A small payment institution (SPI) is a payment firm registered, rather than authorised, by the Financial Conduct Authority (FCA) under the Payment Services Regulations 2017 (the PSRs). Once registered it appears on the Financial Services Register and can provide the payment services named in its registration, provided its volumes stay within the small payment institution limit.
The SPI regime is the proportionate route into UK payments. There is no initial capital requirement, safeguarding is optional, and the application is lighter than for an authorised payment institution (API). In return, the firm accepts a ceiling on volumes and a narrower set of services. It is commonly called an "SPI licence", but legally it is a registration.
An SPI can be a company, a partnership or, unusually among FCA regimes, an individual, provided its head office, registered office or place of residence is in the UK.
SPI registration suits founders launching a focused payments business with volumes that will stay below the threshold for the foreseeable future. Typical applicants are:
It suits less well where rapid growth is planned, where the product needs payment initiation or account information services, or where customers will hold a stored balance, which is electronic money. Those businesses are better served by applying for full authorisation from the start. Our comparison of the API, SPI, RAISP and EMI routes sets out the choice.
| Status | Volume limit | Initial capital |
|---|---|---|
| Small payment institution (SPI) | Average €3 million a month | None |
| Authorised payment institution (API) | None | €20,000 to €125,000 |
| Small electronic money institution | €5 million average outstanding e-money | None (own funds rule applies) |
| Authorised electronic money institution | None | €350,000 |
| Registered account information service provider | None | None (insurance required) |
An SPI can provide any of the payment services in paragraphs (a) to (f) of Schedule 1 to the PSRs, as listed in its registration. In practice that means:
An SPI cannot provide:
Currency exchange on its own is not a payment service. An SPI can exchange currency where it is connected to a payment it executes, for example converting pounds to rupees within a remittance, as an ancillary service.
Regulation 14 of the PSRs sets the core condition: the monthly average of the firm's payment transactions over the preceding 12 months, including those carried out through UK agents, must not exceed €3 million. A firm that has not yet started trading, or has traded for less than 12 months, is assessed on its projected volumes over the next 12 months.
The test is an average, so a single busy month does not break it, but the trend matters. The projections in the application should be realistic and consistent with the business plan; the FCA tests forecasts that appear designed only to sit under the limit.
A remittance business forecasts £18 million of transfers in its first year. At an exchange rate of about €1.15 to the pound, that is roughly €20.7 million, or about €1.7 million a month on average, comfortably inside the limit. If year two is forecast at £40 million, roughly €3.8 million a month, the firm should plan for full authorisation now rather than register and reapply in 12 months.
Under regulation 16, an SPI that no longer meets the volume condition, or wants to provide services outside the SPI regime, must apply for authorisation within 30 days of becoming aware of the change if it wants to keep providing payment services. There is no conversion: moving to an API is a new application with initial capital, own funds and mandatory safeguarding. Planning should start once forecasts show the firm approaching the limit.
The choice turns on three questions: the services the product needs, the volumes the business will reach in the next two to three years, and what banks, partners and customers expect. The SPI route is the right answer for a genuinely small, focused business. It is the wrong answer where it only defers a full application by a year.
An SPI can serve customers outside the UK where the law of the customer's country allows it, but it has no passporting rights into the European Economic Area; passporting for UK firms ended on 31 December 2020. A business that needs to serve EU customers at scale needs a separately authorised EU payment institution.
The FCA may refuse registration only where one of the conditions in regulation 14 is not met. The applicant must show that:
The FCA must be able to supervise the firm effectively, so the UK business should be run from the UK. Founders should be able to show who runs the business, who owns compliance and financial crime, where decisions are made and how outsourced functions are overseen. Directors and managers each complete a PSD Individual form on the FCA's Connect system, and directors must have verified their identity with Companies House.
An SPI that carries on money remittance or currency exchange is a money service business, and is normally supervised for anti-money laundering by HM Revenue and Customs (HMRC) rather than the FCA. It must register with HMRC under the MLRs as well as with the FCA, and the two registrations must be consistent; the FCA cancels the registration of SPIs that do not hold the HMRC registration. Where the firm also carries on other FCA-regulated activities, the FCA can become its sole supervisor. Either way, the FCA expects a business-wide risk assessment, customer due diligence, sanctions screening, transaction monitoring proportionate to volumes, suspicious activity reporting, training and record keeping. The title of the responsible person can vary, but in practice the firm appoints a money laundering reporting officer (MLRO) with the knowledge, authority and time to do the role.
