What are the benefits of becoming a payment institution for a corporate?
The legal requirements for becoming a payment institution are tailored to the specific business model of handling or initiating payments and are therefore lower than those for becoming a bank.
As a result of the PSD´s objective to harmonise the payments market EU-wide, payment institutions can obtain a “passport” to offer their services not only in the country in which they are headquartered. They can obtain permission to offer their payment services across the borders in other EU Member States and establish branches there. This is not only an incentive for new players to enter the European market and spread reach across the EU. It is also an opportunity for established players to realise economies of scale, achieve efficiency gains, introduce standardisation and implement cost savings.
Obtaining authorization as a payment institution strengthens the market leadership position of firms providing payment services.
Having payment institution status extends a greater level of security to a firm´s clients. Obtaining a license as a payment institution means that the regulator is satisfied that the authorised payment institution has met the requirements around
- Sufficient capital
- Proper controls
- Proper governance with adequate systems, system controls and risk controls.
The regulator must also be satisfied that the authorized payment institution
- Communicates its identity, its point of contacts, the services it offers
- Conducts due diligence on its clients
- Safeguards its clients´ funds
- Has risk mitigation measures in place, covering fraud and anti-money laundering.
What are the benefits for consumers?
Consumers who had been using non-banks for payment services can now feel certain that their provider has been duly authorized and registered and is being supervised by the financial authorities in the home country of the provider.
Payment institutions must follow EU regulations, including anti-money laundering, fraud prevention, terrorist financing, etc. and must operate in accordance with all applicable laws and regulations as an international payment service provider. This provides customers of payment institutions with certainty that their provider offers trustworthy solutions and that their payments are processed safely and securely.
Consumers benefit from the availability of “passported” cross-border services which are harmonised and standardised. Payment institutions have also been able to develop innovative solutions such as card and pre-paid products. They are offering online and mobile payment solutions, e-wallets, and international remittance services to a greater degree than traditional banks.
As a result of greater competition in the market among banks, payment institutions and e-money issuers, consumer choice of provider increases. Consumers are likely to demand higher standards of quality, greater convenience of making payments and faster turnaround times.
To find out more about becoming a Payment Institution, click here .