UK Licences

In the UK, the financial services industry is regulated by two bodies: the Financial Conduct Authority (‘FCA’) and the Prudential Regulation Authority (‘PRA’).

The FCA acts as watchdog for the conduct of all regulated firms from smallest SMEs to larger institutions, whereas the PRA is responsible for prudential matters ensuring financial stability of the larger organisations. Some firms are dual regulated by FCA and PRA. 

The PRA is part of the Bank of England and has the general objective to promote the safety and soundness of firms it regulates. Firms regulated by PRA (in addition to FCA regulation) are all major banks, building societies, credit unions, insurers, and major investment firms in the UK.

Payments, E-money
& Crypto-assets

  • An Authorised Payment Institution (API) licence enables firms to offer payment services in the UK, such as:

    • operating a payment account, and services enabling cash to be placed or withdrawn from the account

    • the execution of payment transactions, including transfer of funds, direct debits, standing orders, card transactions etc.

    • issuing payment instruments or acquiring payment transactions

    • money remittance

    • payment initiation services (PIS)

    • account information services (AIS)

    To apply for an API license, a firm must meet several requirements, including:

    • hold adequate initial capital of €125,000

    • be a body corporate (eg a limited company or partnership), with a head office and registered office in the UK, and carry on some of the payment services business in the UK

    • have robust governance arrangements, internal controls and risk management procedures

    • ensure they employ a management body of good repute that possesses relevant qualifications and experience

    • take adequate measures to safeguard payment service users' funds

    • hold adequate indemnity cover if providing AIS or PIS services

    • Provide additional documentation in support of the application, including a programme of operations, business plan, policies and procedures for compliance with money laundering regulations.

  • A Small Payments Institution (SPI) license is a good starting option for firms seeking to provide payment services in the UK, as it has lower application fees and no capital requirements compared to the API license. In addition, safeguarding of customer funds is not mandatory (but recommended for a robust application).

    However, there are some criteria and transaction volume limitations that firms must meet to qualify as an SPI:

    • A firm’s average monthly payment transactions in the preceding 12 months OR (projected average monthly transactions must not exceed €3m

    • Firm cannot provide AIS or PIS services.

  • With a UK EMI license, firms are authorised to issue electronic money or e-money (e.g., prepaid cards, electronic wallets etc.) as well as provide all the payment services that an API can provide, such as issue payment instruments, operate a payment account, execute transactions, money remittance, and AIS and PIS services.

    There are several requirements that firms must meet in order to obtain an EMI license in the UK. A firm must:

    • Hold adequate initial capital of €350,000

    • Maintain ongoing capital of 2% of the outstanding e-money issued

    • take adequate measures to safeguard e-money holders' funds, and payment service users' funds (if applicable)

    • Prove that they employ a management body of good repute that possesses relevant qualifications and experience

    • have robust governance arrangements, internal controls and risk management procedures

    • Provide additional documentation in support of the application, including a programme of operations, business plan, and policies and procesures for compliance with money laundering regulations.

  • A Small EMI (SEMI) license is a good starting option for firms seeking to provide e-money and payment services in the UK, as it has lower application fees and lower capital requirements compared to the EMI license.

    However, there are some criteria and transaction volume limitations that firms must meet to qualify as a SEMI:

    • Average monthly payment transactions in preceding 12 months must not exceed €3m

    • Once trading starts, monthly average outstanding e-money must not exceed €5m

    • Firms cannot provide AIS or PIS services.

  • Payment Initiation Services (PIS) are a type of service that PIs and EMIs can provide. A Payment Initiation Service Provider (PISP) is a type of firm that facilitates initiating payments on the accounts of the user held with other financial institutions.

    PISPs are intermediaries that are integral to the open banking innovations in the UK that consolidate access to a user’s payment accounts (that may be held in different institutions) in one place and allows easy and secure execution of payments.

    A PISP license allows a firm to provide only PIS services. If a firm wishes to provide any additional payment services, they must apply for an API license.

    To apply as a PISP, a firm must:

    • hold adequate initial capital of €125,000

    • hold adequate indemnity cover

    • be a body corporate (eg a limited company or partnership), with a head office and registered office in the UK

    • have robust governance arrangements, internal controls and risk management procedures

    • ensure they employ a management body of good repute that possesses relevant qualifications and experience

    • Provide additional documentation in support of the application, including a programme of operations, business plan, and policies and procedures for compliance with money laundering regulations.

