Payment institutions and electronic money Warsaw

The Raczyński Skalski & Partners Law Firm offers comprehensive legal services in the field of payment services and electronic money, in particular in the creation and implementation of legal obligations within the following entities:

Small Payment Institution (MIP)
National Payment Institution (KIP)
Electronic Money Institution (EMI)
Payment Services Office (BUP)
Account Information Service Provider (AISP)
Payment Initiation Service Provider (PISP).

What is a Small Payment Institution and how to register it?

A Small Payment Institution (SPI) is one of the forms of carrying out the business of providing payment services. Undertaking activities as an SPI requires registration in the register of payment service providers and electronic money issuers maintained by the Polish Financial Supervision Authority (PFSA). This is due to the fact that the activity of payment services is a regulated activity within the meaning of the provisions of the Act of 6 March 2018. Entrepreneurs’ Law.

Who can register SPI?

A SPI can be registered either by a natural person, a legal person or an organisational unit that is not a legal person and is granted legal capacity by law

Scope of SPI’s payment services

As part of its activities, an SPI may provide the following services:

accepting cash deposits and making cash withdrawals from the payment account and all activities necessary for the operation of the account;
the execution of payment transactions, including the transfer of funds to a payment account with the user’s provider or with another provider:
1. by the execution of direct debit services, including one-off direct debits,
2. by using a payment card or similar payment instrument,
3. by carrying out credit transfer services, including standing orders;
the execution of the payment transactions listed in point 2 above, against funds made available to the user on account of a credit, or in the case of a payment institution or electronic money institution, a payment credit (within the meaning of the Payment Services Act of 19 August 2011, hereinafter referred to as “PSA”);
issuing payment instruments;
enabling the acceptance of payment instruments and the execution of payment transactions initiated with a payment instrument of a payer by or through a merchant, consisting in particular of the handling of authorisation, the sending to the issuer of a payment instrument or to payment systems of payment orders of a payer or a merchant with a view to remitting to the merchant the funds due to him, excluding the activities of clearing and settling these transactions within a payment system within the meaning of the Act on Settlement Finality (acquiring);
the provision of a money transfer service.

What documents are required for registration of an SPI?

The application submitted to the PFSA for the registration of a Small Payment Institution should include, inter alia:

data on the applicant,
data on the SPI’s agents (if business will be conducted through agents),
data on the individual branches of the SPI (if business will be carried out through branches),
a diagram of the payment services which the trader intends to provide as an SPI, with a description of those services,
a description of the organisational arrangements for calculating the total monthly amount of payment transactions executed by the SPI,
a programme of operations and a financial plan for the first 12 months of operations, including a requirement for a limit on payment transactions,
an up-to-date risk management procedure,
confirmation of payment of stamp duty for entry in the register in the amount of PLN 616 (to be paid to the account of the City of Warsaw Taxpayer Service Centre).

In addition, following the entry into force of the major changes to the regulations (the so-called “Vegetable Shop”), the additional documents required when submitting an application are:

a description of the business activity with an indication of the type of business activity that the applicant is conducting or intends to conduct
a description of the organisational arrangements to comply with the obligations relating to the prevention of money laundering and terrorist financing (AML procedure),
contact details of the applicant, including the name, telephone number and e-mail address of the person authorised to represent him/her,
the applicant’s address for written communications and, if the applicant has one, the address for electronic communications.

What restrictions does an SPI have?

Firstly, activity as an SPI may only be carried out in the territory of the Republic of Poland. Secondly, the average of the total amount of payment transactions over the preceding 12 months carried out by the SPI (including the agents through which it provides payment services) may not exceed an amount equivalent to €1,500,000 per month. Thirdly, in providing the service referred to in point 1 above, SPI may hold users’ funds on users’ payment accounts, with the total amount of funds accepted for one user at any time not exceeding the equivalent in Polish currency of €2,000.

What if the transaction limits are exceeded by the SPI?

