The Licence Is Itself a Banking Credential
An authorised EMI or payment institution occupies an unusual position: it is a regulated financial firm applying to another regulated financial firm for the account that lets it operate. That changes the conversation. Where a crypto exchange has to prove it is safe to bank, a licensed PI arrives having already satisfied a competent authority on capital, governance, and safeguarding.
Planning has to reflect that distinction. Day-to-day operating banking for a licensed PI is close to routine. Client-money banking, by contrast, is a specialist product, and the institutions that offer it are pricing the operational risk of holding pooled client funds for a firm whose own failure would put them in the middle of an insolvency.
Safeguarding Is the Whole Problem
Customer funds are protected on an EMI or PI failure by a mechanism called safeguarding. Under the Electronic Money Directive, relevant funds are segregated in an account at a credit institution (or invested in secure, liquid low-risk assets), or covered by an insurance or guarantee arrangement.[1] This is not deposit protection, and the difference is not theoretical.
Across twelve payment firms that became insolvent between Q1 2018 and Q2 2023, the FCA estimated an average shortfall in client funds of 65%, and 80% for EMIs alone, using total assets as a proxy for safeguarded funds, a method the regulator considers likely to understate the shortfall. In the six cases where a distribution had been made, the first took an average of 2.3 years; cases still awaiting a distribution were excluded.[2] That evidence base drove the reformed regime in Policy Statement PS25/12, whose supplementary requirements came into force on .[3]
For a firm choosing its safeguarding bank, the practical questions are which credit institutions accept payment-firm client money at all, whether they support the daily reconciliation and acknowledgement-letter regime, whether they will hold funds in more than one institution for diversification, and how quickly funds can move on the same day. A bank that says yes to the relationship but cannot support intraday movement is not usable for a firm running instant payments.
The BaaS Collapse Pushed Fintechs Toward Their Own Authorisation
Banking-as-a-Service, the model in which a fintech reaches the payment system through a sponsor bank rather than its own authorisation, contracted sharply after the April 2024 collapse of the middleware provider Synapse Financial Technologies left roughly a hundred fintech clients and their customers exposed to a ledger nobody could reconcile.[4] US supervisors were already acting against sponsor banks over their fintech partnerships: in June 2024 the Federal Reserve issued an enforcement action against Evolve Bank & Trust over the risk management of those partnerships, which it said was independent of the Synapse bankruptcy.[8] Together, the collapse and the enforcement materially raised the diligence a fintech faces.
Two consequences followed. First, sponsor banks now require evidence of direct ledger reconciliation rather than trusting a middleware layer, which means a fintech has to prove it can reconstruct customer balances itself. Second, holding its own authorisation can reduce a fintech’s dependence on a sponsor. It does not remove concentration risk at safeguarding banks, settlement providers or correspondents; those dependencies still need a workable alternative.
Supervisors moved the same way. In 2025 the UK National Risk Assessment upgraded the EMI and payment service provider sector from medium to high risk, reporting a 231% increase in money-laundering-related supervisory activity for the sector between 2020 and 2024.[5] A licensed firm is a better credential than it was five years ago and is also supervised harder.
Bank-Account Rights Now and Under Proposed PSR
PSD2 Article 36 already requires access to credit institutions’ payment-account services on an objective, non-discriminatory and proportionate basis. A bank must give its competent authority duly motivated reasons for a rejection. A payment institution can challenge a blanket refusal under current rules; this is not a guarantee that every bank must accept its particular risk profile.[9]
The third Payment Services Directive and its accompanying regulation reached provisional political agreement on . COREPER endorsed the trilogue text on and the European Parliament’s ECON Committee approved the final compromise texts on , and neither text had been formally adopted or published in the Official Journal by 10 September 2026 (the Parliament’s indicative plenary date is 14 December 2026).[6]
Under the compromise texts the PSR generally applies, and national PSD3 measures apply, 21 months after entry into force, so neither can take general effect before July 2028.[6] Two elements matter directly to banking access.
Proposed PSD3 would merge the EMI and payment institution authorisation frameworks. Separately, the proposed PSR account-access rules would narrow the grounds on which a credit institution may refuse or withdraw an account for a payment institution, require written reasons, and provide a route of appeal to the national competent authority.
Four Layers, and Only Safeguarding Is Slow
| Layer | Institution | Difficulty | Timeline |
|---|---|---|---|
| Safeguarding account | Credit institution accepting payment-firm client money | Hardest; diversification across two preferred | 8–16 weeks |
| Operating account | Bank or EMI | Routine once authorised | 2–6 weeks |
| Scheme and rail access | Direct participation or indirect via sponsor | Moderate; direct participation widening | Varies |
| Settlement and treasury | Multi-currency bank or EMI | Routine | 2–6 weeks |
Direct rail access is the structural improvement of the last two years. Where an EMI previously reached the payment system through a sponsor bank, eligibility for direct participation in central-bank settlement infrastructure has widened: since , authorised payment and e-money institutions can request TARGET participation, subject to admission requirements rather than automatically.[7] Where access is granted, it can reduce both cost and the concentration risk of a single sponsor.
