Payment Institution (PI) Licence in the EU: Scope, Capital, Application (2026)

The Payment Institution (PI) licence under the EU's Payment Services Directive (PSD2)¹^[1] is the cheapest payment-services authorisation in the EU — and the most under-applied. Most founders default to thinking 'EMI' because EMI is what they read about, what their lawyer mentions, what the regulator's marketing emphasises. For a meaningful share of payments use cases, PI is the right authorisation — at a fraction of the capital, with shorter diligence, and with sufficient scope to passport across the entire EEA.

The trade-off is precise. PI authorises payment services — money remittance, account information, payment initiation, full PSD2 services — but does not authorise e-money issuance. If your product holds customer balances on stored-value instruments (the IBAN-and-card EMI archetype), PI will not work. If your product moves money on behalf of customers without holding their funds beyond the time needed to execute the transfer, PI is structurally a better fit.

This guide covers the four PI licence categories, the capital map, when to choose PI over EMI, the application process, the document file, and how PI passports under PSD2.

The EU's payments authorisation stack has three tiers. Banks hold deposits and lend; €5M capital floor under CRR. EMIs²^[2] issue e-money — stored-value instruments redeemable on demand at par; €350,000 capital floor. PIs execute payment services without issuing e-money; €20,000 to €125,000 capital depending on category.

The defining distinction between PI and EMI is holding period. A PI may hold customer funds only for the time strictly needed to execute the payment transaction — typically same-day, certainly under a few business days. An EMI may hold customer funds indefinitely as e-money on a stored-value instrument. If your product needs persistent customer balances (an IBAN that remains funded between transactions), it is e-money and PI is not enough.

PSD2 Annex I service 6 — money remittance only, no other payment services. The €20,000 capital floor is the lowest in the entire EU payments stack. Right for cross-border transfer products, remittance corridors, and pay-out networks. Limitations: no IBAN issuance, no card products, no PSD2 open-banking services, no e-money.

PSD2 Annex I service 8 — account information services (AIS) only. No minimum capital but mandatory professional indemnity insurance (PII) at a level proportionate to activity. Right for financial-management apps, account aggregators, lending decisioning that reads bank-account data. Limitations: read-only — cannot move money.

PSD2 Annex I service 7 — payment initiation services (PIS), with or without AIS. €50,000 capital plus mandatory PII. Right for open-banking pay-by-bank checkouts, A2A payment products, recurring direct-debit alternatives. The most operationally complex of the four categories because of strong customer authentication (SCA) flow design.

PSD2 Annex I services 1–7 (excluding service 8, which is the AIS-only category). €125,000 capital floor. Authorises a payment account, the placing and withdrawing of cash, the execution of payment transactions, the issuing of payment instruments (debit, but not e-money instruments), money remittance, payment initiation, and acquiring. The full PSD2 toolkit minus e-money issuance. Right for almost every payments business that does not need persistent customer balances.

• You move customer money without persistent balances — funds in, funds out, same business day.

• You operate a remittance corridor or pay-out network.

• You provide pay-by-bank or open-banking initiation/aggregation.

• You operate a card-acquiring product (merchant settlement is execution-of-payment, not e-money).

• You want the cheapest possible compliant entry into EU payments.

• Customers fund a wallet or IBAN that remains funded between transactions.

• You issue prepaid cards or other stored-value instruments.

• You issue tokenised e-money (EMTs under MiCA inherit EMD2 substance).

• Customer balances persist beyond a few business days as a routine matter.

Document file assembly, key persons recruitment, capital plan. PI applications are materially lighter than EMI applications because the prudential perimeter is narrower. 6–8 weeks of full-time work for an experienced team.

Submission against the EBA³^[3] Guidelines on PSD2 authorisation. The supervisor confirms completeness within 30 working days and issues a gap analysis. Expect two rounds of clarifications — typically fewer than EMI applications because the file is smaller.

