Small payment institutions (MIPs), operating in Poland under the option provided for in Article 32 of PSD2, have become an important part of the domestic payment services market. The simplified nature of this regulatory regime enables smaller entities to enter the market without having to comply, from the outset of their operations, with all the requirements applicable to national payment institutions (KIPs). 

The future of MIPs is now, however, in doubt. In its comments on a legislative proposal drawn up by the Ministry of Finance (UC 132), the Polish Financial Supervision Authority (PFSA) proposed that the provisions governing MIPs be removed from the Payment Services Act. Under the proposal, entities already operating under this regime would be required either to cease their operations or to obtain authorisation to provide payment services as KIPs. 

The PFSA’s position is based on concerns regarding the operation of certain parts of the MIP market. The points raised by the supervisory authority include instances in which statutory operating limits have been exceeded and cross-border services have been provided unlawfully, risks relating to anti-money laundering (AML) and circumvention of sanctions, and the abuse of MIP registration by entities that do not provide genuine payment services. 

While the irregularities identified do warrant a discussion as to the effectiveness of the current supervisory model for MIPs, the question remains whether the complete abolition of this category of payment service providers is a necessary remedial measure. 

MIPs do not operate outside the regulatory framework. They are subject to compulsory registration with the PFSA, AML obligations, requirements concerning the safeguarding of users’ funds, and reporting obligations. The simplified nature of this regime therefore consists in limiting certain requirements as compared with those applicable to KIPs, rather than in exempting MIPs entirely from regulation and supervision. 

This is particularly significant for the Fintech sector. For new market participants, the MIP regime may constitute the first stage of entry into the payment services market. It allows them to commence operations on a limited scale, develop the services they provide and, only as the scale of their operations increases, transition to the full regulatory regime applicable to KIPs. The abolition of MIPs could, by contrast, mean that more extensive requirements would need to be met from the very outset of operations. For larger entities, this would primarily entail additional costs, whereas for smaller firms it could constitute a genuine barrier to entry into the payments market. 

The domestic debate is particularly noteworthy in the context of the changes planned at EU level. The proposed PSD3 Directive retains the option for member states to apply a simplified regime to smaller payment service providers, while also providing for stronger supervision and greater transparency of this model. Poland and the other member states may transpose these provisions into their national legal systems on a voluntary basis; EU law does not require them to do so. 

The direction of further work on the PFSA’s proposal will be relevant both to MIPs currently operating and to entities that are only considering entering the Polish market. It is essential to strike an appropriate balance between mitigating the risks identified by the supervisory authority and maintaining a proportionate regulatory model that enables smaller and innovative entities to enter the payment services market gradually.