Electronic money, or e-money, has simplified our lives as the fintech industry develops new technologies to make purchasing goods and services more accessible. Suppose you want to offer payment services as an Electronic Money Institution (EMI) in Europe. In that case, you will need to apply with a financial regulator to obtain an Electronic Money Institution license. Below is some information that EMBank would like you to know about getting an EMI license in Europe.
What is an EMI?
An EMI is an institution that has the authorization to issue prepaid cards, electronic wallets, and other forms of e-money that individuals and businesses can use to make payments.
Article 2(2) of Directive 2009/110/EC defines e-money as, “electronically, including magnetically, stored monetary value as represented by a claim on the issuer which is issued on receipt of funds for the purpose of making payment transaction, and which is accepted by a natural or legal person other than the electronic money issuer.”
Why do you need an E-Money Institution license in Europe?
EMIs need a license to operate in Europe because of EU Directive 2015/2366. The primary purpose of this Directive is to protect consumers in making e-money payments safely and securely. It also has a secondary goal of creating fair competition in the e-money payment industry. This Directive establishes the requirements for EMIs to provide payment services. One of the requirements of EU Directive 2015/2366 is for EMIs to obtain an EMI license.
An EMI can conduct business throughout Europe and beyond once it obtains a license. Customers can exchange traditional cash for e-money that the EMI issues and store their e-money in e-wallets that the EMI creates. Then, customers can make payments with the funds in their e-wallets. When they run out of funds in their e-wallet, they can load more funds by exchanging cash for e-money.
Requirements to Obtain an EMI License in Europe
There are several requirements an EMI must meet to obtain a license in Europe. These requirements include:
- Establishing an operational presence in a European country, including a physical office and local staff
- Having adequate financial and non-financial resources to manage and operate the EMI
- Demonstrating suitable management and employee experience to operate the EMI
- Having EUR 350,000 in start-up capital that is readily available in a bank account in the country where the EMI is applying for the license
How to Obtain an EMI License in Europe?
When applying for a license, an EMI will face regulatory due diligence in many EU countries. The EMI must have at least two managers residing in the EU. They must prove their professional qualifications to manage the EMI. Each jurisdiction in the EU may have its own rules in addition to the mandatory EU Directive 2015/2366.
An EMI must demonstrate it has high-quality software and strong technology infrastructure. They must establish internal controls, safety measures, a plan to manage operational risks to ensure payment security and prevent fraud. The EMI must also have several pieces of information when applying for a license. This information includes:
- A business plan and financial projections
- A description of the EMI’s organizational structure
- Procedures for monitoring, handling, and following up on security breaches and customer complaints
- Internal protocols for combating money laundering and terrorist financing
These are just some requirements an EMI must meet to obtain a license. Every EMI has unique challenges in obtaining a license. It takes on average six months for an EMI to obtain a license.
Benefits of Having an EMI License
An EMI license is universal for e-money transactions and allows an EMI to provide other financial services. These services offer:
- Debit and credit card accounts
- Merchant services that accept debit, credit, and e-money transactions
- Money transfers for cross-border payments
- Payment initiation services where customers can initiate payments through their bank account
- Customers with consolidated account information in one place
How Can EMBank Help?
European Merchant Bank (EMBank) offers accessible financial products for fintech companies and local/regional SMEs across various industries. Established in Lithuania and licensed by the European Central Bank, EMBank provides a Banking as a Service offering, combined with Safeguarding Account, Business Account, and Accumulative Account types as well as payment options through SEPA, Swift, and Target2.
Please keep in mind that the above information has been prepared or assembled by the EMBank and is intended for informational purposes only. Some of the information may be dated and may not reflect the most current legal developments.
Please send an email to [email protected] to arrange a telephone call.