What a PSP License Is and How It Works
What Activities Are Covered by a PSP License
A PSP license authorises a company to carry out a defined set of regulated payment activities. These typically include:
- Processing card and account-to-account transactions on behalf of merchants
- Facilitating cross-border payment solutions between payers and payees
- Providing merchant payment services, including acquiring and payment initiation
- Operating digital payment infrastructure that connects merchants to payment networks
- Enabling online transaction processing for e-commerce and platform-based businesses
The scope of permitted activities depends on the jurisdiction and the specific licence category granted. A company holding a payment institution license under the EU's PSD2 framework, for example, can passport its services across EU member states — a significant structural advantage for businesses targeting European markets. If you're exploring the broader category of regulated authorisations in this space, the fintech license section of the platform covers the full range of options.
What a PSP License Doesn't Cover
A PSP license does not permit the issuance of electronic money — meaning a holder can't assign IBANs, hold customer balances for future use, or issue prepaid cards without a separate EMI (Electronic Money Institution) authorisation. Equally, a PSP licence does not cover the provision of credit, the acceptance of deposits, or the execution of investment-related transactions. These activities each require distinct regulatory permissions under applicable law.
How It Compares Globally
In the United Kingdom, the comparable authorisation is the Payment Institution (PI) licence, regulated by the Financial Conduct Authority (FCA) under the Payment Services Regulations 2017. The scope differs in that UK-authorised firms lost automatic EU passporting rights after 2020, requiring separate authorisation for EU operations. In Nigeria, the comparable authorisation is the Payment Service Solution Provider (PSSP) licence, regulated by the Central Bank of Nigeria (CBN). The scope differs in that PSSP holders operate within a domestic framework focused on local merchant acquiring and switching infrastructure, but the underlying activity — facilitating electronic payment flows between payers and payees — is regulated on similar principles.
Benefits of Obtaining a PSP License
Advantages for Payment Businesses
Holding a PSP license opens access to regulated electronic payment services infrastructure that unlicensed entities simply can't reach. Correspondent relationships, card scheme membership (Visa, Mastercard), and integration with regulated clearing networks all require proof of authorisation. Without it, a payment business can't operate at scale.
Regulated payment services also carry a credibility signal that matters to enterprise clients. Large merchants and platforms won't route transaction volumes through an unlicensed processor — the liability exposure is too high. A payment service provider license removes that barrier.
Why Fintech Startups Choose PSP Licensing
Fintech startup licensing through the PSP route makes sense when the core business model is payment processing rather than e-money issuance or lending. The PSP framework is generally lighter in capital requirements than an EMI licence, which makes it a practical entry point for companies building payment processing solutions or payment gateway provider infrastructure. Founders who want to build a fintech startup around merchant services, payment initiation, or acquiring will typically find the PSP route the most direct path to authorisation.
Requirements and Application Process
Core Requirements for a PSP License
PSP compliance requirements vary by jurisdiction, but most regulators expect the following before granting a payment institution license:
- Minimum initial capital (ranging from €20,000 to €125,000 under PSD2, depending on the service category)
- A fit-and-proper assessment of directors and beneficial owners
- A documented business plan covering the payment services to be provided
- Internal governance policies covering operational risk, IT security, and outsourcing
- A physical presence or registered office in the licensing jurisdiction
Step-by-Step Application Process
- Select the target jurisdiction and confirm the applicable licence category
- Incorporate a legal entity in that jurisdiction
- Prepare the regulatory application package (business plan, governance documents, capital evidence)
- Submit to the relevant regulator and respond to information requests
- Receive conditional or full authorisation and begin operations under the licence conditions
AML, KYC, and Compliance Requirements
AML and KYC procedures are non-negotiable for any licensed payment business. Under FATF AML standards (Recommendations 10 and 11), PSP companies must implement customer due diligence at onboarding, maintain transaction records, and apply enhanced due diligence for higher-risk relationships. Financial compliance requirements also include transaction monitoring, suspicious activity reporting, and regular internal audits. These obligations apply from day one of authorisation and are subject to ongoing supervisory review.
Choosing the Right Jurisdiction for a PSP License
Best Countries for PSP Licensing
Lithuania, Malta, and the United Kingdom are among the most active jurisdictions for PSP licensing in Europe. Lithuania's Bank of Lithuania has processed a high volume of fintech regulation applications and offers a structured, transparent process. Outside Europe, Georgia and the UAE have emerged as practical options for businesses targeting non-EU markets.
UK vs EU PSP License Requirements
UK and EU frameworks share PSD2 origins but have diverged since 2020. EU authorisation (typically via Lithuania or Malta) provides access to the single market through passporting. UK authorisation covers Great Britain and Northern Ireland but requires a separate EU entity for European operations. The choice depends on where the business's primary merchant base sits.
Factors to Consider Before Applying
Before selecting a jurisdiction, a payment business should assess: the markets it intends to serve, the card scheme requirements it needs to meet, the capital it can commit at authorisation, and the ongoing PSP compliance requirements it can sustain operationally. For businesses that also handle digital assets, the crypto license section of the platform covers the additional authorisation layer that may apply.
The platform lists verified incorporation license options across multiple jurisdictions, allowing founders to compare structures, requirements, and timelines before making any decisions. All choices rest with the applicant — the platform provides information, not direction.
This page is for informational purposes only. It does not constitute legal, financial, or regulatory advice. Readers should consult qualified professionals before making any decisions.