As you may or may not know, the 2nd Payment Services Directive or PSD2, for short, is one of the most important legislative documents in the world of finance. The first directive was released in 2007, but after a while it became outdated and needed to be revised. With the revised or the second directive, the European legislators set out to create a financial and economic market that’s better integrated, where the playing field is levelled for all competitors and where consumers are protected, and payments are safe and secure.
PSD2 is a much wider and much more extensive document, covering the ins and outs of online payments and financial account data security. It’s the most powerful document in the world of payments and payment processing as well as open banking. Thus, if you want to develop a tool, start a business or move forward, you need to know all about the PSD2 license!
PSD2 License Requirements
The PSD2 license requirements are outlined in the document, devised by the European Banking Authority. It’s called the
Final Report PSD2 on the EBA Guidelines under Directive (EU) 2015/2366 (PSD2) on the information to be provided for the authorisation of payment institutions and e-money institutions and for the registration of account information service providers
The document is over 130 pages long and payment service providers will have to study it from top to bottom in order to be granted the PSD2 banking license or any other payment-related service authorization. This document should be available not only in English but in your local language as well (if it’s not English).
The requirements and the whole PSD2 license application are very demanding. Besides the regular forms containing basic information (corporate name, websites, address), etc., there are a lot of other documents that are requested, including business plans, financial info, etc.. In general, PSD2 license requirements are strict and can be found on the ECB website.
How to get a PSD2 license?
In order to develop your technology and FinTech solutions, you need to be aware on how to get a PSD2 license!
Without it, any sort of business in Europe, operating in the sphere of finances and payments is in very bad shape. That’s because having the license allows you to access relevant user data that is vital for the development of tools and the improvement of software, user-experience, products, etc.
PSD2 license holders have to through a very demanding and long process. The PSD2 license is obtained from the corresponding regulator. Usually that is the European Central Bank but it can also be your local corresponding institution, working in the name or with the blessing of the ECB.
First, get yourself or responsible people to become familiar PSD2 license requirements. The regulatory environment is actually alive and continuously changing which is why your team needs to be aware of the changes and find solutions or update T&C’s to meet the newest and latest requirements. It is advisable to always be in contact with your domestic regulator in order to discuss regulations as well as have aid in interpretation and legislation.
Getting a PSD2 license is usually handled by your local, domestic payment service regulator. The process consists of filling out necessary forms, meeting the regulators, adjusting the documents and forms according to notes and comments by the regulator. Once all doubts have been cleared and questions have been answered, there is no obstruction for the license to be issued.
PSD2 license cost and other requirements
The process for obtaining a PSD2 license is quite challenging and difficult. In order to prepare every single document and be fully compliant with the demands of the regulators, your business has to do a lot of preparation. The total PSD2 license cost isn’t a fixed amount because regulators usually don’t charge anything. The legal matters, consultancy fees and other work that is what takes up a lot of money. Estimates vary, depending by country, but you are looking for at least 50,000€ to even hit the ground running, and that’s if you choose a less labor costly market.
For most European countries, the PSD2 license cost exceeds six figures and is estimated to be over a quarter of a million euros. And this figure doesn’t include the necessary starting capital that a lot of regulators demand. Depending on the type of your organization, having the payment services directive license may demand anywhere up to 2 million € in starting capital.
In the end, the final cost will of course be impacted by unexpected delays. During such a complex project, there are a lot of different moving parts that influence the end result. Getting a PSD2 license isn’t cheap nor easy. However, if you meet the PSD2 license requirements and draft a solid plan to develop and implement a service, you will most likely succeed without any significant obstacles getting in your way!
PSD2 licensing situation
If you google PSD2 license and try to fill out a PSD2 license application today – you won’t likely have tremendous success. If you know what is a PSD2 license, you’re likely aware that the verification process and the whole licensing procedure takes quite a while.
In Europe, the most PSD2 licenses are granted in the United Kingdom. In the European Union, the leaders are Germany, France, the Netherlands, unsurprisingly – Malta and Lithuania, along with the Baltic States. Significant improvements and technological innovation, in terms of fintech, has also been made in Nordic countries.
The current statistics, indicating the number of licenses issued in each individual EU and EEA country shows us that you can start a PISP, AISP or any other open banking-related as well as payment managing business anywhere. However, you might meet the most appealing legislators and the best conditions for starting and developing such a business in the UK, Germany, France, the Netherlands, Malta or Lithuania.
Keep in mind that you need a strong domestic foundation (a competent team, preferably) in order to take advantage.
Beyond the licensing
After the license has been granted, don’t let up. Your business still has to implement the strategy and execute the business plan. Regulations might change after the approval and licensing, meaning that you have to continuously be aware of the environment that your business is in.
After your business is successfully licensed, you need to overcome the challenges related to: security risk management framework, anti-money laundering and financing terrorism requirements (KYC), governance and the delegation of certain duties.
Make sure that your software and other solutions in-place are always updated with regards to being compliant with the PSD2.
Nordigen has regulated PSD2 APIs which allow you to access relevant account information from two thousand different European banks, categorize transactions as well as generate insights for a more tailored and personalized service. Get a quickstart guide and find out more about how Nordigen can help any business grow by providing top-of-the-range and highly functional tools for open banking services.