Small Payment Institutions in Poland: Comprehensive Guide

Updated: 18.06.2024

Small Payment Institution in Poland – Quick Facts

What you need to know about Small Payment Institution in Poland?

1. Perfect for small payment business. Small payment institution enables small entities, especially start-ups, to provide the majority of the payment services with less strict requirements than national payment institutions. Small payment institution is a particularly good solution for entrepreneurs who want to try out the Polish market, get used to the legal requirements, the approach of the Polish Financial Supervisory Authority, and the needs of the targeted clients.
2. Popular legal form. As of August 2022 there are approximately 134 small payment institutions registered, which is three times more than national payment institutions (41 on the Polish market).
3. Flexible to provide hybrid services. Small Payment Institutions can operate as hybrid institutions, i.e., provide both payment and non-payment services. Therefore, they can fit into the business model of entities that simply want to expand the services offered so far with the possibility of, for example, payment processing.
4. No legal form requirement. There is no requirement for a legal form of small payment institution, which means that monetary services can be conducted by a joint-stock company, a limited liability company or a sole proprietor. The formal requirements for registration are simplified, therefore there is easier and wider access to this institution for more entities.
5. No capital requirement for start up. There are no capital requirements if the entity applying for small payment institution status (except requirements set out in the Polish Commercial Companies Code, or other specific laws, e.g., the Consumer Credit Act, if the MIP will additionally provide consumer loans).

What services can Small Payment Institutions provide?

Small payment institution in Poland can offer almost all type of payment services, that is:

• keeping payment accounts (e.g., storing funds accepted from users, making cash withdrawals),
• executing wire transfers from the account,
• executing payment instrument transfers (including cards, BLIK as well as other instruments like mobile application),
• executing direct debits,
• issuing payment instruments (e.g., payment cards, mobile applications, BLIK),
• acquiring (e.g., enabling the acceptance of card or mobile applications, BLIK),
• providing money remittance services.

Small payment institution is not allowed to conduct the following payment services, that are connected with open banking:

• initiation of payment transactions (PIS),
• accessing account information (AIS).

What are key limitations of SPI’s in Poland?

Despite a broad range of payment services, operating as a small payment institution has limitations such as:

• Limited Territory: it can provide services only in Poland (that provision includes Small payment institution’s branches),
• Limited Clients Funds: the amount of funds that a client can keep on all payment accounts maintained by a small payment institution must not exceed 2,000 euros,
• Limit on Transaction: the average monthly value of all executed payment transactions from 12 months must not exceed 1,500,000 euros (including transactions made through agents).

Hybrid payment institutions: Extending the scope of traditional payment services with non-payment services

It is often the case that small payment institution status is merely an adjunct to the economic activities already carried out by a given entity. In such a situation, when the small payment institution is not exclusively providing monetary services, we are dealing with a hybrid entity (hybrid small payment institution).

A description of additional (beyond payment services) activities should be submitted to the KNF with the application, and in the case of a change in the business model after obtaining registration, the small payment institution in Poland should notify the KNF of this fact.

Comparison of Regular vs. Small Payment Institution in Poland

Small Payment Institution Registration – Step by Step Guide

In this regard, we recommend that you contact the attorneys of our Fintech department, who will help in the effective drafting of the application, to receive a positive decision from the KNF as soon as possible.

We are the only law firm that has successfully registered a small payment institution in Poland since the regulatory changes which came into force on 29th September 2023 (until today – see able date of the article).  This means that every single SPI registered by the Polish regulator since 29th September 2023 is the work of our Fintech team.

Step 1 – Prepare the Business Plan

Currently, the SPI application requires basic information about the applicant, i.e. name, address, KRS number. A statement from the entity representative on completeness and truthfulness of the information submitted is a mandatory attachment, along with the information on whether the entity intends to use agents while providing payment solutions. What is more, the following documents are required:

1. description of organizational arrangements to calculate the total monthly amount of payment transactions,
2. AML procedure,
3. business plan for the first 12 months of operating as a small payment institution in Poland,
4. financial plan for the first 12 months of operating as a small payment institution in Poland,
5. procedure for managing the risks to which the Company may be exposed,
6. description of additional services that the small institution provides (if applicable),
7. description of ways to protect user funds,
8. e-mail address and telephone number of the person authorized to represent the company

Step 2 – Prepare the Internal Procedures

In order to get registered as small payment institution in Poland, the applicant need to present to KNF the following internal procedures:

• a list of payment services that the applicant intends to provide, including a representation of these services in the form of a graphic diagram with a description of these services,
• description of organizational solutions allowing to calculate the total monthly amount of conducted payment services,
• business plan for the first year of small payment institution operation,
• financial plan for the first year of small payment institution operation,
• procedures regarding risk management,
• internal AML procedure,
• description of the business other than the provision of payment services and related and ancillary services (e.g., currency exchange, funds storage, data processing), if applicable to the applicant’s business model,
• description of informing the users of conducted payment services.

