Payments innovation
Our team advises on all legal and regulatory aspects of payment systems, services, and products
There are few sectors that can claim to have changed as significantly in recent years as the payments sector, with a dramatic rise in e-commerce and online payments, wallet services, and other payments innovations. The global payment systems landscape faces continual disruption, as innovators look to alternative payment rails to bring about greater efficiencies in both the retail and wholesale markets. For businesses in the ecosystem, ensuring that they can keep pace with developments and meet future challenges in the payments world is a key priority.
Payments are at the heart of financial services
A global payments offering from an integrated team
Our market-leading, multidisciplinary team work alongside both pioneering new market entrants and long-established players in the payments space. We help our clients structure new payments systems, products and services in local and international markets and with increasing regulatory scrutiny.
Being part of our global Technology Sector, we have insights into many trends emerging across the globe. This gives us a unique breadth and depth of expertise. Our collaborative approach ensures that clients receive commercially innovative and technically strong specialised advice.
Empowering payments innovation
We support our clients with the rapid digital transformation of the payments sector and in seeking opportunities to leverage new technologies, innovative systems and products, whilst navigating the associated risks. We ensure their businesses are structured appropriately, operate compliantly, and are able to offer DLT-based and other innovative systems, products and services.
Finger on the regulatory pulse
Payments are not just of paramount importance to financial services institutions but are increasingly relevant to corporate and tech companies who are being drawn into the expanding regulatory perimeter. We engage directly with regulators in all areas of regulatory structuring, advice and governance, complex regulatory investigations, enforcement cases, system and control requirements, regulatory and reporting advice.
Harry Eddis
Global Co-Head of Fintech
Our full payments offering
Payment systems of the future
Payment systems are the infrastructure that underpins all services relating to the transfer of value. We are at the forefront of the legal developments in payment systems. As technological developments drive new business models, we have supported clients on many ground-breaking use cases within the sector, as well as the payments aspects of innovation in financial market infrastructure.
We have unparalleled experience in establishing global payment systems, both retail-facing and wholesale and in advising on the commercial arrangements. We advise on the inception and design of new DLT-based or other innovative payment systems and on the geographic expansion of existing systems.
Our expertise spans drafting complex system rules, liaising with regulators and advising as to other commercial and structural arrangements, including outsourcing. We also regularly advise on issues of clearing, netting and settlement, including all aspects of settlement finality. Find out more about our wider Financial Market Infrastructure offering.
Case studies:
Fnality – new global wholesale payment system based on blockchain technology
Euroclear digital FMI for digital bonds
"Digital native and established financial institutions in payments alike, face intense regulatory scrutiny as they deploy innovative tech solutions in a complex and evolving regulatory environment"
Richard Hay
UK Head of Fintech
"We have advised on many of the most complex and cutting-edge matters in the market."
Michael Voisin
Capital Markets Partner, London
Payments investment and funding
We provide clients across the payments sector with the right specialist teams to navigate the largest, most complex M&A deals. Our deep technical and commercial understanding of the sector and its infrastructure, our integrated cross-practice offering and the volume of payments deals we execute across our network set us apart.
We also support our clients with a full range of corporate transactions and funding opportunities, including minority investments, funding rounds, corporate structuring, joint ventures and consortium arrangements, and entering new markets in a range of jurisdictions. We also work with clients to prepare for exits and liquidity events, including IPOs, disposals and selldowns. Across these transactions, our clients benefit from the expertise of our cross-border, cross-practice team both within the payments sector and across the full range of these corporate transactions.
The payments sector also faces increased scrutiny from antitrust and foreign investment authorities, particularly due to the focus on companies that hold sensitive data, develop critical or emerging and innovative technologies (such as AI and cryptographic authentication), or are active in data infrastructure. We are well-versed in managing that dynamic on M&A transactions with the focus on helping client to get their deals done.
We offer a one-stop shop for handling merger control and foreign investment review filings: a single, central point of contact and a coherent global strategy, critical to navigating merger control and foreign investment approvals successfully.
