Small Payment Institution (SPI) License
In today’s dynamic world, the financial services market is constantly evolving. As a result, new initiatives are emerging that propose innovative regulatory approaches to improve the functioning of the financial services market. One such initiative is the Small Payment Institution License also known as SPI authorization.
In this article, we will cover:
- What regulates SPIs?
- What is an SPI and what activities are permitted?
- What are the requirements for obtaining an SPI?
- What are the advantages of an SPI?
- What is the best jurisdiction for an SPI?
- How to obtain an SPI?
- Why should you choose www.fintecharbor.com to obtain an SPI?
Regulation of SPI
The regulation of a Small Payment Institution (SPI) includes several levels:
- Main Legal Act (first level):
- The primary legal framework for regulating SPIs across the European Union is Directive (EU) 2015/2366 of the European Parliament and of the Council of 25 November 2015, known as the Payment Services Directive 2 (PSD2). This directive sets out the general conditions and requirements for SPIs operating within the EU.
- Jurisdictional Specifics (second level):
- While PSD2 provides the overarching regulatory framework, the specific conditions and operational details for SPIs can vary depending on the jurisdiction of the Member State. Member States cannot impose regulations that contradict or exceed the scope of PSD2, but they may have additional specific requirements as long as they align with the directive’s terms.
What is SPI License? What are permit activities?
Small Payment Institution means a legal person that:
(1) has been granted authorisation in accordance PSD2 and local requirements by EU Member State;
(2) authorized to provide and execute payment services includes:
- Services enabling cash to be placed on a payment account as well as all the operations required for operating a payment account.
- Services enabling cash withdrawals from a payment account as well as all the operations required for operating a payment account.
- 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:
– execution of direct debits, including one-off direct debits;
– execution of payment transactions through a payment card or a similar device;
– execution of credit transfers, including standing orders. - Execution of payment transactions where the funds are covered by a credit line for a payment service user:
– execution of direct debits, including one-off direct debits;
– execution of payment transactions through a payment card or a similar device;
– execution of credit transfers, including standing orders. - Issuing of payment instruments and/or acquiring of payment transactions.
- Money remittance;
(3) and its services do not exceed a limit of EUR 3 million the monthly average of the total value of payment transactions executed over the preceding 12 months.
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Which requirements for SPI?
As mentioned above, PSD2 establishes the general conditions and requirements for an SPI license. While some requirements are defined broadly, specific regulations may not be detailed. However, some of these requirements are recognized as follows:
- No Initial Capital Requirement: an SPI does not require initial capital;
- Absence of criminal convictions: none of the natural persons responsible for the management or operation of the business has been convicted of offences relating to money laundering or terrorist financing or other financial crimes;
- Location Requirements: authorized entity shall be required to have its head office or place of residence in the Member State in which it actually carries out its business
- Transaction Limits: the SPI’s monthly average of the total value of payment transactions executed over the preceding 12 months must not exceed EUR 3 million.
- Local employees: PSD2 does not specify particular requirements for employees in SPIs; this authority belongs to the regulators in each individual country.
- Other provisions: The business plan, risk management procedures, anti-money laundering procedures, and operational procedures are critical components for SPIs, with requirements that vary depending on the regulator.
What are the advantages of an SPI? What is the best jurisdiction for an SPI?
Our legal experts have conducted numerous assessments to determine the most optimal jurisdiction for operating a small payment institution. According to our evaluations, the best among them are Poland, Lithuania, and the Czech Republic. The relative simplicity and cost-effectiveness of authorization, the wide range of possible activities, client acquisition through the ‘reverse solicitation’ procedure, and the ease of doing business are significant advantages compared to other competitive jurisdictions. Using Poland as an example, we propose to examine what an SPI License practically entails:
1) Wide range of activities (Articles 117f 3nd 74.3 of The Polish Act on Payment Services), includes:
- Provision of payment services.
- Services enabling cash placement on a payment account (storing user funds)
- Services enabling cash withdrawals from a payment account (cash withdrawals)
- Execution of payment transactions
- Issuing payment instruments (mobile apps, payment cards)
- Money remittance.
- Acquiring (provision of the ability to use payment cards, BLIK and mobile apps)
- Other commercial activities that do not require a license (such as IT, software development, etc.)
2) According to Article 117h.1 of the Polish Act on Payment Services, as well as the guidelines of the Financial Supervisory Commission (KNF), the requirements for an SPI applicant are:
- Presence of a Compliance Officer from any jurisdiction (Article 2.1 (3) of the Polish AML Act).
- Program of activities for the first 12 months of operation.
- Financial plan for the first 12 months of operation.
- Business plan for the first 12 months of operation.
- Description of activities other than payment services, including their nature.
- Procedures regarding risk management.
- Internal AML procedure.
- Description of organizational solutions allowing to calculate the total monthly amount of conducted payment services.
- Description of how to protect funds received from users (Article 117 o).
- Procedures for monitoring safety incidents, handling client complaints, rules for managing client funds, informing users about payment services, confirming the current address, providing services exclusively in Poland.
- Information about SPI’s agents (Article 85.1).
3) Easy procedure for obtaining Polish SPI License:
Stage | Duration | Description |
Stage 1: Initial Setup | 1 – 2 Weeks | PEEL and ePUAP Activation: Activation of PEEL and ePUAP accounts, which will require two visits to the embassy by the director. |
Stage 2: Company Incorporation | 1 Week | Company Incorporation Process: Formation of the company, including registration and obtaining necessary corporate documentation. |
Stage 3: Application Submission | 2.5 Months | Submission of a full application to the regulator and preparation of all required AML policies and other documents. Examination and receipt of a formal response from the regulator. |
Stage 4: Authorization Process | 3 – 5 Months | Rounds of communication with the regulator, provision of additional documents Obtaining a Polish SPI authorization |
Why should you choose www.fintecharbor.com to obtain an SPI?
Our extensive experience in obtaining SPI licenses enables us to deliver results quickly, efficiently, and with guaranteed outcomes. Each project is unique and requires a tailored approach, which is why we uphold the highest standards at every stage of the licensing process. Our goal is to ensure that each project achieves the desired result with precision and reliability.
Our motto, “Quality in Everything We Do,” is a steadfast mantra that guides every project we undertake. We are committed to providing exceptional quality and meticulous attention to detail in all aspects of our work.
We ensure the complete achievement of desired results by providing all necessary services to ensure the business reliably fulfills its functions, including:
- Communication with authorities.
- Supporting clients in the process of the company’s setup.
- Registration fee.
- Mailing Address (12 months)
- Preparation of all documents required for company registration.
- Preparation of all documents specified in the “Requirements for the applicant”
- Support in obtaining a Polish Hybrid Small Payment Institution.