If the average total amount of payment transactions referred to above is exceeded, the Small Payment Institution is obliged to:

report to the PFSA the exceeding of the level of EUR 1,500,000:
1. the total amount of payment transactions in the month in question, including those made by agents through which the Small Payment Institution provides payment services,
2. the average monthly amount of payment transactions for each period of the last 3 months and the last 12 months, including those executed by agents through which the small payment institution provides payment services; and
adjust the size of its payment services business to the EUR 1,500,000 quota requirement, or
apply for an authorisation to provide services as a KIP within 30 days of the end of the period in which the overrun occurred.

It is important to note that due to the entry into force on 29 September 2023 of the Act of 16 August 2023 amending certain laws in connection with ensuring the development of the financial market and the protection of investors in that market (the so-called Warzywniak / Vegetables Shop), in the event that a SPI submits an application for authorisation to provide services as a Payment Institution – during the period of recognition of the application, the average of the total amount of transactions may not exceed the amount specified in the notification of excess to the PFSA. Prior to the changes introduced under the Warzywniak, the submission of an application for a Payment Institution entitled a Small Payment Institution to operate without transaction limits.

Some of SPI’s obligations

SPIs are obliged to protect funds received from users, including funds received through agents or another provider for the purpose of executing payment transactions. In addition, the provisions of the PSA oblige SPIs to, among other things:

to inform the PFSA of the total value and number of payment transactions performed for each type of payment services (including by agents),
to submit annual financial statements to the PFSA together with a copy of the resolution or decision of the approving authority on the approval of the financial statements,
submitting to the PFSA annual information on the evaluation and update of procedures in the area of operational and security risk management, as well as evaluation of risk mitigation measures and control mechanisms,
submission to the PFSA of data on frauds related to the payment services provided, taking into account the different ways of providing payment services,
to comply with the obligations arising from the provisions of the AML Act as a so-called “obliged institution” within the meaning of the provisions of this Act,
to make contributions to cover the costs of supervision in an amount representing the product of the total amount of payment transactions performed by the small payment institution, including its agents, and a rate not exceeding 0.025%.

Can an SPI carry out a business activity other than the provision of payment services?

A Small Payment Institution may carry out business activities other than the provision of payment services. In addition, an SPI may provide closely related ancillary services to the provision of payment services, such as currency exchange services, services for the safe custody of funds transferred for the execution of a payment transaction and data storage and processing services. In connection with the provision of payment services, SPIs may also grant a loan for the purpose of executing a payment transaction (payment credit) solely for the purpose of providing the payment services indicated in points 3 to 5 of SPI’s scope of business above, and provided that the loan is not granted:

for a period of more than 12 months;
from funds received or held for the purpose of executing a payment transaction.

What is a National Payment Institution and how to register it?

A National Payment Institution (PI) is a legal entity based in the Republic of Poland, which is another form of business on the payment services market. Importantly, a PI may also operate in the territory of other countries belonging to the European Economic Area in the form of a branch, through an agent or as part of cross-border activities. Taking up business as a PI requires prior authorisation by the Polish Financial Supervision Authority and subsequent entry into the PFSA’s register of payment service providers and electronic money issuers. This means that an application must be submitted to the PFSA for a licence to provide payment services as a domestic payment institution.

Scope of PI’s business

PIs may provide all, as well as only selected payment services indicated in the Payment Services Act of 19 August 2011 (“PSA”), i.e.:

1. accepting cash deposits and making cash withdrawals from the payment account, as well as all activities necessary to operate the account;
2. the execution of payment transactions, including the transfer of funds to a payment account with the user’s provider or with another provider:
  1. by the execution of direct debit services, including one-off direct debits,
  2. by using a payment card or similar payment instrument,
  3. by carrying out credit transfer services, including standing orders;
  1. the execution of the payment transactions listed in point 2 above, against funds made available to the user by way of credit and, in the case of a payment institution or electronic money institution, payment credit (within the meaning of the PSA);
  2. issuing payment instruments;
  3. enabling the acceptance of payment instruments and the execution of payment transactions initiated with a payment instrument of a payer by or through a merchant, consisting in particular of the handling of authorisation, the sending to the issuer of a payment instrument or to payment systems of payment orders of a payer or a merchant, with a view to remitting to the merchant the funds due to him, excluding the activities of clearing and settling these transactions within a payment system within the meaning of the Act on Settlement Finality (acquiring);
  4. the provision of money transfer services;
  5. the provision of a payment transaction initiation service;
  6. the provision of a service of access to account information.

