After reading about how Open Banking is opening up access to customers’ account and transaction data you may well have a great idea for a product you want to launch. This post is to help you get an idea of how much money it will cost to register with the FCA and ongoing unavoidable costs once you are registered.
Firstly, let’s assume you only want to access account and transaction data for your product or service. In regulatory speak, if you want to access this data and present it back to the customer you are providing ‘Account Information Services’ (AIS) and you would be a ‘Account Information Service Provider’ (AISP).
Since January 2018, in the European Economic Area (EEA) you need permission from the financial services regulator to provide these services — in the UK the regulator who gives this permission is the Financial Conduct Authority (FCA). After getting permission you will be a ‘Registered Account Information Service Provider’ (RAISP).
If you want to provide payment services as well, such as initiate payments or hold money for your customers it will be somewhat more complicated (and costly) as you will need to be authorised rather than registered. This basically means you will be subject to following more rules and may need to have some upfront capital. There are a lot of possible different options here so we’ll just look at costs of offering Account Information Services for the moment.
So on to the costs…
- Application fee. You will pay this when you send in the application to the FCA. Unfortunately if you are not approved it is not reimbursed. This is currently £1500.
- Ongoing regulatory fees. Once you are regulated you will need to pay an annual fee. This goes to covering the running costs of the FCA and the Financial Ombudsman Service (FOS). The amount you need to pay depends on your gross income. If your gross income is £100,000 or less it will be about £600. With a gross income of £1 million it would be about £1000.
- Personal Indemnity Insurance (PII). As a RAISP you are required to have insurance which covers you if a third party claims to have suffered a loss, usually due to professional negligence. The European Banking Authority has published criteria on how to calculate the amount of cover needed. You should budget about £1000 for £1 million cover.
*Update on PII – since publishing the article I did some further research on PSD2 specific PII insurance. As there are limited suppliers in the market currently these have quite high minimum premiums in place. The lowest I found was £2,500, with two others coming in at £5,000 and £6,000.*
Bear in mind the above are estimates and there may be other costs associated with getting registered, for example if you use a consultancy to help with your application. Links to the sources used for these calculations are below.
FCA application fee — https://www.fca.org.uk/firms/emi-payment-institutions-application-fees
Ongoing regulatory fees — https://www.fca.org.uk/firms/calculate-your-annual-fee/fee-calculator (use fee block G003)
Personal Indemnity Insurance — http://www.rics.org/uk/knowledge/small-business-hub/small-business-toolkit/pii-for-start-ups/
FCA guidelines on Personal Indemnity Insurance — https://www.fca.org.uk/firms/professional-indemnity-insurance
Image by Ken Teegardin from Boulder, Boulder (Piggy Bank On Pennies) [CC BY-SA 2.0 (https://creativecommons.org/licenses/by-sa/2.0)], via Wikimedia Commons