Additionally, the applicant is obliged to enclose:

• statement that the data contained in the application are complete and truthful, and that the applicant is familiar with the conditions for carrying out business as a small payment institution in Poland, submitted under pain of criminal liability,
• contact information of the applicant, including the name, telephone number and e-mail address of the person authorized to represent the applicant,
• the address of the applicant indicated for delivery of written correspondence and the address for electronic delivery, if the applicant has such an address.

In addition, small payment institutions should have documentation related to customer onboarding, i.e., payment services agreements templates, regulations for the provision of payment services, outsourcing procedure, especially when a small payment institution uses cloud solutions, and GDPR documentation.

Step 3 – Pay the Stamp Fee

There is a fixed duty stamp for submitting the application of 616 PLN.

Step 4 – Submit Application to KNF

The motion can be filed to KNF in 3 different ways:

• via ePaup (electronic platform),
• by mail,
• in person.

How long does it take to process an application?

The maximum time limit for KNF to enter small payment institution in Poland into the payment services providers register is 3 months, provided that the application is complete. If the application requires additional information, then 3-month period runs from the date when the application is corrected.

Requirements to Set up a Small Payment Institution in Poland

Shareholders and Beneficial owners

This includes any connections through citizenship from those countries, the concentration of its social, professional, or business activity in those countries or close personal or business ties with entities concentrating their activity there. Such affiliations raise concerns about the institution’s ability to operate in a lawful, honest, transparent, prudent, and stable manner.

Consequently, this can affect the licensing process, potentially leading to the refusal of registration or deletion from the register.

Management Board

The only legal requirement for the management board member is a clean criminal record (in the scope of the crime against the administration of justice, a crime against economic turnover, a crime against money and securities, financing terrorism crime, a crime committed for financial or personal gain, or a fiscal crime).

During the application process, KNF will not assess the experience and education of the board members in managing a payment institution. There is no technical requirement to present a clean criminal record along with the motion. The certificate is replaced by a written statement of compliance with the statutory requirements, submitted under penalty of criminal liability.

AML/CFT compliance officer

Under the Polish AML Act, each small payment institution, as an obliged institution should appoint an AML/ CFT compliance officer, unless:

• it is a sole trader,
• has a very limited number of employees,
• the following reasons occur that justify the non-appointment (reasons should be well documented by the obliged institution):
  • the nature of the financial institution’s business and the ML/TF risks associated therewith, taking into account its geographical exposure, customer base, distribution channels, and products and services offered,
  • the size of its operations in the jurisdiction, the number of its customers, the number, and volume of its transactions, and the number of its full-time equivalent employees,
  • the legal form of the financial institution, including whether it is part of a group.

Under EBA Guidelines on policies and procedures concerning compliance management and the role and responsibilities of the AML/CFT Compliance Officer (EBA/GL/2022/05) dated July 14, 2022, financial institutions should, prior to the appointment, assess whether the AML/CFT compliance officer possesses:

• the reputation, honesty, and integrity necessary to perform his/her function,
• the appropriate AML/CFT skills and expertise, including knowledge of the applicable legal and regulatory AML/CFT framework, and the implementation of AML/CFT policies, controls, and procedures,
• sufficient knowledge and understanding of the ML/TF risks associated with the business model of the credit or financial institution to perform his/her function effectively,
• relevant experience regarding the identification, assessment, and management of the ML/TF risks, and
• sufficient time and seniority to perform his/her functions effectively, independently, and autonomously.

A small payment institution in Poland should ensure that the AML/CFT compliance function operates on an ongoing basis as part of its overall business continuity management. It should cater for the possibility of having the AML/CFT compliance officer discontinue his/her functions and the availability of a delegate with appropriate skills and expertise to take over the functions of the AML/CFT compliance officer. In the event that he/she is absent for a period of time or the integrity of the AML/CFT compliance officer is called into question.

Where a separate AML/CFT compliance officer is not appointed. Small payment institutions should organize the performance of the AML/CFT compliance officer tasks by either the member of the management body or the senior manager responsible for AML/CFT, or by outsourcing operational functions.

Person responsible for internal control in the company

In accordance with corporate governance principles, supervised institutions, including small payment institution, should have (as long as its size permits) a person responsible for internal control functions.

During the licensing process, there is no obligation to submit a resume of such a person (unlike the KIP). However, it is necessary to ensure that the function is performed by a person with relevant experience and who gives the guarantee of the proper performance of his/her duties.

What are the capital requirements for a small payment institution in Poland?

There are no capital requirements for small payment institution other than generally applicable to all companies under the Commercial Companies Code (minimum for a limited liability company is PLN 5,000, for the joint-stock company it is PLN 100,000, and for the limited joint-stock partnership it is PLN 50,000).

If a small payment institution in Poland will also provide loans to consumers, then it is additionally subject to the regime of the Consumer Credit Act, and then there is an obligation to have a minimum capital of PLN 200,000.

What is the role of the Polish Financial Supervision Authority?

KNF is authorized to take appropriate supervisory actions, including punishment for violations. In particular, the KNF will examine whether the interests of users and consumers (e.g., in terms of fees and information obligations) are being respected.

Finding a violation, the KNF might issue recommendations. These may include demands to take certain actions specified in the summons and aimed at correcting violations. The KNF also has a number of coercive measures to correct violations.

