Understanding Payment Institutions

Moving funds quickly, securely and efficiently is essential for investors. Payment services have to be agile and adaptable in order to fully meet the needs of a varied group of clients. They also need to be trustworthy and transparent. 

The term “Payment Institution” refers to a category of payment service providers which came into being as a result of the enactment of the Payment Services Directive (PSD) which was enacted across the EU in 2009. The payment institution sector is active in each EU member state, as well as other non-EU European countries.  

What were the objectives of the PSD? 

The PSD sought to achieve a single payment market across the EU by providing a single regulatory framework. It aimed to create a level playing field and enhance competition while introducing consistent consumer protection and greater transparency.

The PSD was conceived with the intention of removing legal barriers to the provision of payment services in the EU. By doing so, it was hoped that citizens would be able to make a range of payments safely and easily. The PSD wanted to introduce greater efficiency into the system while opening up the market to new entrants, including institution payment service providers. 

The PSD provides a rules framework for payment institutions and banks. Overall, enhanced competition and transparency has the potential for creating greater efficiency of EU payment systems. New providers can be more adaptive and flexible, helping to offer a greater range of services to match the needs of a broader range of consumers. 

What can payment institutions do? 

The PSD allows payment institutions to offer their customers a range of payment services. This includes executing payment transactions such as credit transfers and direct debits, money remittance, FX services, ancillary services and a 12-month limited credit facility linked to a provided payment service.

How does a payment institution differ from an e-money institution? 

The principal difference between an e-money institution and a payment institution is that only the former can issue electronic money. E-money is a purely digital cash equivalent that can be stored remotely on a server or an electronic device. Because of this difference, the legal framework under which payment institutions and e-money institutions are regulated is also different.  

The emergence of payment institutions 

There have been a number of payment institutions that have emerged into the market across the EU since 2009. Before introducing the new framework, providers that were already providing payment services were regulated at an EU level. Now, a wide variety of new players have entered the payments market across Europe. 

Different types of businesses have sought authorisations as payment institutions. These have included money remittances, execution of payment transactions, card processing, issuing payment instruments, foreign exchange and payment initiation services.  

Efficient payment services 

The UK regulator, the Financial Conduct Authority (FCA), granted Global Investment Strategy UK Ltd additional regulatory permission as an Authorised Payment Institution (API) under the Payment Services Regulations 2009 (PSRs). 

As an Authorised Payment Institution, Global Investment Strategy is a fully licensed payment services provider for our growing list of global clients. We put innovation at the heart of everything we do, using technology to streamline our service. As with everything we offer, our payment services reflect our values of trust and transparency. 

Call +44 (0)20 7048 9400 or email info@gisukltd.com to find out more.

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