MEMA Guides / Payments
SPI vs API: which UK payment institution route is right?
The volume limit, permissions, capital, safeguarding and evidence that decide whether registering as a small payment institution is a sensible route, or the wrong one to start with.
- €3mthe most an SPI's average monthly payment transactions may be, over 12 monthsSource
- Noneongoing capital requirement for a small payment institutionSource
- 7 May 2026the date the FCA's new safeguarding rules came into forceSource
- 30 daysto apply for authorisation once an SPI no longer meets the conditions for registrationSource
The guide in 30 seconds
Practical guidance- 01Services first, volume secondPayment initiation and account information cannot be provided by an SPI, however small the firm is.
- 02The limit is a forecast, not a targetIf your own plan takes you over €3m a month on average, start with the authorised route.
- 03Cheaper does not mean lighterSmall firms still need named people, AML controls and a clear funds flow.
Explore the chapters
Read them in order, or jump to the one you need.
01Start with the services, then test the volumePermissions decide eligibility before any transaction forecast does. Work out exactly which payment services you will provide, then test the volume.
02What changes on capital, safeguarding and fees?This is where a lower-cost route can turn into the wrong operational choice. Capital, safeguarding and fees all depend on the permission you hold.
03Governance and application evidenceA small firm still needs named people, a clear funds flow and controlled third parties. The FCA publishes what it expects in each application.
04Worked example: a remittance start-upForecast volumes can turn a plausible SPI into the wrong route. Test the average, not a single month, and plan the transition before you need it.
05Choose the route with a decision matrixThere is little advantage in a cheaper application if it needs redesign in six months. Six questions send most firms to the right route.
06Your pre-application action listTick off the six points before you choose a route and again before you submit. If you cannot tick one, that is the next piece of work.
Chapter 01 · Eligibility
Start with the services, then test the volume
Permissions decide eligibility before any transaction forecast does. Work out exactly which payment services you will provide, then test the volume.
The Payment Services Regulations 2017 (PSRs) list the activities that count as payment services. They include cash deposits and withdrawals, executing payment transactions, issuing or acquiring payment instruments, money remittance, payment initiation services (PIS) and account information services (AIS). Name the exact activity. "Payments" is not a permission.
A business that provides payment services as a regular occupation or business activity in the UK usually has three payment institution routes, unless it is exempt or excluded: authorised payment institution (API), small payment institution (SPI) or registered account information service provider (RAISP). E-money institutions can provide payment services too, under their own regime. The SPI is an option for firms below a volume limit. It is not a general lighter licence.
The limit is on the total amount of payment transactions the firm executes, including any of its agents in the United Kingdom. It is measured on value moved, not on your fee income or margin. The FCA asks applicants to say how they will monitor the monthly average once registered, so that they know if the limit is breached.
| Route | What is distinctive |
|---|---|
| Small payment institution (SPI) | Registration. €3m average monthly transactions limit. No AIS or PIS. No ongoing capital requirements. |
| Authorised payment institution (API) | Authorisation. No SPI volume limit. Initial capital by service, and ongoing own funds. |
| Registered AISP (RAISP) | Registration for firms whose only payment service is AIS. |
| Electronic money institution (EMI) | A separate regime under the Electronic Money Regulations 2011 for firms that issue e-money. |
Chapter 02 · The cost of each route
What changes on capital, safeguarding and fees?
This is where a lower-cost route can turn into the wrong operational choice. Capital, safeguarding and fees all depend on the permission you hold.
A small payment institution has no ongoing capital requirement. An authorised payment institution must hold initial capital at the level set by the services it provides, and must then hold own funds at all times at least equal to the greater of that initial capital and a figure calculated under method A, B or C (a firm that only provides PIS simply keeps holding its initial capital). Where more than one initial capital level applies, the higher one is used.
Account information services alone carry no initial capital requirement. Services (a) to (e) are cash deposits and withdrawals, executing payment transactions (including on a credit line), and issuing or acquiring payment instruments.
Source: FCA: Payment Services and Electronic Money, Our Approach
Safeguarding is a common pinch point. Authorised payment institutions must safeguard relevant funds, by segregating them or by insurance or a comparable guarantee. The FCA's new supplementary regime applies to all authorised payment institutions except those that only provide PIS or AIS. It came into force on 7 May 2026 and brings daily reconciliations, resolution packs, safeguarding audits and monthly reporting.
A small payment institution is not required to safeguard under the PSRs, but it may opt in. If it does, it must apply the same level of protection as an authorised firm, and tell the FCA when it applies and in its annual returns. Even a small firm that does not opt in must think about protecting customers' money, because the FCA's Principle 10 expects adequate protection of client assets a firm is responsible for.
| Route | Pricing category | Application fee |
|---|---|---|
| Small payment institution | 3 | £1,130 |
| Registered AISP (AIS only) | 3 | £1,130 |
| Authorised PI, services (f) to (h) | 4 | £2,820 |
| Authorised PI, services (a) to (e) | 5 | £5,640 |
The fee is only part of the cost. It is non-refundable if you withdraw or are refused, and capital and safeguarding costs run for as long as you operate. Do not choose SPI only because it costs less to apply.
Chapter 03 · What the FCA asks to see
Governance and application evidence
A small firm still needs named people, a clear funds flow and controlled third parties. The FCA publishes what it expects in each application.
