How to Obtain a Payment Institution Licence in the Czech Republic (KoalaPays-Type Cases)

Securing a Payment Institution (PI) licence is a critical milestone for fintech companies aiming to operate across the European Economic Area. This article outlines the essential legal requirements for obtaining this licence from the Czech National Bank (CNB), ensuring your business is built on a compliant and secure foundation. We clarify the complex regulatory landscape so you can focus on scaling your financial technology.

Need advice on this topic? Contact the ARROWS law firm by email office@arws.cz or phone +420 245 007 740. Your question will be answered by "Mgr. Vojtěch Sucharda", an expert on the subject.

Why Choose the Czech Republic for Your Fintech Hub?

The Czech Republic has established itself as a safe European harbour for financial institutions. For foreign investors and fintech operators—similar to successful platforms like KoalaPays—Prague offers a stable regulatory environment within the European Union, cost-effective operational structures, and direct access to the single market via passporting rights.

As a leading Czech law firm in Prague, EU, ARROWS supports foreign SMEs, large corporations, and investment groups in navigating this process. While the jurisdiction is attractive, the Czech National Bank is a rigorous regulator. Success requires more than just filling out forms; it demands a flawlessly executed legal strategy.

What Do You Need to Comply With?

The core legislation governing this sector is the Czech Act on Payment System. To obtain a full Payment Institution licence, you must prove to the CNB that your company is robust, transparent, and secure. This is not merely a bureaucratic exercise; it is a forensic audit of your business model.

You must demonstrate sufficient initial capital (typically starting at EUR 125,000 depending on the scope of services) and sound capital adequacy planning. Furthermore, you must implement a governance system that ensures the prudent management of the payment institution.

Even simple-looking steps often contain legal traps and hidden risks for laypeople, specifically regarding the definition of funds safeguarding.

We handle this agenda daily. Our experience with the CNB allows us to anticipate questions and structure your application to minimize delays. Our lawyers are ready to assist you – email us at office@arws.cz.

Initial Application Phase

Risks and penalties	How ARROWS helps (office@arws.cz)
Rejection due to vague business plan The CNB rejects applications that lack financial clarity or realistic projections, leading to months of wasted time.	Legal review of business models We align your business plan with regulatory expectations.
Incorrect Corporate Structure Choosing the wrong legal entity type can make you ineligible for the specific license tier you need.	Corporate structuring and incorporation We set up the correct vehicle for a PI licence.
Documentation Errors Inconsistencies between your Terms & Conditions and your internal operational manuals.	Drafting legally required documentation We ensure all documents are legally consistent.

How Can You Avoid Legal Risk in Management?

A critical component of the application is the "fit and proper" test. The CNB evaluates the professional competence and trustworthiness of your management board and supervisory board. This applies to both local and foreign executives.

You must prove that your managers have relevant experience in the financial sector and a clean criminal record. For foreign clients, gathering the correct cross-border verifications can be a procedural nightmare without local legal counsel.

ARROWS operates in 90 countries globally through our international network. We can facilitate the necessary background checks and legal opinions from foreign jurisdictions to satisfy the CNB.

Need legal help verifying your management team? Contact us at office@arws.cz.

FAQ – Legal Tips about Management Requirements

• Must the directors reside in the Czech Republic?
  While they do not need to be citizens, the CNB requires that the management of the payment institution is effectively conducted from the Czech Republic. This usually means key personnel must be present. For advice on relocation or hiring local directors, write to office@arws.cz.
• Can we use a "nominee" director structure?
  No. The CNB requires transparency. The persons managing the business must be the actual decision-makers with real competence. Nominee structures will lead to immediate rejection.To structure your board correctly, contact office@arws.cz.

The Critical Role of AML/CFT Compliance

The steepest hurdle for most applicants is Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT). The Czech Republic implements strict EU directives (AMLD5/AMLD6). Your internal control system must be sophisticated enough to detect suspicious transactions in real-time.

You cannot simply copy-paste a template. The CNB requires a tailored risk assessment specific to your client base and transaction types. Failure to provide a robust AML manual is the most common reason for license delays.

Drafting these internal policies requires deep knowledge of both local execution and international standards.

As an international law firm operating from Prague, European Union, ARROWS specializes in drafting these high-stakes documents. We mitigate the risk of your application being flagged as high-risk by the regulator.

Operational & Compliance Risks

Risks and penalties	How ARROWS helps (office@arws.cz)
Inadequate AML Procedures Risk of the application being suspended or rejected if the system cannot detect money laundering effectively.	Preparation of internal company policies We draft AML/CFT manuals tailored to your product.
Safeguarding of Funds Failure Failure to legally separate client funds from company operational funds leads to severe penalties.	Legal consultations to prevent penalties We help structure your safeguarding accounts with partner banks.
IT Security Gaps Non-compliance with EBA Guidelines on ICT and security risk management.	IT & Legal coordination We cooperate with IT auditors to align tech with law.

What Is the Next Step?

Once the application is submitted, the CNB has a statutory period to decide, but in practice, the process involves several rounds of questions and amendments. This "administrative procedure" is where an experienced law firm earns its value.

We handle communication with the regulator, responding to their inquiries rapidly and accurately. This significantly reduces the client's risk of rejection and saves months of operational time. It is much safer to have the matter handled professionally than to attempt a DIY approach with the CNB.

ARROWS is insured for damages up to CZK 500 million, providing you with an extra layer of security that freelance consultants cannot offer. We also support over 150 joint-stock companies and can connect you with potential partners within our client network when business interests align.

Get tailored legal solutions by writing to office@arws.cz.

Post-Licensing & Operations

Risks and penalties	How ARROWS helps (office@arws.cz)
Passporting Errors Incorrect notification procedures when expanding to other EU states can block your cross-border growth.	Legal guidance in cross-border matters We handle the EU passporting notification process.
Reporting Failures Fines of up to millions of CZK for failing to submit regular reports to the CNB.	Professional training for employees We train your compliance team on reporting obligations.
CNB Inspections On-site inspections can result in licence revocation if violations are found.	Representation before public authorities We represent you during inspections to defend your interests.

FAQ – Most Common Legal Questions about Payment Institution Licences

1. How long does the licensing process take in the Czech Republic?
While the law states specific deadlines, the complexity of the process typically means it takes 6 to 12 months from preparation to final approval. The quality of the initial documentation significantly impacts this timeline. For a timeline estimate based on your specific business model, contact office@arws.cz.

2. What is the difference between a Small-Scale Payment Provider and a full Payment Institution?
A Small-Scale provider has lower capital requirements and simpler administration but is limited to a monthly transaction volume of EUR 3 million and cannot passport services to other EU countries. A full PI licence has no volume limit and allows EU-wide operation. To decide which licence fits your strategy, email office@arws.cz.

3. Can we operate in other EU countries with a Czech licence?
Yes. Once you obtain a full Payment Institution licence in the Czech Republic, you can "passport" it to other EU member states without obtaining a new licence in each country. This makes Prague an ideal entry point. For immediate assistance with EU expansion strategies, write to us at office@arws.cz.

4. Do we need a physical office in Prague?
Yes. You must have a real registered seat and the actual head office in the Czech Republic. It cannot be a virtual mailbox; the CNB requires that the "mind and management" of the company reside here. We can assist with real estate and office set-up. Contact office@arws.cz.

5. How much does the legal support cost?
Costs vary based on the complexity of your business model (e.g., are you issuing e-money, providing account information services, or just payment processing?). We provide transparent fee structures after an initial assessment. Do not hesitate to contact our firm for a quote – office@arws.cz.