Can a PI carry out other business activities in addition to providing payment services?

In addition to the provision of payment services, a PI may also provide additional services closely related to the provision of payment services, such as:

currency exchange services,
services of secure storage of funds transferred for the execution of a payment transaction,
data storage and processing services.

In addition, PIs may also operate payment systems and carry out other business activities. In case a PI has an initial capital of not less than the equivalent of EUR 125,000, it is also entitled to issue electronic money in the territory of the Republic of Poland.

What is electronic money?

Electronic money is electronically (including magnetically) stored monetary value that is issued with the obligation to redeem it for payment transactions and is accepted by entities other than solely the electronic money issuer. The e-money carrier may be a prepaid card (which is also a payment instrument). One of the main differences between e-money and bank money is that funds constituting e-money do not constitute a deposit. In addition, e-money is not subject to the protection of the deposit guarantee scheme (BFG) or the protection against unauthorised payment transactions in case of loss of the anonymous e-money instrument.

What are the elements of an application for an authorisation to provide payment services as a PI?

The application to the Polish Financial Supervision Authority is submitted in writing and contains a number of formal requirements that must be met in order to be accepted by the PFSA. The Regulation of the Minister of Finance, Funds and Monetary Policy of 13 November 2020 (the “Regulation”) sets out the detailed scope of information and the type and form of documents referred to in the PSA that the applicant is required to attach to the application.

The applicant shall attach to the application for authorisation:

the address of the registered office;
the articles of association, memorandum of incorporation or articles of association;
a list of payment services it intends to provide;
a programme of operations and a financial plan for a period of at least three years showing that the applicant is able to employ appropriate and proportionate systems, resources and procedures necessary for the proper conduct of its business (the detailed scope is set out in the Regulation);
documents proving that it has the required amount of own funds;
a description of the risk management and internal control system, including approved internal regulations in this respect (detailed in the Regulation);
a description of the close links between the applicant and other entities, if such links exist;
data allowing for the identification of management persons and persons who directly or indirectly hold a substantial block of shares in the company or cooperative intending to provide payment services, indicating the size of their block of shares,
documents and information making it possible to assess whether the applicant and the persons referred to in point (8) warrant prudent and stable management of the payment institution, in particular:
1. documents making it possible to assess whether the persons in charge have the necessary education and professional experience for the management of the payment services business,
2. information on any criminal convictions or convictions for a criminal or fiscal offence, probationary proceedings, disciplinary proceedings and other administrative or civil proceedings concluded concerning the applicant or persons referred to in point 8,
3. information on pending criminal proceedings for an intentional offence, excluding offences prosecuted by private prosecution, proceedings for a fiscal offence, as well as pending administrative, disciplinary and civil proceedings – conducted against the persons referred to in point 8 or relating to their activities or those of the applicant;
data allowing the identification of statutory auditors and audit firms, including:
1. the name of the statutory auditor or the name of the audit firm,
2. the address of the statutory auditor or the address of the audit firm,
3. the registration number of the statutory auditor or the registration number of the audit firm;
if the applicant intends to provide services of initiating a payment transaction or services of accessing information about the account, a document confirming the possession of civil liability insurance, a bank guarantee, an insurance guarantee or other security of the user’s claims.

Capital requirements for PIs and amount of initial capital

The PFSA shall issue a permit to provide services as a Payment Institution to an entity that has an initial capital of at least the equivalent in Polish currency of:

the amount of EUR 125,000 (if the applicant intends to provide all or some of the payment services listed in Article 3(1)(1-5) of the PSA,
the amount of EUR 50,000 – if the applicant intends to provide the payment service referred to in Article 3, paragraph 1, point 7 of PSA,
an amount of EUR 20,000 – if the applicant intends to provide only the payment service referred to in Article 3(1)(6) of PSA (money remittance).