The FCA's payment institution page lists the supporting material for each route. Both routes need a description of the payment services business (a programme of operations, with financial information), the people responsible for payment services and for managing the firm, anyone with a qualifying holding, anti-money laundering controls, a security policy and a security-related customer complaints policy, and incident reporting and sensitive-payment-data procedures.
People you will have to register and explain
Management board
Every director of a company, or member of an LLP, is registered with the FCA on an individuals form.
Head of compliance or MLRO
Management staff are usually included. Each must be of good repute with appropriate knowledge and experience.
Controllers
Anyone holding 10% or more of the capital or voting rights, or able to exercise significant influence, needs a qualifying holding form.
Agents
Register any agent after authorisation, and be ready to explain your off-site and on-site checks on them.
An authorised payment institution has further evidence to provide: the initial capital and your ongoing capital calculation, your governance and risk management arrangements including a wind-down plan, business continuity arrangements, and professional indemnity cover or a comparable guarantee if you provide AIS or PIS.
Evidence set both routes should be able to produce
- A programme of operations: services, channels, users, jurisdictions and expected volumes
- A business plan and forecasts that support the route you have chosen, including your volume case
- Fit and proper evidence for directors, managers and controllers, and details of any close links
- AML and sanctions controls, and your HMRC money laundering registration details if applicable
- Outsourcing arrangements: who holds accounts, executes transactions or screens customers, and who is liable
- Your measures to safeguard users' funds, if applicable
Chapter 04 · An invented firm
Worked example: a remittance start-up
Forecast volumes can turn a plausible SPI into the wrong route. Test the average, not a single month, and plan the transition before you need it.
Base case: Averages about €3.1m a month over 12 months. Over the limit, so examine the authorised route. A single month above the line is not the test. The SPI test is the average over 12 months.
An illustrative forecast.
Illustrative example Not FCA figures. Use your own.
Forecast the gross value of payments moved, not Larkfield's commission or FX margin. Also check the service definition: the FCA says money remittance cannot involve creating payment accounts in the name of the payer or payee, so a wallet-based app may be a different service. Then test the plan against the precise service definition in the PSRs, and do not shade a forecast down to stay inside the limit. A forecast that is artificially low is not a safe workaround, and the FCA can ask for projected financial statements if it suspects the figure is wrong.
If an SPI outgrows the route
- Day 0The firm becomes aware it no longer meets the SPI conditionsFor example, the monthly average passes €3m.
- Within 30 daysApply for authorisation if it means to keep providing payment servicesUse the authorised payment institution application form.
- With the applicationSubmit a cancellation form for the SPI registrationAuthorisation is not an automatic upgrade.
Chapter 05 · Six questions
Choose the route with a decision matrix
There is little advantage in a cheaper application if it needs redesign in six months. Six questions send most firms to the right route.
Treat the choice as a board decision backed by evidence. Answer the questions below in order. The first "yes" in the first three rows usually decides it.
| Question | If yes, examine |
|---|---|
| Will the business provide payment initiation services? | An authorised payment institution (or an e-money institution). An SPI cannot provide PIS. |
| Will the business provide only account information services? | Registration as a RAISP. |
| Do your projections put the monthly average over €3m? | An authorised payment institution, not an SPI. |
| Will the firm issue e-money? | The e-money regime and its permissions. Issuing e-money is separate from payment services. |
| Will the firm receive customer funds that must be safeguarded? | Safeguarding design and account structure, before you submit. |
| Will another firm execute the payment service for you? | Agency, outsourcing or referral. Work out who is regulated and who is liable. |
Choosing on cost alone, or on fit
Chosen on cost alone
- Lowest application fee picked first
- Volume forecast set to fit the limit
- Safeguarding and AML design left for later
Chosen on fit
- Services mapped to the PSRs first
- Forecast built honestly, with a transition trigger
- Funds flow, safeguarding and controls designed together
Chapter 06 · Put it to work
Your pre-application action list
Tick off the six points before you choose a route and again before you submit. If you cannot tick one, that is the next piece of work.
These six checks turn the choice of route into evidence. Tick each one only when you can point to a document that proves it.
Are you ready to choose a route?
Tick each item you can evidence. Your ticks stay in this browser only.
| Question | Short answer |
|---|---|
| Can an SPI become an API? | Only by applying for authorisation and meeting the API requirements. Moving from registered to authorised is a new application, not an upgrade. |
| Can an SPI provide payment initiation at low volume? | No. PIS is outside the SPI route whatever the volume. |
| Does an API automatically let me issue e-money? | No. Issuing e-money is a separate regime under the Electronic Money Regulations 2011. |
Where this comes from
Sources
Every number and rule in this guide comes from these pages. Check them before you rely on anything, as rules change.
- FCA: Payment institution applicants
- FCA: Apply to become an e-money or payment institution
- FCA: Payment Services and Electronic Money, Our Approach
- FCA: Safeguarding requirements for payment institutions and e-money institutions
- FCA: PS25/12 Changes to the safeguarding regime for payments and e-money firms
- FCA: Authorisation and registration application fees
- Payment Services Regulations 2017, Schedule 1
- Payment Services Regulations 2017, regulation 14
This guide is general information, not legal or regulatory advice. Rules and FCA expectations change; check the sources and take advice on your firm's circumstances.