Author: James Borley, Director of Payment Services
The growth of white‑label arrangements in the payments sector has been nothing short of remarkable. As the market continues to fragment and specialise, firms are increasingly seeking to leverage existing regulatory infrastructure, technology stacks, and permissions rather than building them from scratch. White‑labelling has emerged as a commercially efficient solution but, from a regulatory perspective, it raises complex questions. Chief among them is whether such arrangements constitute agency or distribution, and why that distinction matters. Importantly, you won’t find ‘white-label’ as a defined term in primary legislation or regulatory guidance.
The Rise of White‑Labels
At its simplest, a common white‑label arrangement would involve an authorised firm allowing another (often unauthorised or differently authorised) to offer payment services under its own brand, relying upon the underlying firm’s permission, systems, and safeguarding arrangements. The end customer though may have little visibility of the authorised entity in the background.
Commercially, the appeal is obvious. New entrants can access market‑ready infrastructure without the time, cost, and uncertainty of an application for authorisation under the Payment Services Regulations 2017 (PSRs) or Electronic Money Regulations 2011 (EMRs). Established firms can extend market reach without direct customer acquisition. In an increasingly competitive environment, speed to market is often decisive.
However, this structural flexibility has outpaced regulation itself. Regular readers will know I am fond of the phrase “not in the contemplation of the legislators.” That phrase is particularly apt in this case. The regulatory perimeter under regimes such as PSD2 and PSRs/EMRs was designed with clearer delineations between principals, agents and distributors, with the latter being defined terms in legislation.
Definitionally Deficient
Because there ain’t one! The distinction between agents and distributors is not, however, merely semantic, it determines regulatory obligations, liability and oversight.
- Agents act on behalf of an authorised payment institution or electronic money institution (the ‘principal’ firm) in the provision of regulated payment services. They are explicitly recognised within the regulatory framework and must be registered with the relevant authority (i.e. the FCA in the UK). The principal firm retains full responsibility for their agent’s activities.
- Distributors, by contrast, are exclusively associated with electronic money. They may distribute or redeem e‑money but do not additionally provide payment services (if they do, they are considered agents. Still following?). Their role is intended to be narrower and more facilitative.
At first blush, white‑label arrangements do not neatly map onto either category. In practice, many exhibit characteristics of both. Even at a European level, from where the current drafts of PSRs and EMRs are derived, there is limited help. I recall hours of discussion at an E-money Passporting Working Group meeting debating the distinction between agents and distributors with my European counterparts. The European Banking Authority (EBA) does, however, have some helpful Q&A relating to distinguishing between agents and distributors. But white-labels, not so much.
When a White‑Label Looks Like an Agent
If you read the EBA Q&A, a white‑label partner begins to resemble an agent where it is actively involved in the provision of payment services. This may include:
- Onboarding customers and performing KYC processes;
- Handling transaction instructions;
- Managing the customer interface through which regulated payment services are delivered;
- Providing customer support relating to payment services.
In such cases, the partner is not merely facilitating access to a product (there is no payment service of ‘introducing’), it is participating in regulated activity. From a regulatory standpoint, this aligns closely with the concept of agency, regardless of how the relationship is described contractually.
Critically, regulators tend to adopt a substance‑over‑form approach. Simply labelling a relationship as ‘white‑label’ will not override the factual reality of who is doing what. Where a partner performs functions integral to the provision of payment services, agency classification is difficult to avoid. If you are acting ‘on behalf of’ an authorised firm…
This has several implications:
- The partner firm may need to be formally appointed and registered with the FCA as an agent;
- The principal firm must exercise robust oversight, including ongoing monitoring and control frameworks (specifically called out in the FCA’s 2025 Portfolio letter);
- Liability for regulatory breaches remains firmly with the authorised entity.
When It Resembles Distribution
Conversely, a white‑label arrangement may lean towards distribution where the partner’s role is more limited. For example:
- Marketing or promoting an e-money product (e.g. prepaid card) branded under its own name;
- Facilitating customer access to services without being directly involved in execution;
- Acting as an introducing intermediary rather than a service provider.
In the e‑money context, distributors are explicitly envisaged as part of the ecosystem. However, even here, the line can blur. The moment a distributor becomes involved in activities such as customer onboarding or transaction execution, it risks stepping into agent territory.
Why the Distinction Matters
Assuming it actually does matter, and that it might matter to the FCA, the regulatory consequences of misclassification could be significant.