There is no prescribed initial capital or own funds requirement for an SPI, unlike the €20,000, €50,000 or €125,000 bands that apply to an API. The FCA still expects a viable business: realistic spending, enough funding to reach break-even, and the resources to meet regulatory obligations as volumes grow.
Safeguarding is optional for an SPI. A firm may elect to safeguard customer funds, and if it does, the FCA's CASS 15 safeguarding rules, in force since 7 May 2026, apply in full: a responsible director, reconciliations each reconciliation day, a monthly safeguarding return within 15 business days of month end, and a resolution pack. Firms that safeguard more than £100,000 also need an annual safeguarding audit.
Electing to safeguard can strengthen the firm's position with banks and customers, but it adds a real operating commitment. Our guide to CASS 15 explains what is involved.
The PSRs require the FCA to decide a complete application within 3 months of receipt, and any application within 12 months. In 2025/26 the FCA determined 98.7% of payment services registration applications within these statutory deadlines, according to its operating service metrics.
The firm plans SPI registrations at weeks to a few months from submission, depending mainly on how complete the application is and how quickly questions are answered. Preparing the application typically takes 3 to 6 weeks where the business model is settled.
The FCA application fee for a small payment institution is £1,130 (fee category 3), according to the FCA's application fees page last updated on 13 July 2026. It is paid by card through Connect on submission and is non-refundable.
| Cost item | Who sets it | Notes |
|---|---|---|
| Application fee | FCA | £1,130, paid on submission |
| Annual periodic fee and Financial Ombudsman Service levy | FCA and Ombudsman | Set each year; first year pro-rated |
| Compliance and MLRO resource | The firm | In-house, or part outsourced with oversight retained |
| Screening and monitoring systems | Providers | Scaled to volumes |
| Banking and settlement accounts | Banks and payment partners | Plus a safeguarding account if the firm elects to safeguard |
Once registered, an SPI must keep meeting the registration conditions and file its regulatory returns on time. The FCA cancels the registration of firms that stop filing returns or no longer meet the conditions.
| Obligation | Timing |
|---|---|
| Payment transactions report (FSA057) | Annual, by the end of January |
| Payment fraud report (REP017) | Two half-year reports, within 2 months of the calendar year end |
| Operational and security risk report (REP018) | At least once a year |
| Annual financial return | Annual |
| Complaints return | Under DISP; new rules from 1 January 2027 |
| Monthly safeguarding return | Only if the firm elects to safeguard |
The firm must also notify the FCA of changes to its directors, managers, controllers, services or agents, and keep its financial crime controls, complaints handling and, where it serves consumers, Consumer Duty arrangements up to date. Our guide to FCA regulatory reporting for payment and e-money firms covers each return.
An SPI can provide services through agents, such as remittance agents in shops. Each agent must be registered with the FCA before it acts, and the SPI remains responsible for everything done on its behalf, so onboarding, due diligence, training, contracts and monitoring belong in the compliance framework.
Firms that expect to grow beyond the limit should read our guide to UK authorised payment institution licensing, and details of the firm's SPI service are on the small payment institution registration page.
It is commonly called a licence, but legally it is an FCA registration under the Payment Services Regulations 2017. The firm appears on the Financial Services Register and can provide the services in its registration.
The monthly average of payment transactions over the preceding 12 months must not exceed €3 million, including transactions through UK agents. New firms are assessed on projected volumes.
The FCA application fee is £1,130, paid through Connect on submission and non-refundable. Annual FCA fees and the Financial Ombudsman Service levy follow after registration.
No. There is no initial capital or own funds requirement for an SPI, although the FCA expects the business to be adequately funded.
Yes, if money remittance is in its registration. The firm must still meet the financial crime rules and the local rules of each destination country, and the UK registration gives no rights in the EU.
No. A balance held for the customer to spend later is electronic money, which needs a small or authorised electronic money institution registration.
An SPI that is a money service business, such as a money remitter, is normally supervised by HMRC and must register with HMRC as well as the FCA. The FCA becomes the sole supervisor where the firm also carries on other FCA-regulated activities.
There is no conversion. Moving to an authorised payment institution is a new application, which must be made within 30 days of the firm becoming aware it no longer meets the SPI conditions.
Buckingham Capital Consulting has obtained FCA small payment institution registrations, including for Onpoint Money, and FCA authorised payment institution licences since 2013. The team advises when the SPI route fits and when to build for full authorisation from the start, and prepares the business plan, financial crime framework and FCA submission.
Speak to an expert: WhatsApp +44 7563 115980, Telegram @buckinghamcapital or info@buckinghamcapitalconsulting.co.uk.
This article is general information, reviewed against the regulator’s published requirements on the date shown. It is not legal advice; the regulator’s current publications take precedence.