Our position on access of non-bank PSPs to payment systems

Improved access to payment systems for non-bank Payment Service Providers (PSPs) is a key component of the third pillar of the EU Retail Payment Strategy and one of the core objectives in the G20 roadmap for enhancing cross-border payments. In the EU, this policy goal could benefit payments greatly by fostering competition and innovation. It could also aid financial inclusion. However, there are barriers to overcome in order to put authorised regulated payment institutions (PIs) and electronic money institutions (EMIs) on equal footing with banks from an access perspective. 

By enacting the Electronic Money Directive (EMD) and the Payment Services Directive (PSD), the EU took the groundbreaking decision to establish new forms of payment service providers - EMIs and PIs - reflecting that payments could be facilitated without a full banking licence. This spearheaded a tremendous level of innovation in the financial sector, and in the payments industry in particular. Now, over a decade later, it is right for the EU to continue that progress and reflect the fact that institutions do not necessarily need a banking licence to access the payments infrastructure.


Read the original paper here.


Check to see who supports the call for direct access here.

In order to get access to a payment system, a settlement account with a central bank is required. Today in most jurisdictions, non-bank PSPs can't directly access payment systems, as they are not allowed to obtain settlement accounts. Legal barriers in PSD2 and the Settlement Finality Directive (SFD) force non-bank PSPs to open accounts at commercial banks - often competing with non-banks to some extent - to indirectly access payment systems. 

In general, there are two types of access to payment systems available to PSPs:

  1. Direct access, where a direct participant in a payment system is a party that instructs, clears and settles payments on its own behalf; direct participation requires the participant to have a central bank account of some kind (e.g. a settlement account).
  2. Indirect access, where a PSP can access a payment system via a direct participant acting as its intermediary. The direct participant clears and/or settles funds on behalf of the indirect participant.

Direct access to a payment system requires opening an account at a central bank. There are two main account types:

  1. Settlement-only account that is used only for transactional purposes (participants are unable to hold balances beyond those necessary for effecting payments).
  2. Reserve account or overnight account that gives participants access to additional central bank services (such as deposit and credit facilities, including access to intraday credit or to overnight deposits).

Non-bank PSPs are reliant on banks to submit payment instructions on their behalf and to hold client funds in safeguarded accounts. Access to a settlement account would ensure that non-banks can process payments themselves and would no longer have to rely on banks. However, non-bank PSPs would likely need a reserve account or an upgraded version of a settlement-only account that would allow for holding balances, i.e. client funds, for longer periods.

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.