Electronic Money Institution: A Comprehensive Guide

An Electronic Money Institution (EMI) is a type of financial institution that provides electronic payment services to individuals and businesses.

EMIs are regulated by the European Union's Payment Services Directive (PSD2), which ensures they operate in a secure and transparent manner.

To become an EMI, a company must meet specific requirements, including having a minimum capital requirement of €350,000 and obtaining a license from the relevant regulatory body.

This license allows EMIs to provide a range of services, including accepting deposits, making payments, and issuing e-money.

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Electronic money institutions are authorised entities providing digital payment services and issuing electronic money. They can help you with online money transfers, electronic wallets, and prepaid cards.

EMIs operate through an online platform and are licensed to manage transactions and issue debit cards. This means you can use their platform or debit card to carry out payment transactions.

A company becomes an EMI after acquiring an electronic money license, which permits them to carry out electronic money transactions. This license gives them more leeway than Payment Institutions (PIs) when it comes to e-money payments.

EMIs can store electronic money for as long as necessary, which is a benefit for businesses that need to manage their finances effectively.

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There are different types of Electronic Money Institutions (EMIs), each with its own characteristics.

A full EMI licence is required for larger trading activities, but if your trading doesn't exceed €5 million, you can apply for a small EMI licence with lower capital requirements of €50,000.

Small EMIs are subject to additional criteria, such as a maximum storage of €250 for e-money storing services.

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EMIs can help businesses access financial tools to manage finances more effectively, making them ideal for online money transfers, electronic wallets, and prepaid cards.

Freelancers and small businesses often find EMIs more affordable than traditional banks, making them more accessible with smaller budgets.

The fintech industry is a prime example of an industry that benefits from EMIs, as they enable fintech companies to innovate and provide a user-friendly experience to their customers.

In fact, most fintech companies use EMIs to compete with traditional banks on a level playing field, offering comparable services at a competitive cost.

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Traditional banks, on the other hand, often lack the internal structure to foster innovation from within, leading them to form partnerships with fintech companies to revamp specific aspects of their services.

The financial system has ample room for both traditional banks and fintech enterprises, but fintech companies often offer the advantage of agility, speed, and efficiency, supported by EMIs.

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Multi-currency businesses can greatly benefit from Electronic Money Institutions (EMIs) by facilitating cross-border payments and FX services, making it easier for them to access a wider range of payment methods.

Travel and hospitality companies are a great example of multi-currency businesses that can take advantage of EMIs. They can enjoy better exchange rates and avoid additional charges.

EMIs can provide travel and hospitality companies with a more streamlined and cost-effective way to manage their cross-border payments.

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EMIs offer cheaper fees compared to traditional banking counterparts, making them a cost-effective option.

Their fees are usually cheaper because EMIs often have lower operational costs.

Transactions with EMIs are often faster than traditional banking methods.

EMIs provide businesses with access to financial tools to help manage finances more effectively.

These tools can help businesses streamline their financial processes and make better financial decisions.

Most fintech companies use EMIs to simplify their process and compete with conventional banks on a level playing field.

EMIs enable fintech companies to innovate and provide customers with a better experience at a competitive cost.

Traditional banks often lack the internal structure to innovate and may opt for partnerships with fintech companies to revamp specific services.

The agility, speed, and efficiency of fintech companies, supported by EMIs, provide customers with a significant advantage.

EMIs can benefit various industries, including those that require fast and secure online transactions.

These industries can leverage the cost-effectiveness and speed of EMIs to improve their financial processes.

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Obtaining a licence can be a lengthy process, taking anywhere from 9 to 18 months. You'll need to demonstrate that you have enough capital to cover first year losses, and have a team of local employees in the jurisdiction of application.

The Financial Conduct Authority (FCA) regulates all UK EMIs, and you'll need to gain authorization from them to operate legally. This involves submitting an application outlining a program of operations to the FCA.

In Europe, you can apply for a licence within any jurisdiction, including the UK and EEA. However, application processing times can vary, and some countries like the Bank of Lithuania are known for their fast processing periods.

To successfully obtain an e-money licence, you'll need to ensure you have a core banking solution that is secure, compliant, and ready-to-deploy, with detailed documentation. This will help you launch your e-money institution smoothly.

Here's a checklist of what you'll need to obtain an e-money licence:

You'll also need to meet specific criteria if you're applying as a small EMI, such as providing evidence that your trading activities don't exceed €5 million and having a maximum storage of €250 in relation to e-money storing services.