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Opening Bank Account For Small Payment Institution (SPI)

If you are looking to open a bank account for Small Payment Institution (SPI or Small PI) then keep reading on, as we are going to cover the basic steps and banks that can do that for you.

 

Small Payment Institution is a licensed financial institution concept that is popular in the EU and UK . An SPI typically refers to a type of financial institution that is authorized to provide payment services but on a smaller scale compared to full-scale banks.

 

 

Why SPI Needs An Operational Bank Account?

 

Operational bank account is vital for SPI to segregate its own balance sheet from clients funds. This means an operational bank account is essential for day-to-day business operations. It enables the SPI to pay operational expenses, such as salaries, rent, and other overhead costs.

 

An operational bank account is not allowed to be mixed and used with customers money based on regulatory requirements.

 

Naturally, the client funds will be kept in a safeguarding account and transactions on behalf of the clients will be carried out using clients’ money accounts or also called: third party payment accounts, omnibus accounts, correspondent accounts and so on.

 

Opening an operational bank account for SPI is a straight forward process and requires a regular corporate onboarding preparation that consist of gathering company documents, identifying UBOs, getting POAs and POIs, and potentially a few more steps.

 

Why SPI Needs A Safeguarding Account?

 

A Small Payment Institution needs a safeguarding account to comply with regulatory requirements and ensure the protection of customer funds.

 

Regulatory authorities often mandate that payment institutions maintain a clear separation between their operational funds and the funds held on behalf of customers. The safeguarding account serves as a designated repository for customer funds, offering a layer of financial security.

 

In the event of the SPI going into special administration (insolvency), the safeguarding account ensures that customer funds are distinct and can be returned to customers, safeguarding their interests and enhancing overall financial transparency and accountability in the payment services sector.

 

However, not many banks are willing to engage into safeguarding client funds on behalf of payment institutions, therefore opening such accounts can be challenging.

 

Our team is working with several banks that can onboard SPI’s for safeguarding accounts with several conditions, if you would like to explore, get in touch with us.

 

Why SPI Needs A Clients Money Account Or Correspondent Banking Provider?

 

Small Payment Institutions needs a Clients Money Account to be able to receive and send payments on behalf of their customers while also exchanging currencies.

 

Regulatory authorities mandate the segregation of customer funds from operational funds to ensure the protection of clients therefore establishing a Clients Money Account allows SPIs to adhere to these regulatory requirements, providing a special account that is purposely set-up to carry out client transactions only and nothing else.

 

 

Furthermore, a Clients Money Account enhances operational efficiency by streamlining the management of customer transactions. It provides a centralized platform for processing payments, tracking inflows and outflows related to customer funds, and maintaining accurate records.

 

Additionally, SPIs may opt for correspondent banking relationships to extend their financial reach, particularly in cross-border transactions. These relationships offer access to a broader financial network, enabling SPIs to leverage the services and infrastructure of larger banks for more efficient settlement of transactions, currency exchange, and overall operational capabilities.

 

When our team is helping SPI’s to establish new partnerships we often recommend having several banks or payment providers for Clients Money Accounts so that maximum coverage is achieved. If you would like to receive an up to date list of SPI friendly banks, reach out to us and we will share via email.

 

Conclusion

 

In conclusion, setting up and overseeing bank accounts for a Small Payment Institution (SPI) entails navigating diverse account types, each designed for distinct purposes. These range from operational accounts that facilitate seamless business operations to safeguarding accounts dedicated to protecting customer funds, and client money accounts that support currency exchange and international transactions. This entire process necessitates strict adherence to regulatory standards and comprehensive documentation.

 

 

 

 

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