Passporting After Brexit: How UK Payment Institutions Can Access EU Markets

Since 1 January 2021, UK-authorised payment institutions have been unable to passport their services into the European Economic Area (EEA). This means that UK payment firms wishing to serve EU customers, whether through direct customer relationships, agent networks or partner integrations, must obtain a separate EU licence from a member state regulator. This article provides a practical guide to the available options, jurisdiction considerations and implementation strategy.

Why Passporting Was Lost

The UK's departure from the European Union ended the mutual recognition framework that allowed UK-authorised financial services firms to provide services across the EEA under a single licence. Payment institutions authorised by the FCA under the PSRs 2017 could previously passport into any EEA member state through notification to the FCA. That right ceased on 31 December 2020, and there is no equivalence arrangement that replaces it for payment services.

EU Licensing Options

UK payment firms seeking EU market access must obtain authorisation from an EU member state regulator under the EU Payment Services Directive (PSD2). Once authorised in any EU member state, the firm can passport its services across all 30 EEA countries. The choice of licensing jurisdiction is therefore a strategic decision with significant implications for speed, cost, substance requirements and ongoing supervision.

The core rules are the same everywhere because they come from PSD2:

E-money institutions are licensed under the second Electronic Money Directive, with initial capital of €350,000, until PSD3 applies.

Lithuania. The Bank of Lithuania decides on a payment institution licence within three months of receiving proper documents, after a five business day check for formal gaps. Initial capital follows PSD2: €20,000 for money remittance only, €50,000 for payment initiation only and €125,000 for other payment services. The Bank expects heads of the institution of good repute with relevant experience, sound governance and internal control. Lithuania is a frequent choice for UK groups.

Ireland. The Central Bank of Ireland supervises a large payments and e-money sector and expects the business to be run from Ireland, with senior management and staff based there. The PSD2 three-month decision period runs from a complete application, so the main variable is how quickly the application is accepted as complete. Ireland suits groups that want an English-speaking hub with deep banking links.

Netherlands. De Nederlandsche Bank (DNB) supervises an established payments sector. As in every member state, the PSD2 three-month decision period runs from a complete application, and DNB expects local management, operational presence and sound governance.

Corporate Structure Considerations

Firms must decide on the corporate structure for their EU presence. Common approaches include:

• EU subsidiary. A new legal entity established in the EU, separately capitalised and authorised. This provides the cleanest regulatory structure but requires full capital allocation and local governance.
• Branch. Some jurisdictions allow branches of third-country firms, although PSD2 authorisation typically requires a legal entity established in the EU.

The choice of structure affects capital requirements, governance obligations, tax treatment and operational complexity. Professional advice is essential.

How PSD3 Changes the Plan

The EU reached provisional agreement on PSD3 and the Payment Services Regulation on 27 November 2025. Once they apply, expected in 2028, e-money issuance becomes a payment service within the payment institution framework, and existing licence holders must show compliance within a transitional period. Firms applying now should build their EU entity to the new standards from the start.

Maintaining Dual UK-EU Operations

Operating authorised entities in both the UK and an EU member state requires careful coordination. Firms must maintain separate compliance frameworks where regulatory requirements diverge, ensure adequate resourcing for both entities, manage intra-group arrangements and transfer pricing, and coordinate governance and reporting across jurisdictions.

What Firms Should Do Now

1. Assess your EU customer base and revenue exposure to determine the commercial case for EU licensing.
2. Evaluate jurisdiction options against your priorities: speed, reputation, substance capacity and banking access.
3. Plan your corporate structure and governance model for dual UK-EU operations.
4. Engage specialist regulatory advisors with experience in your target EU jurisdiction.
5. Begin application preparation early, and confirm local directors, premises and a safeguarding bank before submission.

The UK side of the group keeps its own permissions: see our guides to UK API authorisation and UK EMI authorisation.

Regulatory Counsel advises UK payment institutions on EU market access strategy, jurisdiction selection and EU licensing applications across Lithuania, Ireland and other EEA member states. Contact us for a written proposal.