UK Small Payment Institution Registration: FCA SPI Requirements, Cost and Timeline

What is a Small Payment Institution?

The SPI regime sits in Part 2 of the Payment Services Regulations 2017. It is a lighter registration route for firms whose payment activity is small enough that the FCA is prepared to apply a reduced gateway, while still bringing the firm inside the regulatory perimeter and full money laundering supervision.

The practical distinction is that an SPI is registered rather than authorised. Registration carries fewer prudential conditions, but it carries a hard commercial ceiling and it does not confer the standing that banks, card schemes and institutional counterparties associate with full authorisation.

What is the EUR 3 million monthly transaction threshold?

Regulation 14(3) requires that the monthly average, over the 12 months preceding the application, of the total amount of payment transactions executed by the applicant does not exceed EUR 3 million. Where the applicant is part of a group carrying on payment services, the relevant transactions are aggregated.

For a new business with no trading history, the FCA assesses the projected monthly average instead. This is where applications are most often mis-scoped: forecasts prepared for investors are frequently inconsistent with the forecasts filed with the FCA, and a business plan that shows the firm passing EUR 3 million in month nine is not a credible SPI application.

The threshold is denominated in euros in the legislation. There is no fixed sterling equivalent in the statutory instrument, so firms should apply a defensible conversion policy and document it.

Which payment services can an SPI provide, and which are excluded?

An SPI may be registered for the payment services listed in paragraphs (a) to (f) of Schedule 1 to the Payment Services Regulations 2017. In practice this covers services enabling cash to be placed on or withdrawn from a payment account, execution of payment transactions including direct debits, card transactions and credit transfers, execution of payment transactions where the funds are covered by a credit line, issuing payment instruments, acquiring payment transactions, and money remittance.

Two services are expressly excluded. Regulation 14(4) provides that the business to which an SPI application relates must not include account information services or payment initiation services. Open banking firms therefore cannot use the SPI route: an account information service provider must be registered as a registered account information service provider, and payment initiation requires full authorisation.

Does an SPI need initial capital or have to safeguard customer funds?

There is no statutory initial capital requirement for an SPI. The Schedule 3 initial capital figures of EUR 20,000, EUR 50,000 and EUR 125,000 attach to authorisation under regulation 6, not to registration under regulation 14. The FCA nevertheless expects an SPI to hold adequate financial resources to operate and to wind down in an orderly way.

Safeguarding under regulation 23 is framed by reference to authorised payment institutions. An SPI that chooses to hold relevant funds may safeguard voluntarily, and the FCA has consistently encouraged firms holding customer money to do so. The supplementary safeguarding regime introduced by PS25/12 and CASS 15, which took effect on 7 May 2026, is built around firms subject to the safeguarding duty; an SPI opting in should apply the same discipline on records, reconciliation and acknowledgement letters rather than a partial version of it.

Our practical view is straightforward. If an SPI holds customer funds at any point in the flow, it should safeguard from day one. It protects customers, it is what safeguarding banks now expect before opening an account, and it removes the largest single obstacle to a later API application.

What UK establishment and management does the FCA expect?

The applicant must be established in the UK and carry on at least part of its payment services business here. There is no fixed statutory headcount, but the FCA assesses whether the firm is genuinely directed and controlled from the UK.

In practice this means a UK registered office that is more than a mailbox, decision making that demonstrably takes place in the UK, a money laundering reporting officer with real authority and availability, and directors and qualifying shareholders who complete the FCA fitness and propriety process.

What documents does an SPI application require?

• - Programme of operations describing each payment service and the flow of funds transaction by transaction
• - Business plan with a 12-month and three-year forecast, including the monthly transaction volume calculation against the EUR 3 million condition
• - Structure chart identifying directors, persons with qualifying holdings and any group entities whose transactions aggregate
• - Individual forms and fitness and propriety evidence for directors, the MLRO and qualifying shareholders
• - Business-wide money laundering and terrorist financing risk assessment and the AML/CTF policy suite, including customer due diligence, sanctions screening, transaction monitoring and suspicious activity reporting
• - Governance, outsourcing, complaints, operational resilience and data protection policies proportionate to the business
• - Evidence of adequate financial resources, and safeguarding documentation including the acknowledgement letter where the firm safeguards voluntarily

When should a business apply as an API instead?

Choose the API route where forecast transaction volumes will cross EUR 3 million a month within the first 12 to 18 months, where the model depends on account information or payment initiation services, where a banking or scheme partner requires full authorisation, or where the business will need to appoint agents at scale.

The economics matter. The incremental FCA fee between Category 3 and Category 4 is modest against the cost of running an SPI application, trading for a year and then running a second, larger application while managing a volume ceiling in the meantime.

What happens if an SPI exceeds the threshold?

The EUR 3 million condition is a continuing condition of registration, not merely an entry test. If the firm no longer meets it, or is unlikely to meet it, the FCA can cancel the registration. The firm must notify the FCA of the change in its circumstances and apply for authorisation as an API.

The sequencing problem is the real risk. An API application takes months to prepare and months to determine, so a firm that starts the conversation only once it has breached the ceiling faces a period in which it must constrain volumes to stay compliant. We build an explicit upgrade trigger into every SPI application, normally at around 60 per cent of the threshold, so preparation begins before the commercial pressure does.

Can an SPI passport into Europe?

No. Passporting between the UK and the EEA ended with the transition period, and SPI registration in any event never conferred passporting rights. A firm that needs to serve EEA customers needs an authorised entity in an EEA member state, which is a separate authorisation exercise rather than a notification.

What ongoing FCA compliance applies to an SPI?

• - Continuing compliance with the EUR 3 million condition and notification of material changes in circumstances
• - Full application of the Money Laundering Regulations 2017, including the business-wide risk assessment, customer due diligence, screening, monitoring and suspicious activity reporting
• - Regulatory reporting through the FCA reporting system, including payment services returns and financial information
• - Annual FCA periodic fees and the financial crime data return where applicable
• - Complaints handling and Financial Ombudsman Service jurisdiction for eligible complainants
• - Where the firm safeguards voluntarily, the records, reconciliation and governance discipline expected under the current safeguarding regime