Regpilot Explainers

What it is: A company licensed under the EU's Payment Services Directive 2 (PSD2) to offer specific payment services.

Key Activities Allowed:

• Executing payment transactions (e.g., credit transfers, direct debits, card payments).
• Issuing payment instruments (e.g., payment cards - though often done by EMIs).
• Money remittance.
• Account Information Services (AIS): Securely accessing bank account information from other providers with explicit user consent (Open Banking).
• Payment Initiation Services (PIS): Initiating payments directly from a user's bank account with explicit user consent (Open Banking).

Typical Use Cases: Payment gateways, merchant acquirers, remittance services, bill payment platforms, dedicated Open Banking providers (AISPs/PISPs).

Key Differences & Considerations:

• Cannot issue electronic money (e-money) or take deposits like banks or EMIs. Funds held must typically only be transitional for executing payments.
• Generally has lower initial capital requirements (often starting around €125,000) compared to EMIs.
• Subject to safeguarding rules under PSD2, but sometimes perceived as less stringent than EMD2 rules for EMIs holding e-money balances.
• Requires 'Fit & Proper' management and demonstrable local 'Substance'.
• Benefits from EU/EEA 'Passporting' rights, allowing operation across borders after home state authorization.

See the Glossary for definitions of terms like PSD2, Passporting, etc.

What it is: A company licensed under the EU's E-Money Directive (EMD2) and often PSD2 to issue electronic money (e-money) and usually provide payment services as well.

Key Activities Allowed:

• Issuing e-money (digital cash equivalent), storing customer funds digitally (e-wallets), payment processing, currency exchange related to e-money.
• Can perform most PI services too.

Typical Use Cases: E-wallet providers, prepaid card issuers, neobanks (offering e-money accounts), marketplace payment solutions.

Key Differences & Considerations:

• Can issue e-money, unlike PIs.
• Subject to strict safeguarding requirements for customer funds.
• Has higher minimum capital requirements (€350k typical minimum) than PIs.
• Requires Fit & Proper management and local substance.
• Usually benefits from EU/EEA passporting rights.

See the Glossary for definitions of terms like EMD2, Safeguarding, etc.

What it is: An entity licensed under the EU's Markets in Crypto-Assets (MiCA) regulation to provide services related to crypto-assets not already classified as financial instruments under MiFID II.

Key Activities Allowed:

• Custody of crypto-assets.
• Operating a trading platform for crypto-assets.
• Exchanging crypto-assets (fiat-to-crypto or crypto-to-crypto).
• Executing crypto-asset orders.
• Receiving/transmitting orders for crypto-assets.
• Providing advice on crypto-assets.

Typical Use Cases: Crypto exchanges, crypto custodians, crypto wallet providers, crypto brokers.

Key Differences & Considerations:

• Specifically regulated under MiCA.
• Subject to specific capital requirements (€50k-€150k depending on service), governance rules, investor protection measures, and stringent AML/CFT obligations.
• Requires Fit & Proper management and local substance.
• Usually benefits from EU/EEA passporting.

See the Glossary for definitions of terms like MiCA, AML/CFT, etc.

What it is: A company licensed under the EU's Markets in Financial Instruments Directive II (MiFID II) to provide investment services and activities related to financial instruments (like stocks, bonds, derivatives).

Key Activities Allowed:

• Receiving/transmitting orders.
• Executing orders.
• Dealing on own account.
• Portfolio management.
• Investment advice.
• Underwriting/placing financial instruments.

Typical Use Cases: Brokers, asset managers, investment advisors, trading platforms (for traditional securities).

Key Differences & Considerations:

• Regulated under MiFID II, focuses on traditional financial instruments.
• Subject to significant conduct of business rules, transparency requirements, and capital adequacy rules (€75k-€730k typical minimums).
• Requires Fit & Proper management and local substance.
• Usually benefits from EU/EEA passporting.

See the Glossary for definitions of terms like MiFID II, Financial Instrument, etc.

What it is: A fully licensed bank authorized under the EU's Capital Requirements Directive/Regulation (CRD V/CRR II) to take deposits from the public and grant credits for its own account.

Key Activities Allowed:

• Accepting deposits and other repayable funds from the public.
• Lending (including consumer credit, mortgages, factoring, financing of commercial transactions).
• Payment services, issuing e-money.
• Issuing guarantees and commitments.
• Trading for own account or for account of customers (in money market instruments, foreign exchange, financial futures and options, etc.).
• Investment services (often requires additional authorization).
• Custody services.

Typical Use Cases: Traditional retail banks, commercial banks, private banks, some neobanks seeking full deposit-taking capabilities.

Key Differences & Considerations:

• Only entity type allowed to take deposits from the general public and grant credit extensively from its own balance sheet.
• Subject to the highest capital requirements (€5M minimum).
• Undergoes strictest prudential supervision (often involving the European Central Bank - ECB via the Single Supervisory Mechanism - SSM).
• Requires complex processes like ICAAP and ILAAP, recovery and resolution planning.
• Requires highly experienced management passing stringent Fit & Proper tests and significant local substance.
• Benefits from EU/EEA passporting.

See the Glossary for definitions of terms like CRD, CRR, ICAAP, ILAAP, etc.

What it is: A UK-based firm licensed by the Financial Conduct Authority (FCA) under a regime equivalent to the EU's MiFID II, adapted for the UK market post-Brexit. It provides investment services related to financial instruments.

Typical Use Cases: UK brokers, asset managers, and investment advisors.

Key Differences & Considerations:

• Regulated by the FCA in the United Kingdom.
• Does not benefit from EU passporting. Firms need separate authorization to operate within the EU.
• Subject to UK-specific rules (e.g., CASS for client asset protection) which are very similar to MiFID II but may diverge over time.

See the Glossary for definitions of terms like MiFID II, etc.

What it is: A Swiss FinTech license provided by FINMA. It is a "banking license light" primarily for firms that accept deposits from the public (up to CHF 100 million) but do not engage in traditional lending/interest-based banking.

Typical Use Cases: Swiss-based neobanks, e-money providers, or payment firms that need to hold client deposits but don't operate a lending business.

Key Differences & Considerations:

• A Swiss-specific license; does not have EU/EEA passporting rights.
• Allows public deposit-taking up to CHF 100m, but these funds cannot be invested or used for lending (must be held 1:1).
• Has a lower capital requirement (min. CHF 300,000) than a full Swiss bank license (min. CHF 10 million).

See the Glossary for definitions of terms like EMI, etc.