How to become a payment institution in Germany
#1. Identify the type of permit you need
The business model you choose and the design of your products and services determine the permit you must apply for from the German Federal Financial Supervisory Authority.
Do you want to offer payment services? As soon as your institution offers payment services, you need a permit as a payment institution.
Payment services are regulated in the Federal Republic of Germany on the basis of the Payment Services Supervision Act (Zahlungsdiensteaufsichtsgesetz, ZAG). It requires written permission from the Federal Financial Supervisory Authority (BaFin). The purpose of BaFin’s authorization and registration requirement is to increase the security of payment transactions and to protect consumers who are economically disadvantaged, and therefore in need of protection.
If you also want to issue e-money, you need a permit as an e-money institution. With this permit, you can automatically provide all payment services. In addition, the ZAG defines exceptional cases in which no payment services exist.
As part of the permit procedure, you must submit, among other things, a business model, a business plan with a budget plan for the first three fiscal years, and a description of the measures to meet the security requirements. Different requirements are imposed on payment institutions and electronic money institutions, for example, with regard to initial capital.
If your business activity consists in marketing the payment services of another institution, you can register with BaFin as a tied agent through the commissioning institution.
Do you stay below certain limits? In other countries, such as France, there are small payment institutions or small electronic money institution licenses, which are actually an exception to the respective license.
The German legislator has not taken this exception into account. Therefore, payment services, regardless of their size, must always apply for the appropriate permit for the respective business activities.
In which geographical area will you operate? If your payment institution wants to offer its services in other EU states or in the European Economic Area (EEA), it can do so via a cross-border agreement.
If your payment institution has a license in Germany (a member state of the EU), it can operate in any other EU or EEA country without the need for another license.
Can you be exempt from a license? According to the Payment Services Supervision Act, anyone wishing to provide payment services on a commercial basis in Germany requires written permission from BaFin. Privileged payment providers such as the Deutsche Bundesbank are exempt from the permit.