Case studies:
Bitpanda acquisition of a crypto custodian wallet provider
"The Fintech market is set for consolidation, particularly in payments, and that presents a range of opportunities for clients that want to be part of this innovative, fast-paced sector”
Finn Griggs
Global Co-Head of Fintech, London
"Many fundamental growth drivers for the continued digitalisation of financial products, services and market infrastructure present investment opportunity”.
Niranjan Arasaratnam
Global Tech Sector Leader, Singapore
Payments services and products
We undertake a broad range of work for our clients across the payments ecosystem including digital wallet providers, merchant acquirers, payment processors and providers of online payments gateways.
We help them structure new products, including new forms of digital money/ stablecoins and CBDCs, and services in local and international markets and advise on insolvency risks in payments chains.
We advise on all facets of payments regulation, including new authorisations, structuring new products and services in local and international markets, and assisting businesses who find themselves under regulatory scrutiny.
This may include obtaining authorisations, advising on regulatory capital and safeguarding issues, advising on and drafting documentation for payments propositions and advising on dealing with contentious, fraud and complaint cases, giving us a unique breadth and depth of expertise.
Case studies:
UN High Commissioner for Refugees (UNHCR – The UN Refugee Agency) digital wallets
"Working is continuing on developing, and preparing the legal framework for, blockchain-based payments, whether in the form of stablecoins or central bank digital currencies - with hopes of solving the enduring instant payments and cross-border payments challenge."
Peiying Chua
Asia Head of Fintech, Singapore
"Payments services are of paramount importance not only for our financial services clients, but will equally be a key to success for many corporate and tech businesses – who need to be compliance focused as regulatory perimeter expands."
Andreas Van Impe
Financial Regulation Counsel, Brussels
Digital regulation - antitrust and foreign investment; data; cyber and AI – Employment, ESG & Diversity
Antitrust and foreign investment
Our deep experience advising on technological and regulatory change means we are well equipped to advise clients in the payments sector on the challenges associated with new payments technologies and products and increased regulatory focus on this area including antitrust and foreign investment in tech.
Data and cyber
As cloud services, outsourcing arrangements and artificial intelligence solutions move to the centre of the value creation, so too do legal questions.
We have extensive data protection experience and have advised numerous clients on how to best monetise their data – particularly relevant to the payments sector where huge volumes are produced and regulatory scrutiny is sharpening.
Cyber security is one of the most serious threats in payments and is increasing as payment infrastructures become more digitalized, integrated, and interdependent. Cyber risk management is a board level issue and we work with clients to build their cyber and operational resilience compliance – which is extending to all players in the payments ecosystem. They need to protect their intellectual property, and create the appropriate governance structures to respond quickly and appropriately to crisis events when they happen.
Regulation of AI
The increasing adoption of AI in financial services generally continues to raise unique and complex ethical and legal challenges. A dynamic and evolving regulatory landscape, and increasing regulatory focus means firms will need to actively address the challenge of AI risk management.
Our global, cross-practice team can advise on how to navigate the full spectrum of legal risks, as amplified by GenAI, arising from both internal operational and consumer-facing deployments.
Employment, ESG & Diversity
Clients turn to us to address their strategic employment and environmental, societal and governance (ESG) issues to best effect in areas such as workplace culture, diversity, pay and incentives, workforce restructuring, supply chain and climate change compliance and whistle-blowing.
As a firm, our vision is to be known as ‘best in class’ for diversity, equality and inclusion in the legal sector. It’s not just a box-ticking exercise for us, but a strategic and ethical understanding that we cannot be the leaders we aspire to be without the best talent in the world. Visit our dedicated Culture Hub and Diversity Faculty.
"Maintaining customer trust in this fast-moving risk environment is a key priority for all payments providers"
Alex Roberts
China Tech Sector Leader, Shanghai
"A key challenge for payments businesses will be managing the evolving risk and compliance environment for GenAI”.
