Navigating European Financial Regulations: Choosing Between PI and EMI Licences

Navigating European financial regulations involves comparing rules across jurisdictions before seeking authorisation. Companies under PSD2 typically pursue Payment Institution (PI) or Electronic Money Institution (EMI) licences.

FREMONT, CA: Europe has several jurisdictions that can issue licences. Each of these jurisdictions has its own rules that companies must adhere to. It is advisable to compare the terms and conditions of each jurisdiction before one applies to them for authorisation.

European payment companies covet one of the two authorisation types relating to financial institutions issued under the PSD2 regulation: payment institution (PI) and electronic money institution (EMI).

Payment Institution

A payment institution or authorised payment institution (API) provides financial and intermediary services for even traditional businesses. Their services include opening and closing accounts, replenishing accounts, withdrawing funds from accounts of legal entities, conducting payment transactions between client accounts, and money transfers.

The payment institution’s registered capital amount for a company is 125,000 euros, which will be deposited into a bank account opened under the same jurisdiction. However, the final capitalisation amount can be increased by supervisors after analysing the company’s business plan.

Electronic Money Institution

Electronic money institution or e-wallet authorisation allows users to issue e-money and quasi-money, which can be used outside the payment system and converted into other currencies. Companies with an EMI licence can almost act like a bank, as they can open sub-accounts for their customers within their bank account. However, they can issue loans to the customers.

This authorisation is perfect for companies that plan to create user electronic wallets on their website to allow users to withdraw funds. Notably, an EMI licence includes all the features of a PI licence,

Jurisdictions to Apply for Authorisation

In the United Kingdom (UK), the Financial Conduct Authority (FSA) regulates the financial market, and in other European jurisdictions, the Central Bank or a special commission performs the function of the financial regulator. PI and EMI licences are largely accepted throughout Europe, but each jurisdiction establishes its own rules for obtaining them. These rules are in addition to the basic requirements called payment services directive (PSD2).

The complex landscape of European financial regulations demands a thorough understanding of diverse jurisdictions offering licences. One must thoroughly compare the terms and conditions set by each jurisdiction before seeking authorisation. Under the PSD2 regulation, European payment companies typically pursue either Payment Institution (PI) or Electronic Money Institution (EMI) licences. Payment institutions are related to financial and intermediary services, and EMI allows companies to issue e-money and quasi-money and even emulate certain banking functions. The choice between these licences depends on the company's business model and goals. Popular jurisdictions, such as the UK, with its Financial Conduct Authority, attract many seeking EMI licences. However, stringent rules, distinct from the PSD2 directive, govern the authorisation process across European jurisdictions.