Direct settlement access is not central-bank safeguarding. ECB Decision (EU) 2025/222 Article 3 prevents Eurosystem central banks from offering safeguarding accounts to non-bank payment service providers and CASPs. An admitted TARGET participant still needs a lawful arrangement for safeguarding client funds.[7]
How Jagelski & Partners Helps
Placement for a licensed payment firm is sequenced around safeguarding, because it is the constraint and because a regulator will ask about it. Assessment establishes which credit institutions currently accept payment-firm client money in the relevant jurisdiction, whether they support same-day movement and the acknowledgement-letter regime, and whether a second institution is available for diversification.
Above the safeguarding layer we cover the operating and treasury layers, direct versus indirect rail access, and, for firms with a sponsor-bank history, the direct ledger reconciliation evidence institutions now expect. Authorisation pathways themselves are covered on the EMI and payment institution licensing page. Jagelski & Partners scopes these requirements in writing and introduces an independent specialist who carries out the placement; account approval remains the institution’s decision.
Frequently Asked Questions
Yes, materially. An authorised EMI or payment institution arrives having already satisfied a competent authority on capital, governance, and safeguarding, so the authorisation reads to a bank as a credential rather than a risk. In our partner-network experience, licensed payment firms are among the lower-rejection profiles covered on this site.
The exception is the safeguarding account itself, which is a specialist product held by a smaller set of credit institutions than those willing to hold the operating account.
Safeguarding is the mechanism protecting customer funds if an EMI or payment institution fails. Under the Electronic Money Directive, relevant funds are safeguarded through segregation, which includes investment in eligible secure, liquid low-risk assets, or through qualifying insurance or a comparable guarantee. It is not a deposit guarantee scheme and carries no state backstop.
The difference is measurable. Across twelve payment-firm insolvencies, the FCA estimated a 65% shortfall overall and 80% for EMIs, using total assets as a proxy for safeguarded funds. In the six cases where a distribution had been made, the first took an average of 2.3 years; cases still awaiting a distribution were excluded.
A narrower set than accept operating accounts, because the institution is holding pooled client money for a firm whose failure would place it inside an insolvency. The practical filters are whether it supports daily reconciliation and the acknowledgement-letter regime, whether same-day movement is available, and whether a second institution can be added for diversification.
A bank that accepts the relationship but cannot support intraday movement is not usable for a firm running instant payments, which is a constraint firms often discover after signing.
Two effects persist. Sponsor banks now require evidence of direct ledger reconciliation rather than trusting a middleware layer, so a fintech has to prove it can reconstruct customer balances itself. And the episode accelerated the shift toward firms holding their own authorisation rather than renting access through a sponsor.
The April 2024 collapse of the middleware provider Synapse Financial Technologies left roughly a hundred fintech clients exposed to a ledger nobody could reconcile, while US supervisors were already taking enforcement action against sponsor banks over their fintech partnerships, such as the Federal Reserve’s June 2024 action against Evolve Bank & Trust.
PSD2 Article 36 already requires access to credit institutions’ payment-account services on an objective, non-discriminatory and proportionate basis. A bank must give its competent authority duly motivated reasons for a rejection. A payment institution can challenge a blanket refusal under current rules; this is not a guarantee that every bank must accept its particular risk profile.[9]
PSD3 and the accompanying regulation reached provisional political agreement on , COREPER endorsed the trilogue text on , and the ECON Committee approved the final compromise texts on . As of 10 September 2026 the texts had not been formally adopted or published in the Official Journal, and the European Parliament listed 14 December 2026 as the indicative plenary date.
The proposed package would merge the EMI and payment institution frameworks into one authorisation regime and narrow the grounds on which a bank may refuse or withdraw an account for a payment institution, requiring written reasons and an appeal route.
Under the compromise texts the PSR generally applies, and national PSD3 measures apply, 21 months after entry into force, so neither can take general effect before July 2028. A firm needing a safeguarding relationship in 2026 has to solve it under current rules.
Own authorisation can reduce sponsor dependence, but it does not remove the need for safeguarding banks, settlement providers or correspondents. A sponsor model and an authorised model both need a credible continuity plan if a critical provider withdraws.
The counterweight is that authorisation carries capital, governance, and supervisory obligations, and the UK upgraded the EMI and PSP sector from medium to high risk in its 2025 National Risk Assessment, reporting a 231% rise in supervisory activity between 2020 and 2024.
Increasingly yes, and that is the structural improvement of the last two years. Where an EMI previously reached the payment system through a sponsor bank, eligibility for direct participation in central-bank settlement infrastructure has widened: since 6 October 2025, authorised payment and e-money institutions can request TARGET participation, subject to the Eurosystem’s admission requirements rather than automatically.[7]
Where access is granted, the potential benefit is cost and resilience: direct access can reduce the concentration risk of a single sponsor relationship and the sponsor’s transaction margin.