Julian Cunningham-Day
Global Co-Head of Fintech, London
Disputes and investigations in payments
Given payments underpin the entire global economy it is an inherently complex area both in terms of the technology underlying the systems, services and products and the regulations governing them.
As a result, when disputes and investigations arise in the payments context, they are often serious and difficult. Clients need lawyers who understand the space and can advise in the light of the entire payments technological and regulatory landscape.
We work increasingly with clients in engaging with regulators across the globe, both to manage compliance risk and to support regulatory investigations when they occur and any resulting enforcement or litigation.
From advising on major regulatory investigations to urgent injunctions; from IP disputes to anti-money laundering investigations; from judicial reviews to sanctions issues – we’ve advised many of the world’s leading payments operators, and some of the most promising up and coming companies, on their most sensitive issues.
Case studies:
Payments related sanctions enforcement
"Payments is experiencing continual disruption involving a constant flow of innovations and market entrants – leading to competitive tension and new risks. Expect to see the current regulatory focus on payment firms’ compliance with financial regulations continue – as well as disputes between those active in this space."
Ben Packer
Litigation, Arbitration and Investigations partner, London
"Regulatory focus continues on fintechs and payments firms inadvertently facilitating financial crime via money laundering, sanctions evasion or exposing their customers to fraud and scams.
Liz Dowd
Financial Regulation Partner, London
Case studies
Click on each of the topics to find out more
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Fnality – new global wholesale payment system based on blockchain technology
Overview
We continue to advise Fnality (a firm founded by a consortium of leading financial institutions) on a project to establish a new global wholesale payment system based on blockchain technology.
Lawyers across multiple disciplines have been instrumental in advising on the regulatory and structuring aspects of the project from the outset. That has included advising on key points of regulatory impact, including the classification of the system, settlement finality questions, interoperability with systems intended to be set up in other jurisdictions as well as drafting rulebooks and all necessary documentation. Providing a joined-up service has been critical to getting the client over the regulatory line.
One of the key areas of work was to write the contractual document that will be used by all participants, including the admission agreement, the terms and conditions, as well as other relevant arrangements.
Challenges and solutions
This has been a hugely technical project, requiring a detailed understanding of the payments architecture in the UK and a depth of knowledge around the operation and regulation of payment systems.
This legal expertise could only be delivered alongside the technological expertise of how to develop a ground-breaking system provided through a distributed ledger. Our technology team advised around the node operation requirements and the interface with participants, including requirements on outsourcing.
Now that Fnality has been designated as a regulated payment system we are advising on the corporate set-up and on compliance with applicable regulatory requirements.
This matter showcases our ability to navigate complex regulatory and technology driven requirements, driving value for our clients by being proactive in dealing with issues before they materialise. We understand payment systems, and can support their development and expansion, no matter the complexity
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Euroclear digital FMI for digital bonds
Overview
We advised Euroclear Bank SA/NV (Euroclear) and The Toronto Dominion Bank on a flagship and ground-breaking project in the capital markets, being the establishment of the Euroclear’s Digital Financial Market Infrastructure (the D-FMI) and the first series of notes to be issued into the D-FMI.
In our role, we acted as advisor to Euroclear in the legal structuring of the D-FMI (and consequential technological structuring) and provided regulatory advice, stakeholder management and project management support. We also acted as the sole advisor to The Toronto Dominion Bank as the dealer for the first issuance on the D-FMI.
The D-FMI involves the primary issuance of digital bonds using blockchain technology and facilitates immobilisation for onward secondary market trading. It is a highly innovative and market leading project which demonstrates the deployment of DLT/blockchain in the context of continued FMI innovation and digital bond issuances.
Challenges and solutions
As part of our role, we structured a jurisdiction-neutral holding model, which was not solely based on specific English law legal concepts but rather envisioned how digital bonds could be structured under different governing laws. This is crucial for the platform to accommodate securities governed by different legal systems flexibly.
