There are two paths people can take. They can either play now and pay later, or pay now and play later.

Navigating the process to become an authorised payment institution (API) or a small payment institution (SPI) with the FCA can be incredibly confusing and complex. Alumni Compliance, with its team of former FCA personnel, provides expert guidance to ensure your application meets all regulatory requirements. Here’s a detailed guide to help you through the FCA authorisation process. 

To be authorised as an API, your business must meet specific conditions:

Your business needs to hold adequate initial capital and be structured as a body corporate, such as a limited company or partnership, with both a head office and registered office in the UK. It is essential to conduct some of your payment services business in the UK and implementing robust governance arrangements, internal controls, and risk management procedures is mandatory. Additionally, you must ensure that anyone with a qualifying holding in your business is fit and proper. Directors and managers of the business must be of good repute and have the appropriate knowledge, skills and overall capability. 

A high-quality and comprehensive Regulatory Business Plan (RBP) to furnish to the FCA as part of your authorisation application is crucial, alongside adequate measures to demonstrate that your firm has the ability safeguard payment service users' funds. If your firm provides account information services (AIS) or payment initiation services (PIS), adequate indemnity cover is required.

Finally, compliance with UK money laundering regulations (MLRs) is mandatory, and foreign laws must not hinder the FCA’s effective supervision of your business if there are close links to another entity.

For registration as an SPI, specific conditions also apply:

Your business must not exceed average monthly payment transactions of €3 million over the preceding 12 months. If your firm has been providing payment services for less than 12 months or hasn’t started yet, projected average monthly transactions must not exceed €3 million.

Your must have a head office, registered office, or place of residence in the UK, and again, you must ensure that anyone with a qualifying holding is fit and proper, i.e., directors and managers must be of good repute with appropriate skills. 

Compliance with MLRs is also required, and the FCA’s effective supervision of your SPI must not be impeded by close links to another person or entity.

API Applicants

For API applicants, your application must include detailed information about your payment services business. This includes a programme of operations and a business plan, alongside financial information. You must provide details of the individuals responsible for payment services and the management of your firm, registering each individual. Information about anyone with a qualifying holding, control mechanisms to meet MLR obligations, initial capital, and ongoing capital requirements must be included. 

Additionally, include measures to safeguard payment service users' funds, governance arrangements, internal controls, risk management procedures, and a wind-down plan. Procedures for incident reporting, managing sensitive payment data, business continuity arrangements, principles and definitions for statistical data collection, and security policies must also be detailed. 

If applicable, you should also provide to the FCA your MLR registration details with HMRC, professional indemnity insurance information for AIS and/or PIS, outsourcing arrangements, and agent and branch management plans.

SPI Applicants

For SPI applicants, the required information is similar but typically less extensive. Include details about your payment services business, such as a programme of operations and financial information. Information about individuals responsible for payment services and the management of your firm is necessary, as is data on anyone with a qualifying holding.

Include control mechanisms for MLR compliance, procedures for incident reporting and managing sensitive data, principles and definitions for statistical data, and security policies.  Again, if applicable, you should also provide to the FCA your MLR registration details with HMRC and any outsourcing arrangements. You must also explain to the FCA how you intend to use agents and branches, ensuring appropriate checks and controls are in place with regards to effective governance and oversight.

You must register all members of your management board and management staff responsible for regulated activities. You should notify the FCA in advance of any changes in the individuals responsible for your firm's regulated services by completing the appropriate form on the FCA Connect system for each person or firm with a qualifying holding, which represents 10% or more of the capital or voting rights, or less than 10% but with significant influence.

Once authorised, firms must register any agents who will provide payment services on your behalf via the FCA Connect system. Effective oversight of these registered agents is essential, and you must ensure you have appropriate systems and controls in place to do this. If you initially indicate that you do not intend to use agents, you may need to agree to a voluntary requirement not to appoint agents once authorised. There would be an option for you to apply to remove this requirement if you later decide to use agents. 

Ensure that you assess the fitness and propriety of the directors and management of your agents and maintain appropriate systems and controls to oversee them effectively. Finally, notification to the FCA of any changes in agent details or if you cease dealing with an agent should be delivered in a timely manner.

For tailored support and guidance throughout the FCA authorisation process, contact us at Alumni Compliance. Our team of former FCA personnel – which includes FCA Payment Services Authorisation Case Officers - offers expert advice to ensure your application meets all regulatory requirements. 

Our former FCA Payments Authorisation staff possess, deep technical knowledge of all the relevant and applicable UK and EU legislation regarding payment services regulatory laws and regulations and can help your business navigate the complexities of the FCA registration process for payment firms as they know the inner workings how the FCA’s Payment Services Authorisation department.

If you are already authorised by the Financial Conduct Authority, we provide additional compliance solutions and services that can support your business, whether on an ongoing or ad-hoc basis. See what else Alumni Compliance can do for your including creating, reviewing, and assessing payment Services policies.

Financial Conduct Authority are consulting on proposed rules to enhance the safeguarding regime and ensure consumer funds remain safe. The proposed new framework will strengthen compliance with current regulations (EMRs/PSRs) and introduce a 'CASS-style' regime for greater protection, including:

• Minimising shortfalls in safeguarded funds
• Speeding up the return of funds
• Enabling swift intervention for non-compliant firms

The proposed rules impact payment institutions, e-money institutions, credit unions, and others across the financial sector. The FCA are encouraging feedback from all relevant stakeholders with the consultation open until 17 December 2024. 

You can visit the FCA's website to learn more about the CP24/20 Consultation Paper or visit our blog.