United Kingdom Payment Service Agent and the PSD Agent UK Framework are the new routes also which have opened up for the Fintechs to provide their payment services.
It is a sort of authorized delegation model below either a full PI or EMI.
This sub-license opens up the UK regulated market with smaller requirements on entry and less capital, and with faster authorization—an alternate strategic option to landing your own complete PI license in the UK.
This guide captures the essence of what a PSD Agent UK is and how it works, including related regulatory requirements, benefits, use cases, and practical steps on how you can have businesses for sale in UK.
Explanation of the Concept of PSD Agent UK
So the updated Payment Services Directive is in place now in the UK, and one framework that has been allowed by the Financial Conduct Authority is called a PSD Agent. In this framework, a fully authorized payment institution delegates some regulated actions to be carried out by another firm—usually an agent. This agent is not directly, per se, authorized as a PI or EMI; rather, he can deliver payment services on behalf of the principal while under tight controls and liability placed on them by the principal.
Although it is not directly specified in the FCA documentation as a sub-license, the PSD Agent is an authorized sub-delegation relationship by which service provision under the principal’s license is allowed.
The Way It Works
Delegation Contract
The principal and the agent conclude a delegation contract, which describes the services that the agent is authorized to perform and states its obligations regarding compliance together with the scope of operations and arrangements for fees suitable for them.
Approval of the FCA
The principal shall notify or get the FCA’s permission for each agent appointment. The competence and appropriateness of the agent shall be checked without requiring a full PI request.
Delegated Activities
The agent may, therefore, carry out services such as payment initiation, account info services, money remittance, or point-of-sale payments—all within the license banner of the principal.
Supervision and Liability
With regard to the FCA, the principal remains fully liable and accountable for compliance failures. Agents are monitored, reported, and audited with written policies and procedures. This way, agents are able to undertake controlled services without holding their own individual authorizations, but within a legal UK framework.
Principle: It is his/her ultimate responsibility to supervise the delegated functions, and that is a payment firm holding a license.
This is a regulated assistance firm acting under delegation, and agent is a term used for that purpose; compliance, operational, and reporting requirements are in place.
Obligations of Agent
Agents are obliged to act in accordance with the high standards of good regulation to the extent to which they are able without the grant of full permission, which covers:
- Fit and proper management
- Adequacy of operational capability and competence
- Effective compliance history and transaction monitoring
- Fraud prevention policies and customer protection mechanisms
- The agent’s systems and team will be subject to scrutiny by FCA throughout the approval process.
- The PSD Agent Model Benefits
- Faster Entry into the Market
An agent can start working as soon as the delegation agreement goes live—from a few weeks instead of several months needed for a full application.
Low Capital Requirement
There is no need to attract the required minimum level of capital that has to be locked in with full PIs or EMIs, where such levels are generally between €125,000 and in excess of €350,000.
Reduced Compliance Burden
While agents still need the policy and procedures, most of the reporting and control burden will remain with the principal.
Operational Flexibility
Agents can build customer-facing platforms, integrate payment flows, and innovate under the aegis of the principal’s license.
Brand Autonomy
Agents could operate under their own brand, subject to making it clear to the public that the service was being supplied with a principal’s license.
Limitations and Risks
Continuous FCA Oversight
This means that if the principal is liable, then so is the agent and, in turn, both may end up having periodic audits by, investigations or even sanctions from, the other.
Unless provided for otherwise by the party with its principal, agents are only allowed to continue in any other regulated business once extending delegation arrangements.
Dependence on Principal
The operation of the agent ceases upon disqualification of the principal or termination of the delegation agreement.
Clarity of Brand
Consumer disclosures shall state very clearly that the agent does not act as an independent licensee in order to be not perceived as misleading the customers.
PSD Agent UK: Common Use Cases
Embedded Finance
On a principal’s license, tech platforms, SaaS providers, or mobile apps shall be allowed to embed payment initiation or account information services without the need for full licensing.
Expansion of Fintech Vertical
Remittance service providers trying out newer market verticals, like gig economy and cross-border remittance, can make use of the PSD Agent status before looking at full licensing.
International Fintechs
Non-UK businesses could therefore consider serving UK-customers on services controlled by a local principal, without the necessity of obtaining a local entity license.
White-Label Partnerships
Under delegation, agents can run white-label payment systems (cards, wallets, invoicing) under the principal’s regulatory umbrella—while building brand visibility.
Practical Steps to Become a PSD Agent
Identify a Principal
Partner with an FCA-authorized PI or EMI that is open to delegation and willing to support your service model.
Conduct Due Diligence
Ensure both parties align on service definition, compliance standards, reporting formats, and client onboarding procedures.
Draft Delegation Agreement
Define responsibilities, KPIs, breach mechanisms, liability clauses, and termination rights. Include consumer disclosures and branding alignment.
Submit to FCA
The principal must incorporate the agent into its regulatory filing. Depending on the agents’ role, FCA notification may suffice—or prior consent may be required.
Set Up Compliance Infrastructure
Establish AML/KYC procedures, transaction monitoring, fraud detection, complaints handling, and record-keeping—even though oversight is shared.
Launch Services
Begin operations as soon as the FCA approves or acknowledges the delegation. Inform customers about the regulatory relationship in user-facing materials.
Maintain Ongoing Reporting and Monitoring
Stay aligned with principal oversight—provide regular transaction reports, compliance reviews, audits, and respond promptly to FCA inquiries.
Final Thoughts
The PSD Agent UK model offers firms a pragmatic and efficient way to offer regulated income assistance in the UK. By operating under the umbrella of an existing authorized institution, agents can bring services to the field quickly, use lower capital, and build their market presence. However, success in this model depends on strong partnerships, rigorous compliance, and constant alignment with regulatory expectations.
For organizations exploring embedded finance, fintech expansion, or lower-cost entry into payments, the remittance sub-license route may provide the ideal balance between speed-to-market and regulatory integrity.
