Build or Buy? How Payments Startups Should Think About Getting Licensed

Every payments startup hits the same wall. The product works, the first customers are interested, and then someone asks: “Are you licensed?” At that point founders face a decision that shapes the next two years of the company: whether to buy an existing e-money licence or apply for a new one.

Neither answer is always right. Applying gives you a clean entity built around your model. Buying gets you into the market faster, if you find the right company, and there are more regulated companies listed for sale than most founders expect. Here’s how to think it through.

First, do you actually need your own licence?

Before choosing between building and buying, check whether you need a licence at all. Many early-stage payments companies start as agents or distributors of an already licensed institution, or build on a banking-as-a-service provider. That route is quicker and cheaper, but it ties your product, pricing and customer base to someone else’s licence.

Founders usually outgrow it for one of three reasons: the partner’s fees eat the margin, the partner’s risk appetite blocks the customers they want, or investors want the company to own its regulatory position.

If none of those applies yet, you may not need to decide today.

The case for applying

A new application gives you exactly what you designed. The business plan, the policies, the governance and the people are yours from day one, and there is no history to inherit.

The costs are time and capital. In the EU, an electronic money institution needs at least €350,000 of initial capital. Payment institutions need between €20,000 and €125,000 depending on the services they provide. You also need a credible team, including a compliance officer and an MLRO the regulator will accept, plus policies, systems and a realistic three-year plan.

Timelines vary widely by country. Some regulators set clear statutory clocks. The Bank of Lithuania, for example, must assess a complete EMI application within three months. But “complete” is doing a lot of work in that sentence. Questions, revisions and missing documents can stretch the real timeline far beyond the statutory one.

Applying makes sense when you have time, capital and a model that doesn’t fit anything already on the market.

The case for buying

Buying a licensed company means acquiring an entity that has already been through authorisation. If it’s clean and its licence matches your model, you skip the application and go straight to regulatory approval of you as the new owner.

That approval is not a formality. Regulators assess new controllers in much the same way they assess new applicants: who you are, where your money comes from, what you plan to do and who will run the firm. In the EU and UK, the regulator usually has 60 working days to assess a complete change of control notification, and preparing the file takes time too.

The benefits go beyond speed:

• Track record. Banks and card schemes are often more comfortable with a firm that has operated before.
• Existing infrastructure. Some licensed companies come with safeguarding accounts, scheme memberships or technical integrations.
• Certainty. You know the licence exists. With an application, you’re betting on an outcome.

The risks of buying

You inherit everything. If the company has unresolved complaints, a weak AML record, an unhappy regulator or a bank about to close its accounts, those become your problems the moment you complete.

Good due diligence covers the regulator’s file on the company, its capital position, its client and complaint history, its contracts, and whether the approved people are staying. The purchase agreement should make regulatory approval a condition of completion, so you don’t pay for a licence you can’t use.

Don’t forget the people

Whichever route you take, regulators license people as much as companies. You’ll need a management team the regulator will approve, a compliance officer and an MLRO with real experience, and directors with the time and authority to oversee the business.

If you’re buying, find out early whether the existing approved staff are staying. If they’re leaving at completion, you’ll need replacements approved quickly, and senior compliance hires in regulated finance usually take months, not weeks. If you’re applying, the people you name in the application are part of what the regulator assesses. A strong team can carry an average business plan. A weak team will sink a good one.

Hidden costs on both sides

Founders often budget for the capital and the legal fees and forget everything else. Both routes come with running costs from day one: audited accounts, regulatory fees, safeguarding arrangements, compliance systems, insurance and local office space. A licence that sits unused still costs money every month, so plan the first year of revenue as carefully as the licence itself.

A simple decision framework

Ask four questions:

1. How soon do you need to be live? If the answer is “this year,” buying usually wins.
2. Does an existing licence fit your model? If you need an unusual combination of permissions, applying may be the only option.
3. What can you afford? Buying means a purchase price on top of the capital requirement. Applying means legal fees and a longer wait before revenue.
4. How much risk can you absorb? A clean shell with no clients is low risk. An operating business with a client book is higher risk and needs deeper diligence.

What investors want to see

If you’re raising money, your licensing plan is part of the pitch. Investors will ask what happens if the application is delayed, or if the acquisition fails at the regulatory stage. Show them a primary route, a fallback and a realistic timeline for each.

A founder who can explain the trade-off between building and buying, with numbers, looks like someone who understands the business they’re in.

The bottom line

Licensing isn’t a box to tick at the end of the roadmap. It decides when you can launch, which customers you can serve and what your company is worth. Make the build-or-buy decision deliberately, early, and with your cap table in mind.