Electronic Money Institution (EMI)

Electronic Money Institutions (EMIs) are licensed entities in the UK authorised by the Financial Conduct Authority (FCA) to issue electronic money and deliver a broad range of payment services. These services include managing payment accounts, enabling international remittances, and offering other digital financial solutions, making EMIs well-suited for businesses focused on providing innovative, scalable payment options.

Overview

Services Provided

  • Issuance of e-money

  • Payment accounts

  • Remittance

  • Payment Initiation Service (PIS)

  • Account Information Services (AIS)Card issuing

Capital Requirements

  • EMIs are required to hold a minimum initial capital of €350,000 and maintain ongoing capital equal to 2% of the total amount of e-money outstanding. This capital ensures the financial stability of the EMI and its ability to meet operational and safeguarding obligations.

Transaction Limitations

  • There are no specific transaction limits imposed on EMIs. However, these firms must demonstrate financial soundness to meet the FCA's prudential requirements and maintain capital adequacy.

Safeguarding Requirements

  • EMIs are required to safeguard client funds in segregated accounts, separate from their operational funds, to protect against insolvency or operational risk. In certain cases, EMIs can use insurance policies as an alternative safeguard.

Jurisdictional Limitations

  • Post-Brexit, EMIs based in the UK can no longer passport their services across the European Economic Area (EEA). To operate in the EEA, EMIs must apply for separate licenses in each jurisdiction. Firms that previously relied on passporting may need to transition to the Temporary Permissions Regime (TPR) while seeking full authorisation in the UK.

Legal & Regulatory Framework

  • The Financial Services and Markets Act 2000 (FSMA)

  • The Electronic Money Regulations 2011 (EMRs)

  • The Payment Services Regulations 2017 (PSRs)

  • FCA Rules and Guidelines

  • The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017

  • The Criminal Finances Act 2017

  • The Data Protection Act 2018 and UK General Data Protection Regulation (GDPR)

  • Consumer Protection Laws

  • The FCA’s role under the Payment Services Regulations 2017 and the Electronic Money Regulations 2011

Key Restrictions

  • No lending or savings: EMIs are prohibited from offering loans or savings accounts.

  • Safeguarding funds: Client funds must be safeguarded in segregated accounts or through an insurance policy.

Regulatory authorisation process

  • The Financial Conduct Authority (FCA) usually assesses a complete application within 3 months.

  • The Financial Conduct Authority (FCA) requires an application fee of £5,440.

Exemptions & exclusions

  • Exempt bodies

    The Post Office Limited

    Bank of England

    Government department or local authority

    Credit union

    Municipal bank

    National Savings Bank

  • Excluded activities

    Under the PSRs 2017, payment transactions conducted by commercial agents authorised to act on behalf of the payer or the payee (but not both) are exempt from EMI regulations.

    Commercial agents authorised to negotiate or conclude the sale or purchase of goods or services on behalf of the payer or payee, or offer limited-use payment instruments (e.g., gift cards), are exempt.

    Under the PSRs 2017, regulations do not apply when: payment transactions are conducted through a commercial agent. The agent is formally authorised to negotiate or conclude the sale or purchase of goods or services. The agent acts on behalf of either the payer or the payee, but not both.

Regulatory Updates

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Deep dive into Electronic Money Institution (EMI)

Introduction

  • Take advantage of becoming an Electronic Money Institution (EMI) in the UK, authorised by the Financial Conduct Authority (FCA). EMIs are authorised to issue digital money and offer services like payment accounts and international remittance, making them ideal for businesses that want to provide innovative financial solutions. This licence allows firms to operate under strict regulatory standards while offering flexible and scalable payment services.

Definition

  • An Electronic Money Institution (EMI) is authorised to issue e-money and offer payment services, subject to stricter regulatory requirements than Small Payment Institution (SPI) and Authorised Payment Institution (API), making it suitable for larger businesses.

Additional Information (Services)

  • E-money Issuance: Issuing digital money that can be used for purchases, transfers, and other transactions.

