Is your online platform a regulatory risk to your business?

Regulatory risk to your business

Does your payment institution (“PI”) or electronic money institution (“EMI”) have an online platform whereby its customers can:

  • view the balance of their payment accounts with the PI / EMI online? and / or
  • execute payments from payment accounts they hold with the PI / EMI?

If so, did the PI or EMI build its own online platform inhouse or did a third party (including a different member of the PIs / EMIs group) build the online platform for it?

If your PI / EMI has an online platform which a third party built, you need to fully consider whether the provider of software (the “Software Provider“) is providing an account information service (“AIS“) or a payment initiation service (“PIS“) to the PI’s/EMI’s customers and therefore requires the relevant permission from the FCA.

Software providers which require an account information service permission and/or a payment initiation service permission but don’t have one are committing a criminal offence under regulation 138 of the Payment Services Regulations 2017 (the “PSRs“). PIs or EMIs working with third parties committing this criminal offence leave themselves open to disciplinary action from the FCA, including a hefty fine, for potentially breaching some of the FCA’s Principles for Business, namely:

  • Principle 1 – a firm must conduct its business with integrity;
  • Principle 2 – a firm must conduct its business with due skill, care, and diligence; and
  • Principle 5 – a firm must observe proper standards of market conduct.

Typical use case of account information service and payment initiation service

More people within the industry are aware of the typical use case of account information services and payment initiation services. However, if you would like an explanation – please click here.

Why might PIs and EMIs need to consider whether their Software Providers are providing an AIS or PIS if their business models are nothing like the typical models?

It is possible (please see the definitions of AIS and PIS here ) that the Software Provider could be deemed to be:

  • an account information service provider, if the Software Provider is deemed to be providing the PIs/EMIs customers with the ability to view their payment accounts with the PI / EMI online;
  • a payment initiation service provider, if the Software Provider is deemed to be providing the PIs/EMIs customers with the ability to initiate payment orders with the PI / EMI via the online platform.

If it is clear that the PI / EMI is providing these services and not the Software Provider, then in our view the Software Provider does not require the AIS permission and/or the PIS permission. However, if there is any room for doubt whether it is the PI/EMI or the Software Provider which is providing these services, then the risk increases that the Software Provider requires these regulatory permissions. Factors which dictate whether the PI / EMI or the Software Provider are providing these services to the PIs / EMIs customers include:

  • the PIs / EMIs terms and conditions – do they set out clearly that the PI / EMI is providing the customer with access to the online platform or could it be construed that the Software Provider is providing these services?
  • the PIs / EMIs contract with the Software Provider:
    • does this clearly set out that the PI / EMI has certain ownership rights to the online platform so that it can offer the account information and payment initiation services to its customers?
    • does this give the PI / EMI the contractual right to grant a licence to the PIs / EMIs customers so that they can log onto the online platform and view the balance of their payment accounts with the PI/EMI and/or execute payments from their payment accounts?

If you are in any doubt as to whether your Software Provider is providing an AIS or a PIS, please feel free to call +44 2890 650 481 or click here to arrange a 30 minute video call. At the meeting we can review your firm’s business model and chart a path to giving you the clarity you require on the regulatory position, and discuss any steps that might need to be taken to make sure that your Software Provider is not deemed to be an account information service provider or a payment initiation service provider.


Typical use case of an account information service provider

Many firms (for example moneydashboard) offer services to customers whereby clients can view information through one dashboard on payment accounts the clients hold with multiple banks, PIs and EMIs. Having all this information in one place is useful so that the client can have an overview of their financial position as well as being able to set budgets and potentially be recommended better priced (for example, energy) suppliers.

To provide this service in the United Kingdom, the firm must have the AIS payment permission from the Financial Conduct Authority (the “FCA“) and therefore become an account information service provider under the PSRs.

Typical use case of a payment initiation service provider

Some firms (for example truelayer), provide their customers with the ability to pay a third party (for example a merchant), by allowing the client to “push” money from their own payment account with a bank, PI or EMI using the online payments’ platform provided by the firm which is integrated into the third party payee’s website.

This means that the client does not have to use a credit card or debit card on the third party payee’s website or separately log into their banks / PIs / EMIs own online platform to make the same push payment. The advantage for merchants is that they should save money compared to their customer paying using debit cards or credit cards.

For example, if you have used Revolut, you might have noticed that you are provided with the option, when trying to top up your Revolut electronic money account, of making a push payment from your own bank account (using the PIS provided by truelayer) rather than entering your debit card details.


Definition of AIS from the PSRs

An account information service is defined in the PSRs as:

“an online service to provide consolidated information on one or more payment accounts held by the payment service user with another payment service provider or with more than one payment service provider, and includes such a service whether information is provided —

  • in its original form or after processing;
  • only to the payment service user or to the payment service user and to another person in accordance with the payment service user’s instructions.”

Definition of PIS from the PSRs

A payment initiation service is defined in the PSRs as:

“an online service to initiate a payment order at the request of the payment service user with respect to a payment account held at another payment service provider”  

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