Initial Capital and Own Funds Requirements for Cyprus PSPs

Capital adequacy sits at the heart of payment institution and EMI regulation, designed to ensure firms have a financial buffer appropriate to the risks of the payment services they provide. Cyprus applies the capital framework set out in PSD2 and the Electronic Money Directive.

Initial Capital by Service Type

The minimum initial capital a payment institution must hold depends on which payment services it is authorised to provide, with money remittance-only firms subject to the lowest threshold, and firms providing the broader range of payment services subject to a higher figure. Electronic money institutions are subject to a separate, generally higher, minimum initial capital requirement given their ability to issue e-money.

Ongoing Own Funds Calculation Methods

Beyond the initial capital figure required to obtain a licence, PSD2 sets out several methods for calculating a firm’s ongoing own funds requirement, based on measures such as fixed overheads, payment volume, or a combination of relevant income indicators. The regulator approves which method a firm must apply, and firms cannot simply choose the most favourable option unilaterally.

Why This Matters Beyond Compliance

Capital requirements are not just a licensing hurdle; they directly affect a firm’s operating model, since undercapitalisation relative to growing transaction volumes can trigger regulatory intervention. Growing PSPs need to monitor their own funds position as their business scales, not only at the point of authorisation.

Planning Ahead

Applicants should model their expected transaction volumes and income over the first several years of operation and stress-test their capital position against realistic growth scenarios, rather than treating the initial capital figure as the only number that matters.

Enalian advises payment institutions, e-money institutions and fintech businesses on licensing, authorisation and ongoing regulatory compliance in Cyprus. If you are exploring a PSP or EMI licence, or need support with an existing authorisation, our team can help. Get in touch with our team to discuss your specific circumstances.

This article is provided for general informational purposes only and does not constitute legal, tax or regulatory advice. Regulatory requirements are subject to change; readers should seek specific advice on their circumstances before taking action.