  • Payment Accounts: Managing accounts that allow customers to store funds, make payments, and receive deposits.

  • Money Remittance: Offering both international and domestic transfer services.

  • Payment Initiation Services (PIS): Facilitating payments initiated by a customer, often through third-party platforms.

  • Account Information Services (AIS): Providing access to and consolidation of customer account data from various financial institutions.

  • Issuing Payment Instruments: Issuing prepaid and debit cards for use in transactions.

Additional Information (Legal & Regulatory Framework)

  • The Financial Services and Markets Act 2000 (FSMA): EMIs are subject to the overarching regulatory framework provided by FSMA, which governs the provision of financial services in the UK. This act establishes the roles and responsibilities of the Financial Conduct Authority (FCA) in supervising financial institutions, including EMIs, ensuring consumer protection and market integrity.

  • The Electronic Money Regulations 2011 (EMRs): These regulations specifically apply to EMIs, governing the issuance, redemption, and management of electronic money. The EMRs establish key requirements for safeguarding customer funds, governance, and transparency in electronic money transactions.

  • The FCA’s role under the Payment Services Regulations 2017 and the Electronic Money Regulations 2011: SEMIs must comply with several FCA rules outlined in BCOBs, DISP, SUP, PERG, and FEEs sections of the FCA Handbook. These rules include conduct standards for business operations (BCOBs), requirements for complaint handling (DISP), guidelines for regulatory reporting (SUP), perimeter guidance for activities requiring authorization (PERG), and fee structures for regulatory services (FEEs). Adhering to these regulations helps SEMIs ensure legal compliance, maintain operational transparency, and foster consumer trust in the financial system​

  • The Payment Services Regulations 2017 (PSRs): EMIs must also comply with the PSRs, which regulate the provision of payment services in the UK, including payment accounts, transfers, and direct debits. These regulations ensure that payment services are offered securely and transparently.

  • FCA Rules and Guidelines: EMIs must follow various FCA rules, including the Principles for Businesses as outlined in the FCA Handbook, and the FCA’s Approach to Payment Services and Electronic Money. The FCA sets clear expectations for conduct, risk management, and consumer protection under the Electronic Money Regulations 2011.

  • The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (including amendments): EMIs are obligated to comply with AML and CTF regulations, implementing comprehensive systems for customer due diligence, transaction monitoring, and reporting of suspicious activities to prevent money laundering and terrorist financing.

  • The Criminal Finances Act 2017: EMIs must adhere to this act, which establishes obligations for firms to prevent the facilitation of money laundering, tax evasion, and corruption. EMIs are required to have robust compliance frameworks to mitigate financial crime risks.

  • The Data Protection Act 2018 and EU General Data Protection Regulation (GDPR): EMIs must comply with data protection laws, ensuring that personal data collected from customers is stored securely and processed in compliance with GDPR standards. These regulations safeguard customer privacy and prevent data breaches.

  • Consumer Protection Laws: EMIs must also comply with consumer protection regulations such as the Unfair Terms in Consumer Contracts Regulations 1999, the Consumer Protection from Unfair Trading Regulations 2008 (CPRs), and the Financial Services (Distance Marketing) Regulations 2004. If credit services are provided, the Consumer Credit Act 1974 applies, ensuring transparent and fair practices in consumer contracts.

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Additional Information (Key Restrictions)

  • No Lending or Savings: EMIs are prohibited from offering traditional banking services such as lending, savings accounts, or credit lines.

  • Capital and Safeguarding: EMIs must maintain a minimum initial capital of €350,000 and are required to safeguard customer funds through segregated accounts or insurance.

  • Passporting Conditions: EMIs based in the UK can no longer passport services across the EEA post-Brexit. Firms must comply with local regulations in each jurisdiction where they wish to operate.

  • Regulatory Audits: Subject to ongoing scrutiny by the FCA to ensure compliance with AML regulations, e-money issuance, and safeguarding.