  • A RAISP is a type of financial institution providing access to the financial information of the user’s accounts that are held with other institutions, i.e., they act as an intermediary to provide ‘read-only’ access to information on accounts held in other institutions.

    A RAISP license allows firms to only Account Information Services (AIS). If a firm wishes to provide AIS along with other payment services, then they must apply for an API license.

    To apply for a RAISP license, a firm must:

    • not provide any payment service other than AIS

    • hold relevant professional indemnity insurance or a comparable guarantee

    • have robust governance arrangements, internal controls and risk management procedures

    • ensure they employ a management body of good repute that possesses relevant qualifications and experience

    • Provide additional documentation in support of the application, including a programme of operations, business plan, and policies and procedures for compliance with money laundering regulations

  • Crypto-asset businesses need to be registered with the FCA under the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017 (MLRs), and comply with the requirements the regulations, if they intend to provide certain cryptoasset services in the UK, such as:

    • Cryptoasset exchange provider (including Cryptoasset Automated Teller Machine (ATM)

    • Peer to Peer Providers

    • Issuing new cryptoassets, e.g Initial Coin Offering (ICO) or Initial Exchange Offerings)

    • Custodian Wallet Providers

Banking & Lending

  • A bank is a financial institution that is licensed to accept customer deposits, offer current and savings accounts, and make loans and mortgages to consumers.

    Firms that want to become banks in the UK must be authorised by the PRA. Authorisation of a new bank also requires the consent of the FCA.

    The PRA’s assessment will focus on their:

    • statutory objective to promote the safety and soundness of firms; and

    • secondary objective to facilitate effective competition between firms.

    The FCA’s assessment will focus on their statutory objectives of:

    • protecting consumers;

    • protecting and enhancing the integrity of the UK financial system; and

    • promoting effective competition in the interests of consumers.

  • Firms that want to provide credit and lending to consumers, such as credit cards, lending, home financing, and debt firms, must be authorised by the FCA and meet the conditions and regulations set by the FCA for authorisation.

Investment & Trading

  • Retail investment firms are firms whose business is the provision of one or more investment services to retail customers such as stocks, bonds, mutual funds, ETFs, and other securities. Firms wishing to provide investment services must be authorised by the FCA, and meet the threshold conditions (minimum requirements) specified by the FCA, as well as comply with the prudential regulations relevant to them.

  • Wholesale brokers can:

    • recommend particular investments to an investor

    • carry out deals on behalf of their customers

    but the decision to invest must be made by the customer.

    Wholesale brokers can either:

    • arrange for investments into or by a third party, or

    • provide advice on investments and arrange for investments (advisers/arrangers)

    Wholesale brokers must apply for authorisation with the FCA. Typically, these are the permissions required:

    • advising on investments

    • arranging deals in investments

    • agreeing to carry on regulated activities

    • making arrangements with a view to transactions in investments

  • Multilateral trading facilities (MTFs) and organised trading facilities (OTFs) are types of businesses that operate trading facilities or venues, similar to recognised exchanges.

    MTFs and OTFs facilitate the arranging and execution of transactions in financial instruments on a ‘multilateral system’, which means any system or facility in which multiple third-party buying and selling trading interests in financial instruments are able to interact.

    To operate a trading venue, firms must apply for authorisation to the FCA for a number of different permissions, depending on the type of activities they want to carry out.

    Typically, these are the permissions required:

    • operating a Multilateral Trading Facility (MTF)

    • operating an Organised Trading Facility (OTF)

    • making arrangements with a view to transactions

    • arranging deals in investments

    • dealing in investments as agent

    • dealing in investments as principal

  • Crowdfunding is one way that individuals, charities and businesses (including start-ups) can raise money from the public to support a project, campaign or person.

    There are several types of crowdfunding that are regulated in different ways.

    The FCA regulates:

    • Loan-based crowdfunding: also known as 'peer-to-peer lending', this is where consumers lend money in return for interest payments and a repayment of capital over time.

    • Investment-based crowdfunding: consumers invest directly or indirectly in new or established businesses by buying investments such as shares or debentures.

    The FCA also regulates payment services provided in connection with:

    • Donation-based crowdfunding: people give money to enterprises or organisations whose activities they want to support.

    • Pre-payment or rewards-based crowdfunding: people give money in return for a reward, service or product (such as concert tickets, an innovative product, or a computer game).

    To start a P2P lending platform, a firm must meet the requirements for initial capital and other coniditons set by the FCA.