Payment Institution vs. E-Money Institution: What Are the Main Differences?
Payment Institution vs. E-Money Institution: What Are the Main Differences?
Payment Institution vs. E-Money Institution: What Are the Main Differences?
What is a Payment Institution Under the PSD2?
What is a Payment Institution Under the PSD2?
What is a Payment Institution Under the PSD2?
What is an E-Money Institution?
What is an E-Money Institution?
What is an E-Money Institution?
Central Register of Authorized PIs and EMIs
Central Register of Authorized PIs and EMIs
Central Register of Authorized PIs and EMIs
What is the Difference Between PI and EMI Accounts?
What is the Difference Between PI and EMI Accounts?
What is the Difference Between PI and EMI Accounts?
What are the Capital Requirements for PIs and EMIs?
What are the Capital Requirements for PIs and EMIs?
What are the Capital Requirements for PIs and EMIs?
What Are the Safeguarding Requirements for PIs and EMIs?
What Are the Safeguarding Requirements for PIs and EMIs?
What Are the Safeguarding Requirements for PIs and EMIs?
What Are the Preferred Jurisdictions from which to Obtain a PI or EMI License?
What Are the Preferred Jurisdictions from which to Obtain a PI or EMI License?
What Are the Preferred Jurisdictions from which to Obtain a PI or EMI License?
PI or EMI License From the Netherlands
PI or EMI License From the Netherlands
PI or EMI License From the Netherlands
PI or EMI License From the United Kingdom
PI or EMI License From the United Kingdom
PI or EMI License From the United Kingdom
Key PI and EMI License Takeaways
Key PI and EMI License Takeaways
Key PI and EMI License Takeaways
We Help You Obtain a PI or EMI license
We Help You Obtain a PI or EMI license
We Help You Obtain a PI or EMI license
Popular EMI License Q&A from Fintech Founders
Popular EMI License Q&A from Fintech Founders
Popular EMI License Q&A from Fintech Founders
1. What is passporting?
1. What is passporting?
1. What is passporting?
2. What is electronic money?
2. What is electronic money?
2. What is electronic money?
3. What are the main differences between PIs and EMIs?
3. What are the main differences between PIs and EMIs?
3. What are the main differences between PIs and EMIs?
4. Is it easier to get a PI license?
4. Is it easier to get a PI license?
4. Is it easier to get a PI license?
5. Can a PI license be upgraded to an EMI license?
5. Can a PI license be upgraded to an EMI license?
5. Can a PI license be upgraded to an EMI license?
In recent years fintech activity in the European Union (EU), especially in the United Kingdom (UK), has rivaled the leading US market. As a result, Europe has become a leading fintech hub, known for its well-structured regulatory landscape and vibrant startup ecosystem.
The EU has invested significant resources in developing a favorable and innovative regulatory framework by revising the Payment Services Directive (PSD2) and issuing various instructive guidelines (i.e., European Banking Authority Guidelines).
In addition, the EU passporting system for financial institutions enables firms authorized in any EU or European Economic Area (EEA) Member State to operate freely in any other with minimal additional authorizations. These regulatory tools helped level the playing field for international fintechs wanting to operate in the EU.
Our subject-matter experts wrote this analysis, not freelancers, copywriters, or ChatGPT. We are global and EU regulatory compliance experts.
Considering the above, it’s no surprise that over recent years, many US-based money transmitters have become interested in expanding their services to the EU, the UK, or in some cases, even to both. A good example of such a fintech is Stripe which currently holds an E-Money license granted by the UK Financial Conduct Authority and an EU E-Money License granted by the Central Bank of Ireland. By virtue of the latter and the passporting system, the company also provides its services in all other EU and EEA countries.
A company wishing to expand its financial services to EU/UK markets, must inevitably decide whether to apply for a Payment Institution License (Payment License or simply “PI” license) or an Electronic Money Institution License (E-Money License or simply “EMI” license).
The overwhelming amount of available information alone can make knowing exactly where to start challenging. That’s why we’re shedding more light on the topic by exploring the primary differences between the two licenses and by presenting the preferred jurisdictions.
Both Payment and E-Money Licenses have specific requirements that should be taken into account. For instance, the initial capital requirement and the scope of services offered are among the most critical aspects to consider during the initial planning phase.
The license requirements of Payment Institutions and E-money Institutions are contained in Directive (EU) 2015/2366, known as the revised PSD2, and Directive (EU) 2009/110/EC, known as the “E-Money Directive” or “EMD2,” as well as in their national implementations by the EU Member States. The EU Directives give certain discretion to the Member States regarding their implementation into national laws. This means that each EU Member State has its own version of the PSD2 and the EMD2, which may differ slightly from one another.
The Payment Institution License is arguably the most popular license-providing solution for payment platforms and online merchants all around Europe. Obtaining a PI license is an ideal solution for payment service providers processing corporate payments and money transfers of private individuals. Legally defined in the PSD2, the payment institution is “a legal person that has been granted authorization… to provide and execute payment services throughout the Union.”
Under Annex 1 of the PSD2, payment institutions are permitted to offer the following services:
A great example of a payment institution is the Dutch fintech company, Mollie.
To define an E-Money Institution, we should first consider the concept of electronic money itself. The European Central Bank (ECB) defines e-money as an electronically-stored monetary value that may be widely used to pay entities other than the e-money issuer. In simple terms, e-money is the digital alternative to cash. It enables users to make cashless payments with money stored on a card, phone, or internet.
According to the above definition, a company wishing to issue e-money must apply for an e-money license.
E-money institutions provide their users with access to innovative financial services. EMIs offer e-money payment accounts that allow customers to execute payments without needing a bank account. E-money institutions are fintechs authorized to issue e-money in accordance with their specific EU Member State’s implementation of the EMD2.
What differentiates PIs from EMIs regarding services is that in addition to the services offered by PIs, EMIs can also issue electronic money. However, it’s important to note that EMIs are not able to:
To increase transparency and ensure robust consumer protection within the European Single Market, EBA established a central register containing information about PIs and EMIs authorized or registered within the EU and the EEA.
Nowadays, the European market hosts around 500 licensed EMIs. For instance, the widely-known fintech company Wise is authorized as an Electronic Money Institution by the UK Financial Conduct Authority (FCA). In addition, Wise is a Payment Institution – authorized by the National Bank of Belgium – with passporting rights across the EU and the EEA.
At first glance, it may seem that e-money issuance is the only substantial difference between PIs and EMIs. However, there are other important distinctions between the two.
PIs and EMIs accounts are not identical to bank accounts, contrary to what many customers may think. Therefore, let’s examine account functionality by the type of institution that offers them.
For instance, a PI account is much more limited than an EMI account because it cannot hold money on behalf of its users.
These significant differences in functionality translate to significant differences in capital requirements for establishing each institution.
The initial capital requirements for PIs are far lower than the ones for EMIs.
Article 7 of PSD2 requires payment institutions to have initial capital of:
In addition, the payment institution’s own funds shall not fall below the amount of its initial capital.
In comparison, Article 4 of the EMD2 requires that EMIs have an initial capital of not less than EUR 350,000.
