Payment institution licence
What a payment institution does
With a payment institution licence, a company gets official approval to offer certain payment services under the EU Payment Services Directive (PSD2) or under national rules that use PSD2 principles. Payment institutions, often called PIs, are regulated companies allowed to handle money remittance, start payments for you, or let you see your account information from multiple banks in one place. Some firms focus on just one of these, while others combine a few.
Payment institutions operate differently from banks. Banks accept deposits and issue loans; payment institutions don't. You might see your money temporarily held in the PI’s client account (for example, while your wire to a friend is being completed), but those funds can’t be lent out or used for anything else. For an outline of your rights under PSD2, you can check what PSD2 gives you as a consumer.
How a payment institution differs from an EMI
An electronic money institution (EMI) has its own license to create electronic money (e-money), that is, they can let you maintain a digital balance you spend for payments, like you do with many prepaid cards or app wallets. That digital money isn’t just a payment; it’s a stored value. Payment institutions, on the other hand, only provide payment services and don’t issue their own e-money. Both can transfer funds, but EMIs create the balance themselves, while PIs just move it. Our guide on what an electronic money institution is lays this out in more depth.
Check the licensing status of any app or provider, sometimes a service called a ‘wallet’ or a ‘payment app’ leaves it unclear which licence is involved. You’ll want to look them up on the public register if you’re unsure.
What the licence means for your protection
Payment institutions have a duty to meet capital requirements and keep customers’ funds protected, as set out by their regulator. That means your money is kept separate from the company’s own money, so, if the provider were to go out of business, the funds should be returned to you. This practice is called safeguarding. But, it isn’t deposit insurance and doesn’t provide exactly the same security as a guaranteed bank deposit.
If you want to check whether a company really holds a payment institution licence, you can search for them by name on either their national regulator’s website or on the EU-wide register. Confirm the country, match the company details, and confirm which services they’re allowed to offer. Sometimes licences are limited, so make sure the service you’re using is covered.
Frequently asked questions
Is a payment institution the same as a bank?
No, a payment institution is not the same. Banks accept deposits, can issue loans, and your money is usually protected by a deposit guarantee (up to a set limit). Payment institutions handle payment services instead, and do not provide the same protection as a deposit account. Always verify what type of regulated firm you’re dealing with before moving money or holding a balance with them.
Where can I check if a payment institution is licensed?
You should search your national financial regulator's public register. In some countries, there's also an EU-wide register you may use. Enter the firm's official name and country, and review the licence type plus which services are shown as authorized. If you don’t see the company listed, or information is inconsistent with what you find on their site, don’t send money and report this directly to the regulator.