We carried out detailed analyses for all elements of the structure, including in respect of UTXO and account based models, questions surrounding insolvency remoteness, formality requirements, conflicts of laws, settlement finality and CSDR.
Our support enabled Euroclear to engage with key policymakers, the central bank of Belgium and prospective participants (both direct and indirect) in the D-FMI, as well as prospective issuers. As a part of this, we produced high level materials to explain the intended structure of the D-FMI and the underpinning key regulatory concepts.
We helped Euroclear draft and negotiate the issuance documentation for its first issuance on the D-FMI which will be issued by World Bank and also helped Euroclear amend its platform-level documentation.
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Wise listing
Overview
We advised Wise plc, on its £8 billion direct listing on the London Stock Exchange the first time such a listing mechanism have been used on the UK market and the largest ever tech listing on the London Stock Exchange. We played the central role between the company, its financial advisers and the London Stock Exchange in preparing and implementing this one of a kind transaction, setting the market precedent for future listing structures of this kind.
We demonstrated our ability to work with a high-growth, innovative issuer to build a fully bespoke and novel listing structure. In doing so we helped Wise achieve its goal of entering the conventional public markets in an unconventional way, highlighting our ability to work seamlessly across our specialisms to deliver untested products in a highly regulated and controlled landscape.
Challenges and solutions
We designed a mechanism that allowed Wise to come to market without raising capital through the issuance of shares or an offer to public investors.
We worked with Wise from the project’s inception through to the implementation of the direct listing, in doing so advising across the items Wise saw as the core value drivers for its successful public markets debut. This included:
- Assessing the pros and cons of the listing venue so that Wise could make an informed decision.
- The design and implementation of the first widely held dual-class share structure seen in the UK public markets (to provide pre-listing shareholders enhanced voting rights).
- A direct listing without dilution of existing shareholders.
- An open auction to ensure sufficient liquidating and allow efficient market prices to be formed.
- Leading shareholder negotiations and designing a governance framework within Wise to ensure early shareholder backing.
- Leading discussions with key stakeholders, including the Financial Conduct Authority, the Takeover Panel and global competition regulators, to collectively understand the applicability of this one of a kind structure to the various regimes that would apply to it.
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Bitpanda acquisition of a crypto custodian wallet provider
Overview
We advised Bitpanda GmbH, an Austrian-based digital assets trading platform company founded in 2014 which enables users to trade online in crypto currencies, stocks, metals and ETFs, on its acquisition of 100% of Trustology Ltd a UK-based crypto custodian wallet provider.
Challenges and solutions
This was the first M&A transaction for Bitpanda, who are one of the fastest growing fintech companies in Europe with a current valuation of $4.1bn.Trustology is registered with the FCA under the Money Laundering Regulations being one of only a few dozen crypto custody platform companies satisfying the FCA's MLR requirements.
The acquisition has therefore strengthened Bitpanda’s ability to offer digital asset custodian services in the UK alongside its existing licences in the EU, making it one of the world’s largest digital asset custodians.
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UN High Commissioner for Refugees (UNHCR – The UN Refugee Agency) digital wallets
Overview
Our global fintech team provided pro bono advice to UNHCR, the UN Refugee Agency, on the launch of a first-of-its-kind blockchain payment solution for distribution of financial assistance to internally displaced persons in Ukraine. The solution allows funds to reach vulnerable people on the move, at speed.
Challenges and solutions
The pilot project enables UNHCR to deliver humanitarian assistance in USD Coin directly to beneficiaries’ digital wallets, without the need for a bank account. Depending on need, beneficiaries are able to either convert the received aid into fiat cash or transport their funds securely in their digital wallets. This helps individuals impacted by the war (particularly those unable to access banks) to cover basic needs like accommodation, food, medical care and heating.
