Electronic Money Institution VS Payment Institution: The Differences

by Tanya September 16, 2023

With the rise of digital payments and innovative fintech solutions, new players have emerged in the field of payment services.

To navigate this changing landscape, businesses often require specific licenses to operate legally and securely.

Two common licenses for entities dealing with payment services are the EMI (Electronic Money Institution) and PI (Payment Institution) licenses.

They serve to demonstrate the credibility and reliability of financial institutions, thereby fostering consumer confidence.

In this guide, we will explore the differences between EMI and PI licensing, how to obtain them, and the implications they have on businesses.

Electronic Money Institution (EMI) licensing

An Electronic Money Institution (EMI) license is granted to companies that issue electronic money, providing a digital alternative to physical currency.

EMIs play a vital role in the modern financial ecosystem, facilitating online transactions and electronic wallets. To obtain an EMI license, companies must meet stringent regulatory requirements, including capital adequacy, security protocols, and compliance with anti-money laundering (AML) and Know Your Customer (KYC) regulations.

The advantages of an EMI license

Obtaining an EMI license offers several advantages for businesses. It grants access to the European Economic Area (EEA), allowing EMIs to operate across multiple European countries. Additionally, EMIs can provide e-wallets, prepaid cards, and other electronic payment solutions to consumers and businesses. This versatility makes EMIs an attractive choice for companies seeking to offer digital payment services.

Obtaining an EMI license

Obtaining an EMI license is a complex and lengthy process. Companies interested in applying for this license must first establish a legal entity and meet minimum capital requirements. Additionally, they need to demonstrate their ability to comply with AML and KYC regulations, as well as have robust security measures in place to protect customer funds.

Once these prerequisites are met, businesses can submit their application to the relevant regulatory authority, such as the Financial Conduct Authority (FCA) in the United Kingdom.

The challenges of obtaining a license

For SPIs (Small Payment Institutions), the EMI licensing process can be particularly challenging. Meeting the substantial capital requirements and investing in compliance infrastructure can strain the resources of smaller businesses. As a result, many SPIs opt to partner with larger EMIs or financial institutions to leverage their licenses and expertise, allowing them to offer payment services without the burden of obtaining their own EMI license.

Payment Institution (PI) licensing

Payment Institutions (PIs) differ from EMIs in their primary focus. PIs are licensed entities that offer various payment services, excluding the issuance of electronic money. Payment services can include money transfers, payment processing, and merchant acquiring services. Like EMIs, PIs must adhere to strict regulatory requirements, particularly regarding security and compliance.

The advantages of a PI license

PI licenses offer businesses the ability to provide a wide range of payment services without the need to issue electronic money. This can be advantageous for companies looking to specialize in payment processing, cross-border money transfers, or merchant services. PIs also have access to the European market, enhancing their potential for growth and expansion.

Obtaining a PI license

The application process for a PI license shares some similarities with that of an EMI license. Companies must establish a legal entity, meet minimum capital requirements, and demonstrate compliance with regulatory standards.

However, the key distinction lies in the services provided. PIs must clearly outline the payment services they intend to offer, specifying whether they will focus on money transfers, payment processing, or other payment-related activities.

PI licensing may be more suitable for a small payment institution (SPI) since the process is more manageable than that of EMIs, primarily because they do not need to issue electronic money.

However, the challenges of compliance, security, and capital requirements still exist. Collaborating with larger financial entities or specialized payment service providers can help smaller businesses overcome these obstacles and enter the payment services market.


In conclusion, understanding the differences between EMI and PI licensing is crucial for businesses entering the payment services industry.

EMIs focus on electronic money issuance, while PIs offer a broader range of payment services without issuing electronic money.

Both licenses require adherence to strict regulatory standards, making the application process complex and demanding.

For SPIs, the decision to pursue an EMI or PI license depends on their business model and resources.

While EMI licensing offers the ability to issue electronic money and provide digital wallets, the associated requirements can be a substantial barrier for smaller companies. PI licensing, on the other hand, allows businesses to focus on payment services, but compliance and security remain significant considerations.

In either case, partnering with established financial institutions or payment service providers can be a strategic move for SPIs. These collaborations can provide access to licenses, compliance expertise, and resources needed to navigate the regulatory landscape successfully.

As the financial technology sector continues to evolve, staying informed about licensing options and regulatory requirements is essential for businesses seeking to offer payment services in a rapidly changing market. Whether pursuing an EMI or PI license, thorough preparation and a commitment to compliance are key to success in the payment services industry.

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