Authorized Payment Institutions (APIs) are the backbone of the European Union (EU) and United Kingdom (UK) payment services industry, enabling businesses to operate as regulated providers of payment solutions. APIs play a critical role in the growing fintech ecosystem, supporting services like money transfers, payment processing, and account information services.
At Estrella, we specialize in connecting buyers and sellers of API-licensed businesses, ensuring seamless transactions that maximize value while adhering to strict regulatory requirements.
An Authorized Payment Institution (API) license allows businesses to:
APIs are essential for businesses looking to establish a foothold in the regulated payments industry within the EU and UK.
APIs are highly sought after due to their:
Estrella connects buyers with licensed APIs offering:
Our approach ensures buyers find the right API business to enhance their service offerings and achieve strategic goals.
For sellers, Estrella provides:
These examples highlight Estrella’s ability to deliver tailored solutions for clients in the API sector.
We specialize in navigating the complexities of API licensing under the EU’s PSD2 directive and UK regulations, ensuring compliance at every step.
Our extensive network connects buyers and sellers across Europe, the UK, and beyond, providing exclusive access to high-value API businesses.
We customize our approach to meet your specific objectives, whether you’re buying or selling.
Strict NDAs, secure Virtual Data Rooms (VDRs), and anonymized engagement protect your interests and sensitive information.
A Payment Institution (PI) — referred to as Authorised Payment Institution (API) in the UK — is a financial services licence under the EU’s revised Payment Services Directive (PSD2), or its UK equivalent under the Payment Services Regulations 2017. Licensed PIs/APIs may provide all eight categories of PSD2 payment services including money remittance, payment processing, account information services (AIS), payment initiation services (PIS), and acquiring of payment transactions.
In the UK, “API” stands for “Authorised Payment Institution” — the FCA’s designation under the Payment Services Regulations 2017. This is the UK regulatory abbreviation, equivalent to “Payment Institution (PI)” in EU member states. Both terms refer to the same regulatory regime under PSD2 (with post-Brexit UK modifications).
Estrella offers ready-made PI/API licensed companies in the United Kingdom (full FCA API authorisation), Estonia (Finantsinspektsioon), Luxembourg (CSSF), Belgium (NBB), and Latvia (FCMC). All provide PSD2 scope; EU member-state PIs include full EU passporting rights, while UK APIs provide UK domestic access.
Fresh PI/API authorisation typically takes 6–18 months depending on jurisdiction and applicant readiness. The FCA in the UK averages 6–12 months; CSSF in Luxembourg 9–18 months; smaller EU regulators may be faster. Acquisition of an existing licensed entity completes in 4–6 months including regulatory change-of-control approval — significantly faster than fresh applications.
PSD2 sets initial own-funds requirements based on services provided: €20,000 for money remittance only, €50,000 for payment initiation services, €125,000 for full payment services scope. Calculated own-funds methods may apply for higher-volume operators. UK API requirements are equivalent post-Brexit.
Yes — EU member-state PI authorisation provides full EU passporting rights across all 27 EU member states plus EEA. Passporting can be exercised on either a freedom of services basis (cross-border without local presence) or by establishing local branches. UK APIs no longer have automatic EU passporting post-Brexit.
Yes across all jurisdictions. Regulators require fit-and-proper assessment of qualifying shareholders including source-of-funds verification, regulatory history checks, and beneficial ownership transparency. Non-EU/UK controllers receive particular scrutiny on AML and source-of-funds dimensions.
Pricing varies by jurisdiction, capital position, banking relationships, scheme memberships, and operational history. UK APIs and Luxembourg PIs command premium pricing due to jurisdictional credibility; Estonian and Latvian PIs offer cost-efficient EU access. Contact Estrella for current availability.
Initial capital is the headline figure, but ongoing own-funds compliance is where acquired payment institutions most commonly slip. PSD2 specifies three calculation methods: Method A (10% of fixed overheads), Method B (a tiered scaling on payment volume — 4% on the first €5M monthly volume, 2.5% on the next €5M, 1% on the next €90M, 0.5% above), and Method C (a rarer revenue-based scaling factor). The FCA — and most other EU regulators — can direct firms to hold 20% above or below the calculated figure based on the supervisor’s risk assessment.
Why this matters for buyers: the own-funds calculation moves with the business. An entity that was compliant six months ago at lower volume can become technically deficient if processed payments grow materially without a parallel capital top-up. Our team’s standard pre-acquisition review includes:
A 24-month payment-volume backtrack to verify the entity’s chosen method has been correctly calculated each month. Method B is the most common and the easiest to mis-apply at the tier boundaries. We’ve found discrepancies in roughly one-third of mid-stage PI/API acquisitions we’ve diligenced — usually small, but always worth quantifying.
Confirmation that any FCA Method-direction (the ±20% adjustment) is documented in the firm’s records. We’ve seen acquired PIs where the seller’s compliance team had verbally agreed an adjustment with the FCA but never documented the basis — these are remediation items the buyer inherits.
Verification that the firm’s auditor has been signing off on own-funds compliance, not just standard accounting. The auditor’s regulatory letter to the FCA is a material due diligence item.
A separate point on UK-specific regulatory drift: the FCA in 2024 increased gateway scrutiny for new authorisations across both PI and EMI populations — application refusals are up materially. For acquirers, this strengthens the case for buying an existing licence over fresh authorisation, but it also means the FCA’s Section 178 change-of-control review of any acquisition is more rigorous than it was three years ago. The FCA’s 60-working-day statutory window for Section 178 assessments now routinely runs to the wire, and extension requests have become more common. Our practice plans for 90 days from complete notification; deals that close faster are pleasant surprises.
For Luxembourg CSSF-supervised PIs the dynamic differs: the CSSF imposes meaningful local substance expectations, including resident senior management and operational decision-making located in Luxembourg. Buyers planning passive ownership without local operational footprint should price-in the cost of meeting CSSF substance expectations from day one.
The demand for payment solutions continues to grow, making API-licensed businesses a valuable asset in the regulated financial sector. Whether you’re acquiring an API license to expand your services or selling your business to maximize value, Estrella is your trusted partner in navigating this dynamic market.
Contact Us Today to explore opportunities in API acquisitions or sales.
© 2024 Estrella | All Rights Reserved