The programme was piloted in Kyiv, Lviv, and Vinnytsia and will expand to other locations. The initial pilot phase of the project was designed specifically for Ukraine but the use of the blockchain technology can be adapted to other humanitarian contexts. The project won the “Best Impact Project Award” at the Paris 2023 Blockchain Week.
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Crypto asset authorisation
Overview
We helped Revolut become registered as a cryptoasset business under the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017, successfully contesting a Warning Notice issued by the FCA proposing to refuse Revolut’s application.
We advise Revolut on its most strategically important and time sensitive matters with successful outcomes. This mandate, in addition to its important strategic value to Revolut, highlights the strength of our practice in advising clients and engaging with regulators to resolve disputes across a dynamic regulatory environment.
We understand Revolut’s priorities and expansion plans in detail and are able to leverage this background to provide effective and tailored advice to ensure that Revolut achieves its strategic vision. We uniquely combine our Tier 1 contentious regulatory and advisory practices to provide holistic advice across all aspects of fintech and payments mandates.
Challenges and Solutions
Having previously offered cryptoasset services under the FCA’s Temporary Registration Regime, such refusal would have required Revolut to cease offering these services, closing down a significant and growing part of its business. Contesting the Warning Notice involved complex legal and factual analysis, liaising closely with Revolut executives and SMEs, and instructing a barrister and a compliance consultant to produce an expert report on Revolut’s compliance with the MLRs.
We prepared substantive written representations to the FCA (supported by the expert report on Revolut’s compliance with the MLRs) contesting the grounds for refusal expressed in the Warning Notice and explaining the systems and controls around the Revolut’s cryptoasset offering. Our information gathering and analysis was done through Google Docs, which allowed real time updates from both the Revolut and Linklaters teams. We provided fixed fees for each separate workstream, providing Revolut with costs certainty.
We leveraged our significant contentious regulatory experience and knowledge of Revolut’s business to strategically position the written representations and advocate for approval of Revolut’s registration. As a result, the FCA approved Revolut’s registration, subject to agreeing to certain directions (which we assisted in negotiating) aimed at ensuring its systems and controls continued to meet the requirements of the MLRs.
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Payments related sanctions investigation
Overview
We advised a payments services company on an investigation by the Office of Financial Sanctions Implementation (OFSI) into an alleged breach of UK sanctions after our client voluntarily reported the suspected breach. The investigation resulted in the OFSI issuing a public censure without a financial penalty.
Challenges and solutions
The numbers of restrictions imposed on payment firms under the various sanctions regimes across the globe have increased significantly in recent years. Payments firms need advisors who understand not only sanctions but also their regulatory obligations and market practice. We can field teams who can consider the impact of US, UK, EU and UN sanctions, alongside local financial regulatory regimes, to provide actionable advice. Explore Sanctions at Linklaters.
Hot Topics
Unbundling and repackaging of payments value chain
- Consolidation (e.g. in the acquiring market) and new alliances
- Processor consolidation (US led)
- Merchant services
- Card networks moving closer to the user
- Further intermediation (e.g. by certain digital wallets)
- New alliances and strategic partnerships
Commercialisation of payments data
- Data is a key asset in payments
- Open banking > open finance
- Growth of data monetisation business models
- Richer data/ greater standardisation driving operational efficiencies
- Smarter fraud/risk management systems
- Increasing data privacy and cyber security concerns
Innovation in payments infrastructure
- Changes to the “plumbing”
- Developments in instant payment rails
- Globalisation of payment rails; acceleration of cross-border payments
- Connecting open loop payments with cross border payments
- Mobile and real time payments for B2B B2C and P2P
- QR codes, contactless open banking and super-apps driving digital wallet adoption
- Digital ID
Rise of Big Tech in payments
- More direct investment from Big Tech in payment solutions
- Fast growing Asian markets driving new business models and innovation – AliPay and WeChat Pay superapps
- Consumers in emerging markets leapfrogging from cards to mobile wallets providing greater financial inclusion
- Payments as a gateway to broader financial services
- Crossover with regulatory activism and commercialisation of payments data
Collaborations:
New forms of “money”
- Private sector cryptocurrencies
- “Stablecoins” (in a variety of forms)
- Fiat-cryptocurrency conversion and storage opportunities
- Payments infrastructure as part of industrial policy
- Early phase development for many retail/wholesale Central bank digital currencies (CBDCs)
- In-game tokens and crypto in gaming
- Buy Now Pay Later
Regulatory activism
- Regulation continues to direct innovation & foster competition, particularly in EU
- However many regulators are also taking a more interventionalist approach in terms of investigations and enforcement
- Merger control and foreign investment impacting payments M&A
- Open banking opening doors to increasingly sophisticated cyber/ financial crime
- Emerging operation operational resilience standards creating compliance uplift
Thought Leadership
Insights
The legal outlook for fintech and payments 2024
11 December 2023 //
Despite challenges for the global industry, there are still fundamental growth drivers for the continued digitalisation of financial products, services and market infrastructure. Read more about the legal outlook for fintech and payments markets in the year ahead.
