Concept
In EU and UK payments, regulated activity can be conducted under someone else's license—as an agent of a neobank (PI, neobank) or an e-money issuer (neobank). The agent acts on behalf of the principal licensee (PSD2, Art.4(38)); the license remains with the principal, and the principal files the agent's registration with the regulator. This is the payment vertical of embedded finance.
Roles differ. neobank agents and PI agents provide payment services on behalf of the principal. E-money distributors distribute e-money (sell and redeem), do not provide payment services, and are not registered with the regulator. In investment services, the analogue is a tied agent under MiFID.
Legally, the construction grew out of PSD2 (in application since 2018): the directive established the figure of the agent and the principle of single authorization with a passport, and on that foundation the embedded finance market rose—fintechs embed an account, a card, and a payment into a non-core product under someone else's license. Economically it is a close relative of license for rent from adjacent verticals, while who actually stands behind embedded finance in practice is covered in a separate analysis.
How It Works
The agent route: the principal neobank/PI conducts due diligence on the candidate, then submits it to the national regulator as its agent. After registration, the agent operates under the principal's license—in its home country and in countries where the principal has obtained a passport. The agent does not need its own authorization or capital.
Client funds are protected through safeguarding: they are ring-fenced in a separate account at a credit institution or covered by insurance/guarantee. Commingling with the principal's own funds is prohibited. This is the same fund segregation discipline as in correspondent banking and safeguarding.
What You Need to Launch
Through the agent model—no capital, no own license: you need to meet the principal's requirements (AML policies, fit-and-proper for management, operational readiness) and register through it. Launch—within weeks. For your own license, minimum capital depends on the regime.
| Regime | Minimum Initial Capital |
|---|---|
| neobank — e-money issuer | €350,000 (EMD2, Art.4) |
| PI — money remittance | €20,000 |
| PI — payment initiation services (PIS) only | €50,000 |
| PI — full range of payment services | €125,000 |
Timelines for your own license are a guide that depends heavily on the completeness of the application and the regulator's workload: Lithuania—usually 6–9 months (one of the fastest routes in the EU), UK (FCA)—9–12, Ireland—12–18. Therefore, many start as agents and arrange their own authorization—for example, an neobank in Luxembourg or PSA payment licenses in Singapore—later, when volumes justify the capital and compliance staff.
Compliance
Basic set: AML/KYC under AMLD (CDD, monitoring, suspicious transaction reporting), sanctions screening, safeguarding reconciliation of client funds, reporting to the principal and regulator. The agent operates within the principal's compliance perimeter: the principal is obliged to monitor the agent, conduct periodic reviews, and disconnect it in case of violations. Responsibility before the regulator remains with the principal.
How It's Done in the Market
Principals are BaaS neobanks and neobanks—in the EU and UK these include, for example, ClearBank, Griffin, Swan, Treezor, Modulr. They give agents access to accounts, cards, and payments via API and take on the license and safeguarding; the card part of the program is usually built through BIN sponsorship. The principals' market has gone through notable consolidation and stress: Railsr, following its rescue, merged with Equals Money (2025), and Solaris operates under heightened BaFin supervision and with restrictions on onboarding new clients. The principal's condition is therefore checked in advance, at the selection stage.
What to look for when choosing a principal: stability and reputation (license revocation of the principal stops agents too), where it has a passport, which safeguarding bank and how reconciliation is organized, economics (revenue share, access fees, minimums), and the right to transfer the program. When volumes and desire for control outweigh—they transition to their own neobank/PI license.
Applicable Regulation
PSD2 (agent—Art.4(38)) and EMD2 (neobank and capital) grant a passport across EU/EEA based on a single authorization—the legal foundation of the entire agent model. They are being replaced by PSD3 and PSR: the Council published the final compromise text on April 23, 2026; ahead lie a European Parliament vote and publication in the Official Journal (expected in the second half of 2026), with application approximately 21 months after that. Key points for agents: the neobank regime merges into PI (becoming its subcategory; existing institutions are given 24 months to reauthorize, up to 30 on extension), the commercial agent exemption is narrowed, e-money distributors are directly regulated as agents, starting capital is indexed to inflation, and non-bank PIs gain direct access to payment systems (TARGET2). Where the entire regulatory perimeter is moving is covered in a separate material; the primary source on the reform is the European Commission's Payment services page.
| Pros | Cons |
|---|---|
| Launch without capital and own license | Dependence on the principal: its problems or license revocation hit the agent |
| Passport across EU/EEA through the principal's authorization | Revenue share goes to the principal; economics squeeze with growth |
| Ready infrastructure for accounts, cards, and payments | PSD3/PSR tightens: neobank reauthorization, narrowing of agent exemptions |
| Clear path to own license | Safeguarding and AML under constant monitoring and audit |
Neighboring models and the perimeter boundary
The same logic—operating under someone else's authorization—repeats in adjacent niches. In crypto it is the white-label CASP: a service under a provider's license under MiCA. In the US, the role of the European principal is played by sponsor banks and BaaS middleware such as Unit or Treasury Prime. In the investment industry the analogue is a tied agent under MiFID and host structures, while in Singapore payment activity is built on PSA licenses. The motive is the same everywhere: regulatory access is rented, while responsibility remains with the license holder.
The perimeter boundary keeps shifting. PSD3/PSR pulls e-money distributors and commercial agents under supervision, MiCA closes off crypto, and the course toward direct access for non-bank neobanks to payment systems reduces dependence on sponsor banks. Therefore a model for which agent status is enough today may tomorrow require its own license—it is worth tracking how the regulatory perimeter is shifting in advance.
Frequently asked questions
Does an agent need its own license
No. The agent operates under the principal neobank/PI's license; the principal registers it with the regulator. An e-money distributor is not registered at all, but does not provide payment services either.
How much capital is needed for your own license
neobank—€350,000. PI—€20,000 (money remittance), €50,000 (PIS only), or €125,000 (full range of payment services). Plus safeguarding of client funds and a compliance function.
What does PSD3 and PSR change
The neobank regime merges into PI: existing neobanks are given 24 months to reauthorize (up to 30 on extension), the commercial agent exemption is narrowed, e-money distributors are regulated as agents, starting capital is indexed to inflation, and non-bank PIs gain direct access to TARGET2. The Council's final compromise text is dated April 23, 2026; a European Parliament vote and OJ publication lie ahead, with application approximately 21 months later.
This material is prepared as an expert overview and does not constitute individual legal advice.