Payment Provider in the EU: how a ready-made payment infrastructure helps you enter the market faster

Starting a payment or fintech business in the EU is not just about creating a company and developing your own product. An entrepreneur also needs to address the issues of accepting payments, transferring funds, working with banks, card systems, IBAN, KYC/AML and other financial infrastructure.

That is why for many companies, an alternative to creating an entire payment system from scratch is a ready-made Payment Provider - a payment provider with an already configured infrastructure and the necessary regulatory capabilities.

This approach can significantly reduce the time to market for a product. But it is important to understand: a ready-made Payment Provider is not just a technical service for accepting cards. In many cases, it is backed by a licensed financial institution, banking and payment partners, compliance procedures and an already formed operating system.

A Payment Provider is a company or financial institution that provides a business with the ability to make and receive payments. Depending on the model, it can be a Payment Institution, Electronic Money Institution or other regulated payment provider.

Payment services in the EU are regulated, in particular, by PSD2 rules, which set requirements for payment institutions, payment security, user protection and cross-border provision of services. For businesses, this means that instead of building their own payment infrastructure, a company can use an existing system and focus on their core product.

What can be included in a ready-made payment infrastructure? Depending on the specific Payment Provider and the structure of the agreement, a company can access pre-configured solutions for:

- card payment acceptance;

- SEPA transfers;

- international payments;

- payment accounts;

- IBAN solutions;

- e-wallets;

- money transfers;

- merchant acquiring;

- payment processing;

- KYC/AML checks;

- automated transaction control;

- integration of payment methods into their own website or application.

The specific list of possibilities depends on the license, technological infrastructure and the provider's agreements with banks and other financial institutions.

Why does a ready-made infrastructure help you get to market faster? When creating your own payment business from scratch, an entrepreneur needs to go through several complex stages: determine the regulatory model, create a legal structure, obtain the necessary authorization, prepare a compliance system, build an IT infrastructure and establish partnerships with banks and payment systems.

For regulated payment activities, this can be a lengthy process. The European Banking Authority separately sets requirements for information and documentation that applicants must submit to obtain authorization as a Payment Institution or Electronic Money Institution. A ready-made infrastructure allows you to avoid creating a significant part of this work from scratch. As a result, the company can move faster from idea and product development to real payments and the first customers.

This is especially important for a startup, since the speed of launch directly affects the ability to test the business model and start generating revenue.

Does this mean that a separate license is no longer needed? Not always. It all depends on the role the company plays in the payment chain. If a business uses the infrastructure of an already licensed Payment Provider and does not carry out self-regulated activities, a separate financial license may not be required, but if the company itself accepts and stores customer funds, carries out regulated payment transactions or provides financial services on its own behalf, appropriate authorization may be required.

Therefore, before launching a payment product, it is necessary to clearly define who exactly is the payment service provider, who controls customer funds and who is responsible to the user.

What are the advantages of a ready-made Payment Provider? The first advantage is the speed of launch.

The company does not need to create the entire infrastructure on its own. This allows you to significantly reduce the time between product development and its actual launch on the market.

The second advantage is access to existing payment channels. An entrepreneur can access card payments, SEPA and other payment instruments without having to independently conclude dozens of agreements with different financial institutions. SEPA, in particular, creates uniform standards for cross-border payments in euros.

The third advantage is a ready-made compliance infrastructure. For a financial business, it is not enough to simply conduct a transaction. It is necessary to identify the client, control risks, detect suspicious transactions and comply with AML/KYC requirements. If these processes are already integrated into the Payment Provider infrastructure, the business does not need to create the entire system on its own.

The fourth advantage is scalability. If the provider has the ability to operate in several EU countries, the company can use the existing infrastructure to enter new markets.

For payment institutions in the EU, there is a passporting mechanism: a Payment Institution authorized in one member state can provide services in other EU countries in accordance with established procedures. That is why a properly structured Payment Provider can become the basis for an international fintech business, and not just a local solution for accepting payments.

And what about EMI? For some business models, a regular Payment Institution may not be enough. If a company plans to work with electronic money or create its own e-wallet, the Electronic Money Institution model may be relevant.

EMI can issue electronic money and, with appropriate authorization, provide payment services provided for by European legislation. Therefore, when choosing a ready-made structure, it is important not to just look for the presence of the word "Payment Provider", but to check the specific regulatory status and list of permitted services.

What should you check before purchasing or connecting a ready-made Payment Provider? A ready-made payment infrastructure can significantly simplify starting a business, but it must be checked before starting work.

In particular, you should pay attention to:

- the legal status and license of the provider;

- the list of permitted payment services;

- countries in which the provider has the right to operate;

- availability of passporting in the necessary jurisdictions;

- banking and payment partners;

- conditions for storing and protecting customer funds;

- KYC/AML procedures;

- transaction monitoring;

- payment limits and restrictions;

- the ability to connect new merchant accounts;

- API and technical integration capabilities;

- history of activity and regulatory status;

- agreements with key partners.

It is especially important to check whether the license is limited to specific types of activities. Having a license does not mean an automatic right to provide any financial services.

Who is a ready-made payment infrastructure suitable for? This format may be especially interesting for companies that:

- launch a fintech startup;

- create a payment platform;

- work in the field of e-commerce;

- plan international online payments;

- create a marketplace;

- launch a subscription service;

- work with international clients;

- want to quickly enter the EU market;

- do not want to spend years building their own financial infrastructure;

- plan to scale the business to several European countries in the future.

Is it possible to purchase a ready-made Payment Provider? Yes, there are ready-made licensed companies and payment structures on the market that may be available for purchase. In this case, the buyer receives not just a legal entity, but an already formed regulatory and operational basis for starting a business.

Depending on the specific company, the license, corporate structure, payment infrastructure, agreements with partners, technological solutions, history of activity and other assets may be transferred with it, but before the acquisition, legal and regulatory due diligence must be conducted. It is especially important to check whether a change of ownership or control requires prior approval from the regulator and whether the company retains the ability to carry out the necessary operations after the transaction is completed.

A ready-made Payment Provider can be a way to significantly shorten the path from creating a fintech product to launching it on the European market. Instead of building the entire infrastructure from scratch, a company can use an existing regulatory, banking and technological system.

The main thing is to choose the right structure for a specific business model. For one project, a Payment Institution will be enough, for another, EMI may be required, and for a third, the optimal solution will be to work through a third-party licensed Payment Provider.

Therefore, before launching a payment business, it is important to assess not only the cost of the ready-made structure, but also what services it allows you to provide, in which countries it will work, and what regulatory responsibilities will be transferred to the new owner.

The Antwort Law team helps entrepreneurs and fintech companies select ready-made payment structures and licensed companies in the EU, conduct legal due diligence and support transactions for the acquisition of a ready-made business.

If you are planning to launch a Payment Provider, fintech platform or other payment business in the EU - contact Antwort Law. We will help you determine the necessary structure, check available ready-made solutions, and choose an option that will allow you to enter the European market faster.

Lidia Ivanova

International lawyer
Antwort Law