In case you’re wondering what an e-money institution is, we have to start by saying what it is not: it is not a bank. It may seem like one because you can save money and even have a prepaid card, but it’s not. E-money institutions (EMI) can issue electronic money (the digital equivalent of cash stored on an electronic device). To do so, they need to access one of the many Emoney licences in the world to offer their services.

In this article, we will explain what an e-money institution is and its main features

First, what is e-money?

E-money represents monetary value stored electronically. An EMI holds the value in a central accounting system or on an electronic carrier (a chip). You can use the money to execute payments with other parties.

A gift card is a perfect example of what e-money is.

Categories of e-money institutions

These vary from jurisdiction to jurisdiction, but there are roughly three or four:

● Payment institutions; regularly called small e-money institutions.

● E-money institutions per se.

● Exempt e-money institutions, which are exempt from the registry (this feature exists in, for example, Netherlands).

● Banks, which may also act as e-money institutions.

E-money institutions

EMIs are authorized to issue e-money as a digital equivalent of cash, which is stored in a main platform or in chips in prepaid cards. E-money usually has e-wallets, where users can make payments and see their balances through the website or in a mobile app.

The specific services an EMI can provide vary from jurisdiction to jurisdiction, but are roughly these:

● Issuing e-money

● Distributing and redeeming e-money

● Enablement of cash placement on e-money account

● Operating payment accounts

● Executing payment transactions

● Issuing and acquiring payment instruments

● Remittances

What´s the difference between a bank and an EMI?

When you place money in a bank, you’re taking credit risk. The bank will generate interests because it will take your money and lend it somewhere else. EMIs don’t do this. Your money is completely safe in that regard, albeit it won’t generate interests. Thus, there are three main differences between e-money institutions and banks:

● EMIs don’t offer advice about banking products

● EMIs don’t offer investment products

● EMIs cannot take credit risk

Where to establish my e-money institution?

The absolute king of e-money institutions until not so long ago was the UK. It had 187 EMIs, which was almost half of the EMIs in Europe. The second place is Lithuania, with 54 EMIs. However, that was before Brexit. One advantage of being in the EU is that your EMI has passporting rights. This means you can operate around the EU without additional licenses or incorporation procedures.

The UK offered the best regulatory framework on the planet plus passporting rights. Now, with Brexit, no one actually knows what will happen. Having half of the European market, it’s hard to think that both parties won’t work out an agreement, but the fact is no one knows.

Still, the UK is an unbeaten jurisdiction. It offers the best regulatory frame, some tax optimization possibilities, the best IT teams, and top telecommunications. And we can help you establish your own EMI in the UK. Read more about it right here.

Now, if you want stability and passporting rights, the best option is Cyprus, which is one of our favorite EU jurisdictions. We have a first-level expert team that can help you acquire an EMI license and e money institution accounts in the best Cypriot and European banks. Read more about it.

E-money institutions are a growing market, and we can help you start your own EMI. Contact us right now!

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