If you want to provide payment services to clients, it’s a common misconception that you need to get your own license. In fact, you can leverage the license of another company and become a PSD agent or an EMD agent – in other words, to operate under an authorised E-money or Payment institution. In this article, we’re going to run through some of this so that you know what’s required to get your business up and running!
Who is a PSD or PI, EMD or EMI Agent?
When you are an EMD or EMI (Electronic Money Institution) agent, it essentially means that you are offering payment and e-money services on behalf of an authorised electronic money institution (as defined in the E-money Directive 2, EMD2). You effectively have a sublicence riding on the authorisation of the licensed company.
A PSD or PI (Payment Institution) agent is very similar, except the definition of an authorised payment institution comes from the Payment Services Directive 2 (PSD2). Again, you hold a sublicence on the back of another party who is fully authorised to provide these services.
Both these types of agents are then able to conduct business on behalf of the principal firm, but with the parent firm taking full responsibility for the actions of their agents, as if they had carried out the business itself.
An EMI or PI may distribute or redeem payment services and e-money through an agent or distributor:
- PIs can engage agents to provide payment services; while
- EMIs may engage agents to provide payment services with regards to products related and unrelated to issuing e-money. They may also redeem e-money through agents, though it’s important to note that electronic money institutions shall not issue electronic money through agents.
Now that you’ve got some background as to what it means to be an agent, let’s look at how you go about registering as one.
How to Become a PSD or EMD Agent – Registering Agents
To become an authorised PSD or EMD agent, you need to be registered.
All EMIs and PIs are required to register their agents with the respective regulators to ensure that all agents are included on the register. The requirements here will vary depending on the regulator, but typically you’ll need to fill in an application form and add an EMD/PSD agent as part of the process. Some of the information that they typically ask for is as follows:
- The name and the address of the agent;
- A description of the anti-money laundering internal control mechanisms;
- A description of the agent’s fitness and propriety; and
- The identity of the directors and persons responsible for the management of the agent, as well as evidence that they are fit and proper persons.
Those are the basics, but there are some further complexities depending on your unique situation. If you’re looking for some help in applying for this, we can definitely help you here at Advapay. We have a team who is more than adept in navigating these waters and it’s advisable to work with a professional so that you can get things right the first time.
Agents and Distributors are Not the Same
One further distinction that is important to understand is that an agent is not the same as a distributor. As discussed above, an agent may distribute and redeem e-money and provide payment services subject to the correct registration.
On the other hand, distributors may distribute and redeem e-money, but they do not provide payment services – and so they have no need to be registered at all. All that is required is that the EMI and PI identifies their proposed use of distributors so that everything is kept above board.
We hope that clears up some of the murky waters and gives you a sense of what is required to become an agent in these circumstances. Again, if you’re looking for some professional help here, we’d love to hear from you. Our dedicated team can help guide you through the process and get you the results you need in no time!
Advapay is a technology company providing the Digital Core Banking platform to empower fintech clients or digital banks to start their businesses and accelerate digital transformation. The platform delivers all essential functionalities, a back-to-front system and a set of tools to customise and bring new integrations. With Advapay, potential and existing customers can connect either to the cloud-based SaaS or on-premise software. Besides the technical infrastructure, the company provides business advisory and fintech licensing services. Interested to learn more, please drop us a message