These will include, for example, financial penalties, demanding the dismissal of the entity’s managers, and even, in extreme cases, issuing a ban on operating as an polish small payment institution.

Small payment institution, as part of its operations, is required to pay the costs of supervision. The maximum rate is 0.025% of the total value of the amount of transactions performed by small payment institution in a previous year.

Small Payment Institutions in Poland- FAQ:

Technically yes, in practice no. Under Article 117f (1) of the Polish Payment Services Act, payment services may be performed only in the territory of the Republic of Poland. Usually, we would assume that the transaction is conducted in the place where it is ordered.

Nevertheless, KNF’s position is that the transaction cannot cross the Polish border, therefore following a precautionary approach, we assume that the small payment institution cannot conduct international transactions.

We are noticing multiple SPIs using license umbrella in order to overcome the above limitation.

Yes, small payment institution can apply for KIP (authorized or national payment institution; API / NPI) license voluntarily anytime, provided that it meets the formal requirements.

Small payment institution in Poland is obliged to apply for KIP license when it exceeds 1,500,000 euros per month in transactions, and it is not able to adjust the size of its payment services business to fit the limit. We have successfully exercised transitions from SPI to API in the past.

Yes, under Article 117f (5) and 74 (1 p. 1) of the Polish Payment Services Act, the small payment institution can provide currency exchange services that are closely associated with payment services – e.g., a situation in which a payment transaction with currency conversion is performed.

That is, when the funds accepted from the payer are in a different currency than the currency in which the payee’s account will be credited.

Yes, such business model is acceptable, in fact in the Polish market there are several entities who links providing payment services with cryptocurrency services.

It is important to note, that in such a case, the entity will be obliged to both (i) get a small payment institution license and (ii) register itself in the virtual currency register (under Article 129m of the Polish AML Act).

In our practice, we noted that the average time to process the small payment institution motion is in fact around 3 months, with our shortest registrations finalized in 3 to 4 weeks.

Provided that their criminal record is clean, the Polish Financial Supervision Authority (KNF) will not assess the experience and education of the board members in managing a payment institution during the application process. There is no technical requirement to present a clean criminal record along with the motion.

However, as a good practice (especially if a small payment institution in Poland plans to become KIP), it is recommended that:

• Board members have appropriate educational profile, reputation, and experience for prudent and stable management.
• The number of members on the management board (and the supervisory board, if applicable) should be sufficient to ensure the effective, proper, and prudent management of the institution. It is typically recommended that at least two to three board members be appointed.
• At least half of the board of directors, including the chairman, and the member of the board responsible for risk management should speak Polish.
• the duration of board member duties is sufficient to guarantee efficient governance, reflecting the entity’s size, specificity, and operational breadth.

Furthermore, any connections with Russia or Belarus could result in the registration being denied. This is due to the impact of the KNF resolution on 14 April 2022.

The institution must provide payment services in an effective manner, in line with the scope and scale of their activities.

As a good practice and under the recommendation of KNF, we advise to have a Polish chairman of the management board, but it is not mandatory under the Polish Payment Services Act.

There is a fixed duty stamp fee of PLN 616 for the small payment institution application.

In cases when small payment institution in Poland intends to:

• expand the scope of payment services,
• provide services by an agent,
• establish a branch;

the company should file an application in this regard, which is subject to a fee of PLN 308.

Moreover, small payment institution in Poland is also required to pay the costs of supervision conducted by the KNF. The amount depends on the value of payment transactions performed in a given year and on the rate announced by the Chairman of the KNF. The maximum rate is 0.025% of the total value of the amount of transactions performed by the MIP.

There are no capital requirements for small payment institution other than those under the Commercial Companies Code (minimum for limited liability company is PLN 5,000, for the joint-stock company it is PLN 100,000, and for the limited joint-stock partnership it is PLN 50,000).

If a small payment institution maintains payment accounts for its customers, it may hold for one client funds not exceeding the amount of EUR 2,000.

The average of the total amount of payment transactions for the previous 12 months performed by small payment institution, including agents, may not exceed the amount of EUR 1,500,000 per month.

Small payment institution in Poland is obliged to protect the money received from customers on the following terms:

• cash accepted for payment transactions may not be combined at any time during storage with cash held by small payment institutions on any other account;
• cash accepted for the purpose of executing payment transactions that has not been transferred to the recipient by the end of the business day following the day of receipt of such funds, should be: (i) deposited in a bank account set aside for this purpose, or (ii) invested in safe, liquid, low-risk assets, deposited in a separate account for this purpose.

The KNF may refuse to make an entry in the Register if the application is incomplete and not has been supplemented within the prescribed period, or the data contained in the application is inconsistent with the actual state of affairs.

The KNF refuses entry (obligatorily), if:

• a final judgment has been issued prohibiting the entrepreneur from carrying out the business activity covered by the entry in the register of payment service providers,
• The entrepreneur in question has been removed from the register of payment service providers. The KNF has decided to prohibit that entrepreneur to carry out the activities covered by the entry in the 3 years preceding the submission of the application.

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