Today, non-bank PSPs are in a disadvantageous position compared to banks - their direct competitors - (figure 1) as sponsoring banks need to process the non-bank's payment on their behalf.

Source: Górka J., 2016, IBANs or IPANs? Creating a Level Playing Field between Bank and Non-Bank Payment Service Providers, in Górka J. (ed.) “Transforming Payment Systems in Europe”, Palgrave Macmillan, London, p. 199.

This also means that sponsoring banks have a disproportionate say in the non-bank's daily operations, business model, compliance programme or even product suite. They can express concerns about compliance with money laundering and terrorist financing laws in the EU and other jurisdictions, which has led to de-risking (i.e. a bank refusing to provide services to a non-bank). The European Banking Authority (EBA) found that banks in the EU refuse to start, or decide to unilaterally terminate, business relationships with some types of customers (often including non-bank PSPs), which they judge to be associated with higher ML/TF risk. Blanket de-risking of an entire category happens most frequently in relation to so-called non-bank PSP money transmitters, negatively impacting remittance senders and in-country recipients.

Unwarranted de-risking can have serious consequences. In a worst-case scenario, it can put non-bank PSPs out of business, as banks can choose to terminate relationships with very little advance warning. This means that the PI’s or EMI’s customers have to find an alternative payments provider at short notice, which can lead to a suboptimal customer experience. The EBA found that unwarranted de-risking occurs across the EU. This has a detrimental impact on competition in the single market, fighting financial crime effectively and promoting financial inclusion.