submitting the application form, paying the application fee, conducting the it and proper assessment, an on-site inspection and – if needed – providing additional information.
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