What Are International Payment Providers and Why Are They Regulated by the Bank of Spain
What Are International Payment Providers and Why Are They Regulated by the Bank of Spain
If your company exports or imports, you probably use your bank for international payments. It's what you've always done. It feels safe.
But at some point, someone may tell you there are specialised providers that can handle your currency operations at a significantly lower cost. And your first question will probably be: is it safe?
The short answer is yes. Here's why.
What are these providers?
They are companies that specialise exclusively in international payments and currency exchange. Unlike your bank, which offers hundreds of products (mortgages, loans, credit cards, insurance), these providers do one thing: move money across borders and convert currencies.
Because it's all they do, they do it more efficiently. They don't apply hidden markups on the exchange rate. Their cost is transparent and typically 60% to 70% lower than what traditional banks charge for the same operation.
In practical terms, a company that pays 1.5% to 2.5% in hidden exchange rate costs through their bank could reduce that cost significantly by using one of these providers.
Are they legal?
Yes. These providers are officially known as Payment Service Providers under European law. They are authorised and supervised by the Bank of Spain, the same institution that supervises banks.
To operate in Spain, a payment provider must obtain prior authorisation from the Bank of Spain. This involves meeting strict requirements: minimum capital, qualified management, internal controls, anti-money laundering procedures, and regular audits.
How is your money protected?
This is usually the biggest concern: what happens to my money if the provider has a problem?
European regulation requires all authorised payment providers to keep client funds in what are called safeguarding accounts. These are segregated accounts held at authorised banks, completely separate from the provider's own money.
What this means in practice:
Your money is never mixed with the provider's funds. If the provider were to face financial difficulties, your money is legally protected and separated from the provider's creditors. The funds sit in a regulated bank, ring-fenced from anything that happens to the provider itself.
This is different from how banks work. When you deposit money in a bank, it becomes part of the bank's balance sheet. If the bank fails, your deposit is covered by the Deposit Guarantee Fund, but only up to 100,000 euros. With a payment provider, your funds are segregated with no upper limit.
What regulation applies?
The legal framework is the European Payment Services Directive, known as PSD2. In Spain, this was transposed through Royal Decree-Law 19/2018 and further developed by Royal Decree 736/2019.
You don't need to remember these numbers. What matters is that the regulation requires:
Authorisation before operating. No company can offer payment services without being approved first. Ongoing supervision by the Bank of Spain, with regular reporting, inspections, and transparency requirements. Client fund protection through safeguarding accounts, as described above. Clear information to clients about costs, exchange rates, and execution times.
A new directive, PSD3, is currently being prepared at the European level. It will further strengthen transparency and consumer protection.
Do I need to leave my bank?
No. Using a specialised payment provider doesn't mean closing your bank account or changing your banking relationship. Your bank continues to handle your day-to-day operations: your business account, your credit line, your payroll, your direct debits.
The payment provider acts as a complementary channel, specifically for your international currency operations. Think of it like getting a second medical opinion. It doesn't mean you're changing your doctor. It means you're making a more informed decision.
How do I know if a provider is trustworthy?
Two simple checks:
First, ask them directly how they protect your funds. Any legitimate provider will explain their safeguarding arrangements openly.
Second, check how they make money. Legitimate providers earn a transparent fee or margin on the exchange rate. If a provider claims their service is completely free with no cost whatsoever, ask more questions.
The bottom line
Specialised international payment providers are not new, exotic, or risky. They are regulated financial institutions, authorised by the same authority that supervises your bank, and subject to strict rules about how they handle your money.
The real question is not whether they're safe. It's whether continuing to pay hidden costs at your bank, without comparing, is the best decision for your company.
Free diagnostic
At IPAyments, we provide free currency cost diagnostics for companies with international operations. We analyse your recent transactions, calculate the real cost your bank is applying, and show you how much you could optimise.
The diagnostic is free and comes with no commitment. Write to us at clientes@ipa-yments.com or contact us directly through LinkedIn.