You are considering the acquisition of a Small Payment Institution (SPI) license in the UK. While this is a notable option for entering the financial services market, I would like to propose a smarter, more cost-effective solution that could better serve your business objectives and provide enhanced operational capabilities. I will now explain Why UK EMD and API in Ireland Outperforms a UK SPI .
Our analysis suggests that investing £150,000 in a UK SPI readymade license, which is the current minimum for such an acquisition, is not the smartest way to start your financial business in the UK.
Indeed, a SPI comes with significant turnover and client onboarding limitations, you might benefit greatly from acquiring an Electronic Money Directive (EMD) Agent status in combination with an Authorized Payment Institution (API) status in Ireland. This approach not only aligns with efficient capital utilization but also broadens your operational reach across the entire European Union, a crucial advantage in the current financial landscape.
Transferring to a FCA SPI license may take from 90 to 180 days
I have prepared a detailed comparison to illustrate the potential savings and expanded capabilities that these alternatives offer. My goal is to ensure that you have a comprehensive understanding of the options, enabling you to make a well-informed decision that aligns with your strategic goals.
Please find below a detailed overview of this alternative route, highlighting the key advantages and operational benefits.
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| Feature/Requirement | EMD Agent | SPI (Small Payment Institution) |
| Capital Requirements | No need to maintain a €350,000 reserve deposit | Lower capital requirement than full payment institutions |
| Time to Market | 8-12 weeks | Currently takes 9/12 months to apply for a license – ready made are fetching price from 150,000 GBP for an empty suit. Transferring the license may take from 90 to 180 days |
| Scope of License | Full range of payment services as main license The agent’s license will have the same content as the main license, i.e.:
(a) Services for placing money in a payment account b) Services to withdraw cash from a payment account c) Execution of payment transactions (not covered by a credit line) (d) Execution of payment transactions (covered by a credit line) e) Issuance of payment instruments or acquisition of payment transactions f) Remittance of money g) Execution of payment transactions through a telecommunications operator, computer systems or networks h) Issuance of electronic money | Primarily money remittance and currency exchange No Electronic Money issuance option |
| Limitations | No turnover limitation | Turnover limitation of €3,000,000 per month |
| Operational Scope | Can onboard EU clients | Restricted to less complex operations |
| Regulatory Oversight | Oversight through main license holder and EMD regulations | Direct regulation but limited to smaller scale operations |
| Business Operations | Both individual and corporate clients | Typically limited to specified activities under SPI |
| Registration Visibility | Appears on FCA website | Also listed but under less stringent conditions |
| Monthly Operating Expenses | Around 7,000 GBP per month | Around 6,000 GBP per month |
Option 1: Purchasing a UK SPI License
Cost: £150,000 (approximately €175,000)
Limited to money remittance and currency exchange.
Restriction on turnover and client onboarding.
Operates primarily within the UK.
Option 2: Acquiring EMD Status and API Status in Ireland
Total Expenditure for EMD Agent in UK + API in Ireland
EMD Agent Uk: Access to a comprehensive range of payment services, including issuing electronic money, under the umbrella of the main license holder.
API in Ireland: Can offer services across the EU, including full account management and payment processing capabilities. The API is passportable within the EU, meaning it can operate across all member states.
Cost Savings: By choosing the combined EMD and API route, you will save up money, compared to purchasing the UK SPI license, even with the higher capital option. This translates to savings from €50,000, to €80,000 and more financial flexibility.
Broader Operational Scope: Unlike the UK SPI, which is limited in turnover and scope, the EMD and API statuses allow for a broader range of services and a larger operational footprint within the EU. This is crucial for scaling operations and accessing a larger market.
Faster Market Entry: The EMD status can be obtained in about 10 weeks, and the API application process, although longer, offers a faster route compared to many licensing processes. This quicker entry into the market can be vital for leveraging business opportunities.
EU Passporting Rights: The API license is passportable across the EU, providing significant advantages in terms of market reach compared to the UK-specific SPI license, especially in the post-Brexit landscape where UK financial licenses may not offer direct access to EU markets.
In summary, investing in EMD and API statuses in Ireland not only results in cost savings but also enhances your operational capabilities and market access across the European Union. This strategic move could provide flexibility and growth potential essential for a burgeoning financial services business. This recommendation aligns your financial goals and strategic business objectives, offering a smart, efficient, and economically sound decision.
Do not hesitate to contact me at connect@swissfintechpro.com for more information on this matter
