Since 1 January 2021, UK-authorised payment institutions have been unable to passport their services into the European Economic Area (EEA). This means that UK payment firms wishing to serve EU customers — whether through direct customer relationships, agent networks or partner integrations — must obtain a separate EU licence from a member state regulator. This article provides a practical guide to the available options, jurisdiction considerations and implementation strategy.
Why Passporting Was Lost
The UK's departure from the European Union ended the mutual recognition framework that allowed UK-authorised financial services firms to provide services across the EEA under a single licence. Payment institutions authorised by the FCA under the PSRs 2017 could previously passport into any EEA member state through notification to the FCA. That right ceased on 31 December 2020, and there is no equivalence arrangement that replaces it for payment services.
EU Licensing Options
UK payment firms seeking EU market access must obtain authorisation from an EU member state regulator under the EU Payment Services Directive (PSD2). Once authorised in any EU member state, the firm can passport its services across all 30 EEA countries. The choice of licensing jurisdiction is therefore a strategic decision with significant implications for speed, cost, substance requirements and ongoing supervision.
Lithuania. The Bank of Lithuania offers the fastest PI authorisation in the EU — typically 3–6 months from complete application submission. Lithuania has actively positioned itself as a fintech licensing hub and has streamlined its authorisation process. Substance requirements include at least one local director, a registered office in Lithuania, and AML compliance officer presence. Lithuania is the most popular choice for firms prioritising speed to market.
Ireland. The Central Bank of Ireland provides a strong regulatory reputation and extensive banking partner ecosystem. Authorisation typically takes 6–12 months, reflecting the CBI's thorough assessment approach. Substance requirements are more demanding — the CBI expects multiple local directors, a physical office with operational staff, and demonstrable local governance. Ireland is preferred by firms where reputational strength and banking relationships are priorities.
Netherlands. De Nederlandsche Bank (DNB) oversees a large and established payments ecosystem. The Netherlands offers strong market access and a sophisticated regulatory environment, with authorisation timelines of 6–9 months. Substance requirements include local management, operational presence and comprehensive governance structures.
Corporate Structure Considerations
Firms must decide on the corporate structure for their EU presence. Common approaches include:
- EU subsidiary. A new legal entity established in the EU, separately capitalised and authorised. This provides the cleanest regulatory structure but requires full capital allocation and local governance.
- Branch. Some jurisdictions allow branches of third-country firms, although PSD2 authorisation typically requires a legal entity established in the EU.
The choice of structure affects capital requirements, governance obligations, tax treatment and operational complexity. Professional advice is essential.
Maintaining Dual UK-EU Operations
Operating authorised entities in both the UK and an EU member state requires careful coordination. Firms must maintain separate compliance frameworks where regulatory requirements diverge, ensure adequate resourcing for both entities, manage intra-group arrangements and transfer pricing, and coordinate governance and reporting across jurisdictions.
What Firms Should Do Now
- Assess your EU customer base and revenue exposure to determine the commercial case for EU licensing.
- Evaluate jurisdiction options against your priorities — speed, reputation, substance capacity and banking access.
- Plan your corporate structure and governance model for dual UK-EU operations.
- Engage specialist regulatory advisors with experience in your target EU jurisdiction.
- Begin application preparation — document assembly typically takes 8–12 weeks before submission.
Regulatory Counsel advises UK payment institutions on EU market access strategy, jurisdiction selection and EU licensing applications across Lithuania, Ireland and other EEA member states. Contact us for a free initial consultation.
Frequently Asked Questions
Not under their UK authorisation. UK-authorised PIs must obtain separate EU authorisation to serve EEA customers lawfully.
Lithuania typically offers the fastest authorisation at 3–6 months. Ireland takes 6–12 months but offers stronger reputational weighting.
Yes. All EU jurisdictions require some level of local substance — including local directors, registered office and operational presence proportionate to the firm's activities.
Yes. Once authorised in any EU member state under PSD2, you can passport your services across all 30 EEA countries through notification.