- Regulatory Breach Risk
Failure to correctlyidentify an agent relationship can result in a breach of the principal firm’s scope of permission and/or authorisation requirements. This is not a mere technicality as operating an unregistered agent structure may invite FCA supervisory scrutiny. - Governance and Oversight
Agency arrangements impose clear obligations on the principal firm.These include conducting due diligence, implementing monitoring frameworks, and ensuring the agent complies with regulatory standards. Underestimating this can lead to weak controls and supervisory intervention. - Consumer Protection Considerations
From a regulatory perspective, clarity of responsibility is essential.In line with Consumer Duty, customers must ultimately be protected by the authorised firm’s safeguards, complaints procedures and capital requirements. Blurred lines can erode accountability. - Financial Crime Exposure
White‑label partners often sit at the customer interface, making them critical toAnti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) controls. If such partners are not appropriately categorised and overseen, financial crime risks may increase materially.
The FCA’s Evolving Focus
While regulatory frameworks have not been fundamentally rewritten to address white‑labelling, supervisory scrutiny across the payments sector has intensified. Without specifically referencing white-labels, the FCA has repeatedly highlighted concerns around:
- Complex outsourcing and distribution chains;
- Firms delegating material activities without sufficient oversight;
- Lack of transparency in customer relationships;
- Weak governance in agent networks.
White‑label models frequently sit at the intersection of these concerns. As such, firms operating such structures should expect increasing regulatory attention, particularly where scale is significant.
Substance Over Structure: A Practical Approach
In assessing whether a white‑label arrangement constitutes agency or distribution, firms should step back from contractual labels and consider the following:
- Who performs regulated activities? If the partner is executing or materially contributing to payment services, agency is likely.
- Who owns the customer relationship? Branding is not determinative, but operational control often is.
- What is the customer journey? Mapping the end‑to‑end process and payments flow typically reveals where regulated activity occurs.
- What controls are in place? The level of oversight required may itself indicate the nature of the relationship.
In many cases, the conclusion may be that the arrangement is, in substance, an agency relationship, even if not initially designed as such.
Conclusion
Regardless, white‑labelling is now an embedded feature of the payments ecosystem, enabling innovation and market access. However, its regulatory treatment remains nuanced and, at times, ambiguous. It is primarily for the firm itself to determine where its arrangement fit within the current regulatory perimeter but, ultimately, for the FCA to agree. Or not.
The key takeaway is that form does not trump substance. Where a white‑label partner is involved in the delivery of regulated payment services, the arrangement is likely to fall within the scope of agency, bringing with it clear regulatory obligations. Conversely, where the role is limited to promotion or distribution (within e‑money frameworks), a distributor classification may be appropriate.
For firms, the priority should not be to try to fit within a preferred category, but to accurately assess the nature of the arrangement and implement controls commensurate with the underlying risk. It is what it is. In an environment of increasing FCA supervisory focus, getting this wrong is not simply a theoretical concern, it is a tangible regulatory risk.
Ultimately, white‑labelling does not sit completely outside the regulatory perimeter; it tests its boundaries. Firms that recognise this, and act accordingly, will be better positioned to balance commercial opportunity with regulatory compliance.
We have commented in other articles about the expected forthcoming revisions to the PSRs and EMRs, and how they will likely be folded into the Financial Services and Markets Act. This would be an ideal opportunity for HM Treasury, to consider and address the current ambiguity of white-label arrangements with, perhaps a definition that helps determine regulatory status. Or not.
How Complyport Can Help
Complyport assists payment institutions, electronic money institutions, fintech firms and other regulated businesses in assessing complex business models and regulatory perimeter issues.
Our services include:
- Regulatory perimeter assessments for white-label, agency and distribution models;
- Gap analyses against the FCA’s expectations for payments and e-money firms;
- Outsourcing and third-party risk management reviews;
- Drafting and reviewing agency, distribution and white-label agreements;
- Compliance monitoring and oversight frameworks for agent and distributor networks;
- AML and CTF control reviews;
- Consumer Duty assessments and customer journey mapping;
- FCA authorisation, variation of permission and regulatory change support;
- Independent compliance audits and regulatory health checks.
Speak with a Subject Matter Expert
If you would like to discuss your white-label arrangements, regulatory obligations or broader payments compliance requirements, contact Complyport today and book a meeting with one of our Subject Matter Experts.
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