UK confirms regulatory policies aimed at creating a “global hub” for crypto
6 November 2023 //
Three papers from HM Treasury are an important stepping-stone towards a comprehensive licensing regime for cryptoassets in the UK.
More systemic oversight on the way for the payments sector
29 August 2023 //
More businesses that are involved in payments chains – even those that do not handle funds directly – are being subject to more regulatory scrutiny.
EU lays out ambitious plans to open up financial data and reform digital payments
28 June 2023 //
Legislative proposals on the digital euro, Open Finance and PSD3 will set the agenda for digital finance in Europe for the next few years.
UK looks to the future in its case for a “digital pound”
1 March 2023 //
The Bank of England and HM Treasury’s consultation on a UK central bank digital currency marks the start of a multi-year “design phase” for the digital pound.
UK Crypto Proposals: next steps for firms
17 February 2023 //
Completing our series of posts on the UK Treasury’s crypto proposals, we explore next steps for firms considering their regulatory strategies.
UK Crypto Proposals: how do they compare to the EU’s?
16 February 2023 //
Next up in our series on the UK Crypto Proposals, we compare the UK’s emerging framework against the EU’s Markets in Cryptoassets Regulation (MiCAR).
UK Crypto Proposals: a short series reflecting on the implications
13 February 2023 //
In this collection of blog posts, we consider the UK’s most recent proposals on cryptoasset regulation from various angles.
UK government plans next phase of cryptoasset regulation
3 February 2023 //
In its consultation on the future regulatory regime for cryptoassets, HM Treasury aims for similar regulatory outcomes to apply to cryptoasset activities as apply to other financial services.
EU plans to push banks to provide instant payment services
5 January 2023 //
Draft legislation from the European Commission suggests forcing EU payment service providers to provide instant credit transfers in the euro.
The legal outlook for global fintech - 2023
3 January 2023 //
Introducing our Fintech Legal Outlook 2023 – after a rollercoaster year for fintech in 2022, explore the key legal and regulatory developments we expect to see emerging globally in the year to come.
New Bill lays foundations for future UK cryptoasset regulation
25 July 2022 //
The Financial Services and Markets Bill proposes handing powers to the Treasury to modify existing regulations and shape new digital asset regimes.
UK proposes measures to protect against the collapse of systemic “digital settlement assets”
6 June 2022 //
The government is consulting on a proposal to bring systemic “digital settlement asset” firms within the FMI special administration regime, following the recent collapse of algorithmic stablecoin, TerraUSD.
The Kalifa Review of UK Fintech: One Year On
3 February 2022 //
One year on from the Kalifa Review of UK Fintech, we look at how the implementation of its recommendations is progressing.
Global Fintech Trends in 2022
13 January 2022 //
In our Fintech Year to Come 2022, Year in Review 2021 report, our global fintech team identified seven key legal and regulatory trends in fintech for 2022. In this blog we provide a deeper dive into each of the seven trends.