It is important to note that the funds for the initial capital of a KIP must not come from a loan or credit or be otherwise encumbered and from illegal or undisclosed sources. In addition, the entity must have funds earmarked for own funds in an amount that cannot be less than the higher of:

the minimum value of the initial capital, as indicated above, or
the amount calculated on the basis of the Regulation.

What is the processing time of an application by the PFSA?

In the case of deficiencies in the application at the formal stage, the PFSA shall call upon the applicant to remove such deficiencies within a period not shorter than 7 days from the date of receipt of the call. Failure to remove the formal deficiencies within the deadline shall result in leaving the application unrecognised. If the application meets all formal requirements and is complete in terms of the required attachments, the PFSA shall commence the substantive analysis of the application. The PFSA’s decision on the authorisation should be issued within three months of receipt of the application or its supplementation. However, in practice and in the Law Firm’s experience, this process can be significantly prolonged and lasts on average approximately 1 year.

Our team specializes in legal advice for payment institutions. Over the years, we have conducted multiple proceedings before the Polish Financial Supervision Authority (KNF) in obtaining authorizations to provide payment services or entries in appropriate registers. We provide our clients with legal support not only in relations with administrative authorities (including KNF, Office of Competition and Consumer Protection, GIIF), but also in the scope of activities excluded from the provisions of the polish Payment Services Act.

Law Firm’s services:

Legal services provided by the Raczyński Skalski & Partners Law Firm in the area of payment institutions are comprehensive and include in particular:

Conducting proceedings before the Polish Financial Supervision Authority for issuing a permit/obtaining an entry in the register

The Law Firm offers legal support at the highest substantive level to all entrepreneurs who plan to establish an MIP, KIP or acting as an Account Information Service Provider (AISP) or Payment Initiation Service Provider (PISP). Each time, we adjust the scope of services to the individual needs of the client, while ensuring the implementation of all statutory obligations. The experience of the Raczyński Skalski & Partners team also includes legal services in the transformation of a small payment institution into KIP.

Development and audit of contracts and regulations for payment institutions and other entities providing payment services

Our Law Firm conducts detailed audits of the solutions adopted by payment service providers, identifying risk areas and developing and adapting the required documents to current standards and regulatory guidelines. We implement, among others: reporting procedures and risk management and internal control procedures, risk assessment sheets and personalized procedures and policies necessary for the proper conduct of business, confirming the use of appropriate and proportionate systems and resources by obliged entities. Our services also include legal security of the outsourcing process (support in selecting contractors), and constructing and negotiating the terms of outsourcing contracts.

Handling disputes between service providers and between suppliers and clients

Raczyński Skalski & Partners specializes in conducting disputes both at the pre-litigation and court stages. The experience of the Raczyński Skalski & Partners team includes, among others: conducting disputes related to the termination of an agreement on maintaining accounts in corporate banking, or informing the relevant supervisory authorities about irregularities in the activities of supervised entities in order to initiate appropriate supervisory activities.

Representation before supervisory authorities and administrative courts

Our experienced lawyers represent clients before supervisory authorities, such as the Polish Financial Supervision Authority, the GIIF and administrative courts, ensuring effective defense of our clients’ interests, also when financial sanctions have been imposed or there is a risk of being imposed on the obliged entity or its managers.

Support in completing all reports and reporting information

Reporting and providing reporting information is the responsibility of payment institutions. Each year, MIP and KIP are obliged to submit to the supervisory authorities annual and quarterly information on their activities in the previous year. Being up to date with all amendments to the regulations regarding the reporting of supervised entities, the Law Firm’s team offers full support in completing all reports and forms required by supervisory authorities, including the Polish Financial Supervision Authority, the National Bank of Poland and the GIIF.

Conducting workshops and webinars

We provide comprehensive workshops on the legal aspects of conducting supervised activities, each time adapting their scope and program to current guidelines and regulations. The Law Firm’s lawyers also organize webinars enabling interested entities to obtain substantive knowledge in the field of payment institutions.

Cooperation with Raczyński Skalski & Partners is a guarantee of professional and transparent licensing and registration processes