The development of financial services is represented by electronic money institutions (EMI).
Banking-as-a-Service (BaaS) has created new fintech specializations. Neobanking is entering a new era with the usage of blockchain-based digital currency.
Such financial services demand specific regulation and incorporation into the global banking system. A digital banking service needs an EMI license to comply with rules. FCA issues UK EMI licenses.
What is a license issued by the Electronic Money Institute (EMI)?
Digital money is the value of digital assets. The issuer releases electronic money after receiving payments equal to its value. Organizations must accept this payment option.
Digital money meets the standards with an EMI license. The EMI facilitates worldwide financial services delivery. Unlike banks, EMIs operate under distinct legislation. Such firms are licensed to handle and distribute electronic cash.
Entities with an EMI license are permitted to issue electronic money and provide payment services and other possibilities. Among them is the keeping of customer cash for indefinite lengths of time via IBAN accounts.
The licence also links the organization to the Single Euro Payments Area (SEPA), allowing customers to accept Euro payments with low rates and equitable conditions across Europe.
The Distinction Between an Electronic Money Institution (EMI) license and a Payment Institution (PI) license
The EMI license and the Payment Institution, or PI license, are required for institutions that deal with electronic money. The primary distinction between the two is that EMI licensees are authorized to issue electronic money, while PI licensees provide a broader variety of services. EMI license holders are permitted to preserve their customers’ discoveries for longer durations than PI license holders, who are prohibited from doing so.
The EMI license permits holder organizations to produce a variety of payment cards, electronic wallets, and financial services. The supporting storage enables consumers to electronically store and move their monies.
Who Should Have an EMI license?
With the rising use and popularity of digital currencies and the blockchain-based platforms that enable them, the number of services that support the ever-expanding decentralized financial infrastructure, or DeFi, is booming. To get their services connected into the European and international financial systems and to serve more customers, however, businesses in these developing areas should consider asking for an EMI license.
- Services for Card Payment and Processing
As a result of the advent of new 3DS2 laws and the rising costs imposed by gateways such as MasterCard and VISA, many companies are looking to neobanks for alternative payment and banking solutions. A BaaS certified by an EMI license will enable non-financial entities to provide financial services on par with mainstream giants, as well as offer clients branded cards, cashout, and funds storage options. The license enables retailers using BaaS systems to accept direct bank transfers and dramatically increase payment alternatives at reduced transaction costs.
Many BaaS systems advocate the usage of digital currencies as a form of backing deposits and credits, so providing financial leverage and collateral for transactions.
- Conformity-Based Services
Companies requiring KYC (Know Your Customer) benefit from the license, since the EMI license calls for the adoption of stringent standards and monitoring around cybersecurity and customer identity. The underlying KYC will minimize fraud, identity theft, and lack of transparency, while attracting new consumers and maintaining existing ones.
Compliance is the next required requirement for all providers of financial services. Through its maintenance’s stringent application and reporting processes, the EMI license automatically assures compliance with legal and regulatory requirements.
Fraud prevention is essential to guaranteeing the success of a BaaS. The EMI architecture consists of many security layers meant to prevent fraud and provide adequate risk management.