A separate regime from the RAO
Most of the UK perimeter is set by the Regulated Activities Order. Payments and e-money are different. They are governed by the Payment Services Regulations 2017 (PSRs) and the Electronic Money Regulations 2011 (EMRs), which have their own definitions, their own routes to authorisation or registration and their own exclusions. The FCA supervises both, and explains its reading of them in PERG 15 for payment services and PERG 3A for e-money.
What counts as a payment service?
Part 1 of Schedule 1 to the PSRs lists the payment services. In plain terms they cover:
- services that let cash be placed on or withdrawn from a payment account, and the operation of that account
- executing payment transactions such as direct debits, card payments and credit transfers, including where the funds come from a credit line
- issuing payment instruments and acquiring payment transactions for merchants
- money remittance
- payment initiation services
- account information services
A business does not need to call itself a payments company to be providing one of these. Marketplaces, platforms, collection services and software firms that receive and pass on money for others are common places where the question arises.
What is electronic money?
Under the EMRs, electronic money is electronically stored monetary value, represented by a claim on the issuer, which is issued on receipt of funds for the purpose of making payment transactions and is accepted by someone other than the issuer. Prepaid cards and stored value wallets are typical examples. Issuing e-money is restricted to authorised or registered e-money institutions and some other bodies, such as banks.
Authorisation or registration
Both sets of regulations offer more than one route, and the right one depends on what you do and how much of it you do.
- An authorised payment institution or authorised e-money institution meets the full requirements, including capital and safeguarding of customer funds.
- A small payment institution or small e-money institution registers with the FCA instead, if its business stays within the thresholds the regulations set. Registration carries lighter requirements and some limits on what the firm can do.
- A business that only provides account information services can usually register rather than seek full authorisation. Payment initiation services generally need authorisation.
- An agent of an authorised payment institution provides payment services on its principal’s behalf and must be registered with the FCA on that principal’s application. E-money institutions can distribute or redeem e-money through distributors or agents, but cannot issue e-money through them.
Providing payment services or issuing e-money without the right authorisation, registration or exclusion is a criminal offence under the regulations.
Payment initiation and account information services
Payment initiation services start a payment from a customer’s account held elsewhere, at the customer’s request. Account information services gather information from one or more accounts the customer holds with other providers and present it in one place. Both often sit inside fintech apps that do not otherwise look like payment businesses, which is why software firms using open banking connections need to look at whether they provide one of these services themselves or rely on a regulated provider.
The main exclusions
Part 2 of Schedule 1 to the PSRs lists activities that are not payment services. Two of the most discussed are:
- The commercial agent exclusion. This covers payment transactions from the payer to the payee through a commercial agent authorised by agreement to negotiate or conclude the sale or purchase of goods or services on behalf of only the payer or only the payee. A platform acting for both buyer and seller will usually find it harder to fit.
- The limited network exclusion. This covers instruments that can only be used to buy goods or services at the issuer’s premises or within a limited network of providers under a direct commercial agreement with the issuer, or for a very limited range of goods or services. A business relying on it must notify the FCA once payment transactions under it exceed 1 million euro in any 12 month period.
Other exclusions cover areas such as technical service providers and some payments within a group. Each has conditions, and a business relying on an exclusion should be able to explain why it applies.
Where payments meet other parts of the perimeter
A payments model can raise questions under other regimes. Spreading the cost of a purchase may be credit, and deferred payment credit has been regulated since 15 July 2026 (see buy now pay later). Holding money that is repayable to customers may raise deposit questions. Cryptoasset payment products bring in the cryptoasset rules (see cryptoassets).
Your marketing is a separate test
Payment services and e-money are generally not controlled investments under the Financial Promotion Order, so advertising them alone is not usually a financial promotion under section 21. That can change if your product also involves credit, interest-bearing accounts, investments or cryptoassets. Firms authorised or registered for payments or e-money are also subject to FCA rules on how they communicate with customers. How the marketing test works and why the two tests are separate.
Common misunderstandings
We use a payment provider, so we are not providing payment services
That depends on whose account the money passes through and who controls it. If funds land in your account before you pass them on, you may be providing a payment service yourself.
We only hold the money for a short time
Holding funds briefly does not by itself take you outside the regulations. The question is what service you are providing, not how long you hold the money.
Marketplaces are covered by the commercial agent exclusion
The exclusion only works where the agent acts for one side of the transaction and has real authority to negotiate or conclude the sale. Many marketplace models do not fit.
Our gift card is a limited network
It may be, but the conditions are specific and there is a notification requirement once transactions pass 1 million euro in 12 months.
When a written opinion helps
Banks, acquirers and payment partners often ask platforms to confirm that they do not need authorisation or registration, or that an exclusion applies. A written legal opinion applies the PSRs and EMRs to your actual money flows and contracts, which is what those partners usually want to see. How written opinions work