Direct settlement access is not central-bank safeguarding. ECB Decision (EU) 2025/222 Article 3 prevents Eurosystem central banks from offering safeguarding accounts to non-bank payment service providers and CASPs. An admitted TARGET participant still needs a lawful arrangement for safeguarding client funds.[7]
Plan on the safeguarding account, which runs 8 to 16 weeks and is the item a regulator will ask about. Operating accounts and treasury relationships run 2 to 6 weeks and can be arranged in parallel.
Where diversification across two safeguarding institutions is intended, run both applications together rather than sequentially, because the second institution will want to know the first exists and adding it later restarts the conversation.
Beyond the standard corporate pack: the authorisation itself with scope and conditions, the safeguarding policy and reconciliation methodology, evidence of the acknowledgement-letter arrangement, the compliance officer’s appointment and credentials, and audited or management accounts.
For firms with a sponsor-bank history, direct ledger reconciliation evidence is now routinely required, which is a post-2024 addition rather than a long-standing expectation.
No. Jagelski & Partners is paid by the institution that takes the business, through a referral or revenue-share arrangement, not by a fee billed to the client. The pricing on the client’s institution agreement is the institutional rate, with no markup and no onboarding fee.
Ready to Find Out Which Institutions Can Hold Your Safeguarded Funds?
Book an assessment. We establish which credit institutions currently accept payment-firm client money in the relevant jurisdiction, whether they support same-day movement and the acknowledgement-letter regime, and whether a second institution is available for diversification, then introduce an independent specialist to carry out the placement. No markup on institutional pricing. No onboarding fee.
References
Show all references
- European Union, Directive 2009/110/EC on the taking up, pursuit, and prudential supervision of the business of electronic money institutions (EMD2), Article 7 on safeguarding requirements, eur-lex.europa.eu, accessed .
- Financial Conduct Authority, Consultation Paper CP24/20: Changes to the safeguarding regime for payments and e-money firms (September 2024, insolvency-outcomes dataset), average 65% shortfall in client funds across twelve insolvent payment firms (Q1 2018 – Q2 2023), 80% for EMIs alone, estimated with total assets as a proxy for safeguarded funds; average 2.3 years to first distribution across the 6 cases with a distribution (Table 3, footnote 10, and paragraphs 45–49; 5 EMIs and 7 payment institutions), fca.org.uk, accessed .
- Financial Conduct Authority, Policy Statement PS25/12: Changes to the Safeguarding Regime for Payments and E-Money Firms (; supplementary regime in force ), fca.org.uk PS25/12, accessed .
- United States Bankruptcy Court, Central District of California, In re Synapse Financial Technologies, Inc., Case 1:24-bk-10646-MB (filed ); November 2024 court filings record peak-platform metrics of approximately 120 fintech customers at platform peak (about a hundred at the April 2024 filing), accessed .
- HM Treasury, UK National Risk Assessment of Money Laundering and Terrorist Financing 2025, paragraph 5.64 onwards (money-laundering risk of the EMI and PSP sector increased from medium to high; 231% increase in EMI and PSP MLR-related supervisory activity recorded by the FCA between 2020 and 2024), , gov.uk, accessed .
- European Commission, Proposal for a Payment Services Regulation (PSR) COM(2023) 367 and Proposal for a Directive on payment services (PSD3) COM(2023) 366, ; Council and Parliament provisional political agreement ; COREPER endorsement ; ECON Committee approval ; not formally adopted or published as of (agreed text approved in committee; indicative plenary ); Council compromise texts ST 8221/26 (PSR Article 112) and ST 8222/26 (PSD3 Articles 44, 45 and 49), , oeil.secure.europarl.europa.eu, accessed .
- European Central Bank, Decision (EU) 2025/222 on access by non-bank payment service providers to Eurosystem central bank operated payment systems and central bank accounts (ECB/2025/2), Articles 1(3), 2(1) and 2(2), eur-lex.europa.eu, as amended by Decision (EU) 2025/1148 (ECB/2025/18), Article 1(1), eur-lex.europa.eu; Guideline (EU) 2022/912 on a new-generation Trans-European Automated Real-time Gross Settlement Express Transfer system (TARGET) (ECB/2022/8), consolidated text as amended by Guideline (EU) 2025/1889 (ECB/2025/28), Annex I, Articles 4(2)(da) and 5(1), eur-lex.europa.eu, verified .
- Board of Governors of the Federal Reserve System, Federal Reserve Board issues an enforcement action against Evolve Bancorp, Inc. and Evolve Bank & Trust for deficiencies in the bank’s anti-money laundering, risk management, and consumer compliance programs (press release, ; findings from 2023 examinations of the bank’s fintech partnerships; action independent of the Synapse bankruptcy proceedings), federalreserve.gov, accessed .
- European Union, Directive (EU) 2015/2366 (PSD2), Article 36 (access to credit institutions’ payment-account services), primary source, accessed .