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.
The FCA examined twelve payment firms that became insolvent between Q1 2018 and Q2 2023 and found an average safeguarding shortfall of 65%, rising to 80% for EMIs alone, with distribution to customers taking an average of 2.3 years.[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] The consequences ran through the sponsor-bank sector as consent orders and 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, the episode accelerated the shift toward firms holding their own authorisation instead of renting access, because a licence removes the single point of failure that a sponsor relationship represents.
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.
PSD3 Narrows Bank De-Risking, but Not Before H2 2027
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 , with publication in the Official Journal anticipated mid-2026 and application following an expected 21-month transition. That puts the practical effect in the H2 2027 to H1 2028 window.[6] Two elements matter directly to banking access.
EMI and payment institution frameworks merge into a single authorisation regime, which removes a distinction banks currently use to differentiate risk. Separately, anti-de-risking provisions narrow the grounds on which a credit institution may refuse or withdraw an account for a payment institution, requiring written reasons and providing 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 only through a sponsor bank, direct participation in central-bank settlement infrastructure has widened, with TARGET opening to EMIs from . That reduces both cost and the concentration risk of a single sponsor.
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.
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. Licensed payment firms sit at the low end of the rejection-rate range across the profiles this firm places.
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 either segregated at a credit institution or covered by insurance or a guarantee. It is not a deposit guarantee scheme and carries no state backstop.
The difference is measurable. The FCA found an average 65% shortfall, rising to 80% for EMIs alone, with distribution taking an average of 2.3 years.
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, and the consequences ran through the sponsor-bank sector as enforcement.
Eventually, not yet. 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 , with Official Journal publication anticipated mid-2026. It merges the EMI and payment institution frameworks into one authorisation regime and narrows the grounds on which a bank may refuse or withdraw an account for a payment institution, requiring written reasons and an appeal route.
Allowing for the expected 21-month transition, the honest planning horizon is H2 2027 to H1 2028. A firm needing a safeguarding relationship in 2026 has to solve it under current rules.
Increasingly its own, and the reasoning is concentration risk rather than cost. A sponsor relationship is a single point of failure: if the sponsor exits the sector or comes under enforcement, the fintech loses access on the sponsor’s timetable rather than its own.
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 only through a sponsor bank, direct participation in central-bank settlement infrastructure has widened, with TARGET opening to EMIs from October 2025.
The benefit is both cost and resilience: direct access removes the concentration risk of a single sponsor relationship and the margin that sponsor charges on every transaction.
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 firm’s agreements is the institutional rate, with no markup and no onboarding fee.
Ready to Place Safeguarding With an Institution That Can Actually Support It?
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. No markup on institutional pricing. No onboarding fee.
References
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- 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% safeguarding shortfall across twelve insolvent payment firms (Q1 2018 – Q2 2023), 80% for EMIs alone, average distribution 2.3 years, 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, EMI and PSP sector upgraded from medium to high risk; 231% increase in FCA money-laundering-related supervisory activity 2020–2024, , 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 ; Official Journal publication anticipated mid-2026 with an expected 21-month transition, eur-lex.europa.eu, accessed .