Licence passporting is the practice of using a financial services licence granted in one country to operate in other countries of the same single market, and it is explained in full under passporting. The longer name simply makes clear that what is being passported is the licence, as opposed to a product or a fund.
The best-known example is the European Economic Area. A bank, payment institution or electronic money institution authorised by its home regulator can notify that regulator that it wishes to serve customers in another member state, either on a cross-border services basis or through a branch or agents. After the notification process, the firm can operate in the host state without a separate local licence, while remaining supervised mainly by its home authority. Host regulators keep some powers, for example over conduct and anti-money laundering for locally established agents.
The United Kingdom lost passporting rights when it left the European Union, which led many payment firms to set up licensed entities in EU states. Banks use the related term banking licence passporting.