How to obtain payment system license in the UK?
One of the jurisdictions for obtaining a payment system license is the United Kingdom. The kingdom grants different licenses depending on what kind of activity you are carrying out. At the same time, the British regulator checks the documents submitted by the applicant very carefully and requires a detailed description of all the processes. You can read about what the requirements are for a payment system in the UK and how to get a license in this article.
- Types of payment system licenses in the UK
- Requirements for obtaining a UK payment system license
- The procedure for obtaining a payment system license in the UK
Types of payment system licenses in the UK
Before obtaining a payment system license, it is necessary to understand what type of activity your company carries out. UK regulation distinguishes the following types:
- Payment institutions:
- Electronic money issuer:
Limited licenses for UK payment systems
A payment institution with a limited license has some restrictions. Their volume of transactions should not exceed 3 million euros per month. They cannot initiate payments or provide advisory services. However, their registration is simpler and faster.
An electronic money issuer with a limited license can obtain such a license if the volume of electronic money does not exceed 5 million euros.
Requirements for obtaining a payment system license in the UK
Obtaining a license is only possible if certain requirements are met, some of which are related to the features of payment systems.
- Authorized capital:
- 350,000 € for the issuer of electronic money
- 20,000 € for the systems that transfer money
- 50,000 € for the systems that initiate money transfers
- 125,000 € for the systems that perform all other activities
- A payment system shall be obliged to take measures to protect its users' funds. For this purpose, it is necessary to adopt an investment policy, to keep company and user funds on different accounts.
- Also, the payment system must develop procedures to prevent fraud, both against the system and against specific users. In the UK, as in other jurisdictions, there is AML/CTF regulation, so it is worth creating a payment system in accordance with these requirements. You can read more about this aspect in our other article.
- Protection of personal data. In any case, a payment system will receive information about its users. The legislation provides for strict rules for the processing of these data. Therefore, a fintech project must create a system that meets these requirements, as well as provide for internal regulation in the form of a Privacy Policy.
The procedure for obtaining a license of a payment system in Great Britain
In order to obtain the relevant license, it is necessary to submit documents to the local regulator. It is the Financial Conduct Authority (FCA). By submitting the documents the applicant confirms that he corresponds to all the requirements, imposed on the payment system. These documents include
- An operational plan, which includes a step-by-step description of the payment system, contracts with users, as well as other important aspects of the system's operation;
- Business plan, which includes
- Marketing plan (description of potential users)
- Description of the market
- Financial plan for the next three years
- Information about the company's own funds
- Structure of the fintech project, in particular
- Potential number of employees during three years
- Company executive bodies
- Presence of branches
- List of affiliated persons
- Documents, confirming the availability of the authorized capital
- Information about the directors and beneficiaries. This point is worth special attention since the documents contain information on the reputation and education of the directors, work experience, absence of bringing them to responsibility by the public-legal authorities.
- Certificates confirming professional liability insurance
- And other necessary information:
- Name and documents confirming the company's status
- Applicant’s office address and website
- Person in charge of the application who can be contacted by FCA
- Availability of other licenses, if there are any
Licensing fees for payment systems in the UK
The amount of license fees in the UK depends on many factors. There are two types of license fees:
- On application. The amount of this fee depends on the number of activities listed on the application and shall be at least ?1,500.
- Annual. The amount of this fee depends on the specific activities of the payment system, as well as the volume of your system's transactions. A complex formula is used for the calculation, the amount of which depends on various parameters.
Thus, obtaining a payment system license in the UK is preceded by a long process of paperwork. The FCA has detailed requirements for all documents, with legal as well as technical aspects. These requirements are designed to reduce the risks associated with payment systems. If you still have questions about UK payment system license or need help with obtaining a license, contact the lawyers of A4 Law Firm.
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