EMI vs payment institution: which licence does your fintech need?

The one-line difference

A payment institution moves money. An electronic money institution (EMI) can also store it. If your customers will keep a balance with you, in a wallet or an account they can pay from later, you are issuing e-money and need to be an EMI.

Payment institutions

• Provide payment services such as money remittance, payment accounts, card acquiring and payment initiation.
• Small payment institution: monthly payment volume averaging €3 million or less, no initial capital.
• Authorised payment institution: initial capital of €20,000 for money remittance, €50,000 for payment initiation, €125,000 for most other services.
• Funds should arrive and leave in connection with a payment, not sit as a stored balance.

Electronic money institutions

• Issue e-money (stored balances) and can provide payment services as well.
• Small EMI: average outstanding e-money of no more than €5 million, with limits on unrelated payment volume.
• Authorised EMI: initial capital of €350,000, no cap on e-money issued.
• Suited to wallets, multi-currency business accounts, prepaid cards and banking-style products.

What they share

Both are regulated by the FCA, both must safeguard customer funds, both need anti-money-laundering controls and fit-and-proper management, and neither is a bank: customer funds are safeguarded, not covered by deposit protection, and you cannot lend them out.

How to choose

• Sending money from A to B with no stored balance: payment institution.
• Customers hold balances, in one currency or several: EMI.
• Not ready for your own licence: operate as an agent or distributor of an authorised firm, or on a white-label programme, and apply later.

Where software comes in

Whichever licence you hold, you need a ledger that records every customer balance, reconciliation against your safeguarding accounts, onboarding and screening, and connections to the banks that hold and move the funds. That is what core banking software provides. The licence defines what you may do; the platform determines how quickly you can do it.