Fit-and-proper interviews, AML/CTF deep dive, ICT/DORA assessment, safeguarding review, decision. The PI authorisation is then operational subject to conditions clearance (capital injection, key persons hiring, IT go-live).

PI applications follow the EBA's PSD2 authorisation guidelines. The structural file is similar to EMI but lighter:

• Programme of Operations — services in scope (Annex I services), product description, customer base, geographies.

• Capital plan — own funds methodology, 36-month projection, capital adequacy under stress.

• Governance and key persons — board, senior management, MLRO, fit-and-proper documentation.

• AML/CTF programme — policy, customer risk model, monitoring, AMLR-aligned.

• Safeguarding methodology — segregation, daily reconciliation, attestation cadence.

• ICT, security, and DORA programme — architecture, third-party risk, incident response.

• BCP / DR — business continuity, RTO/RPO commitments.

• Outsourcing register and risk register.

PIs sit fully inside the DORA⁴^[4] perimeter — no relief by virtue of being smaller than EMIs. The ICT-third-party risk programme expectation is the same.

A PI authorised in any EEA state passports across all 30 EEA states under PSD2 — the same passporting framework that applies to EMIs and banks. Two modes:

• Freedom-of-services passport: provide services into another member state without local establishment.

• Right-of-establishment passport: open a branch or use agents in another member state.

Notification to the home NCA, which forwards to the host NCA. Typical processing: 30–60 days before activation. Post-Brexit, no passporting between EEA and UK — separate FCA authorisation is needed for UK customer service.

Customers leaving funds on the platform between transactions, even unintentionally, converts the product into e-money. Operationally enforce automatic same-day pay-out or commit to upgrading to EMI by the time customer-balance volume crosses a defined threshold.

Even in the short window funds are held, PSD2 Article 10 requires safeguarding. Method 1 (segregation in a credit institution) is standard. The supervisor will inspect the safeguarding architecture even for low-volume PIs.

The PII level is calculated against transaction volume. Applicants who buy minimum-coverage policies and then scale faster than expected fall out of compliance silently. Re-evaluate PII annually against actual volume.

PI is right for early-stage and many mid-stage payments products. At scale — particularly when customer balances become structural — the upgrade to EMI is non-trivial. Plan the PI-to-EMI upgrade path at PI authorisation; do not wait for the cliff.

AIS-only PI — no minimum capital, just professional indemnity insurance. Money-remittance PI is the cheapest with capital, at €20,000. Both are dramatically below the €350,000 EMI floor.

A general PI can hold payment accounts with IBANs under PSD2 service 1, but those accounts cannot persistently hold customer funds beyond execution. If your customers want a funded account that stays funded between uses, that is e-money and EMI is required.

No, post-Brexit. PSD2 passporting applies only between EEA states. UK service requires an FCA payment-services authorisation under the UK Payment Services Regulations.

Yes. The same legal entity submits a variation-of-permissions request adding e-money issuance under EMD2, with capital topped up to the EMD2 floor and the EMD2-specific document modules added. Realistic timeline: 4–8 months. Faster than a fresh authorisation but not trivial.

PSD3 (and the parallel PSR) is in EU legislative process and will likely apply from 2026–2027. The expected direction: tighter PI/EMI alignment (PSD3 effectively merges them), tougher safeguarding, expanded SCA, and harmonised supervisory expectations across NCAs. Plan for substance increases; the cheap-PI gap to EMI narrows.

• EMI vs PSP vs VASP vs CASP — the wider authorisation map.

• EMI Licence Application in Lithuania — for products that need full e-money issuance.

• EMI Licence Application in Cyprus — alternative EEA jurisdiction with a dual-licence overlay.

• Bank Account for an EMI: 2026 Buyer's Playbook — most of the same banking framework applies to PIs.

PI is the under-applied authorisation. The €350,000 EMI floor scares founders into either over-authorising (too much capital, too long a timeline, too rigid a substance footprint) or under-authorising (operating outside any licence and hoping). The PI categories are the right answer for a wider set of payments products than founders realise — provided the holding-period question is honestly answered at design time.