Electronic money institution

An Electronic money institution (EMI) is a market participant that possesses a license issued by a relevant authority in a given nation or region                    [1] In Lithuania for instance, the Bank of Lithuania is a relevant authority that grants EMIs the right to issue electronic money. [2][3][4] The same is applicable is other nations where EMIs are functional.[5][6]

EU Payment Services Directive

EMIs are promoted in the EU Payment Services Directive with specific aims.[7] These include:

  • Creation of a single payment market in Europe
  • Establishment of a necessary regulatory framework
  • Encouragement of competition in the field
  • Assuring improved transparency and high-level customer protection
  • Building a beneficial ecosystem that will contribute to the establishment of efficient payment systems in Europe

Electronic money issuance

Electronic money issued by EMIs constitutes a pre-paid monetary value that can be stored on users’ electronic devices and used for conventional payments.[8][9] Besides offering cash deposits and withdrawals, electronic money institutions also provide money remittance services, process payment transactions and direct debit or credit transfers, as well as other similar well-known financial operations.[10]

E-money account

This is an account, opened with an EMI, e-wallet or payment company, that allows users to enjoy the conventional range of banking services, along with additional advantages.[11] Transactions made on such accounts are processed in a fast, secure and convenient way, for lower fees. The 24/7 availability of the account is also a certain benefit. E-money accounts prevent users from constantly sharing credit card details and are, therefore, ensuring increased security.[11]

E-money Mobile App

Each EMI operates with its custom app, which clients download and use on their smartphones in order to have a quick and convenient access to their accounts.[12] E-money apps serve as smartphone wallets that allow users to store all of their accounts and cards at one place. It is a great tool for always staying in control of personal and corporate finances, making fast payments and transfers, reviewing transactions history and so on. It is simply a portable bank, with the user as his own personal banker, performing all operations from money remittance to currency conversion.[13]

The number of EMIs present on the market is expanding rapidly, which facilitates the creation of new innovative products and gives customers a variety of options. However, each company has a distinct business model and technology in place and operates on a particular scale.[14] The concept of e-money stretches from complex e-wallet systems with mobile apps to companies providing money transfer services. This allows customers to find the option that will satisfy their specific business or individual needs and substitute traditional banking services.[14] The Electronic Money Institution – The short overview of the latest financial trends and tendencies

E-wallets

E-wallets serve as a storage place for e-money, just like regular wallets do for cash. It is an electronic environment with a high level of encryption that also allows users to securely store credit card and bank account details.[15] Offering the option to pay online with an e-wallet is a simple and effective way to increase sales and improve customer experience.[16]

EMI license issuance

Countries across Europe are interested in creating initiatives to help start-up companies to acquire EMI licenses. Among such countries include Lithuania, Malta, the Czech Republic and Luxembourg.[17] [18]

Payment services regulators

The regulatory body that establishes supervision procedures for EMIs is the Central Bank.[19] The latter applies a set of requirements and exercises continuous monitoring in order to ensure that the company is complying to its responsibilities and has relevant internal controls and a quality management system. The employees of payment service providers are also subject to a set of requirements to ensure competence and compliance with standard procedures. Practice standards must be maintained at all times, which is controlled by the regulatory authorities.[20] Compliance and risk mitigation are central to the operation of EMIs, which is why they are required to establish effective internal policies and procedures to monitor them.[20] Consumer protection is another important nuance, controlled by the supervisory agent.[21]

EMIs vs Traditional banks

EMIs provide a range of services that is practically identical to the one of traditional banking institutions yet possess certain differences that mainly refer to innovation and advanced AML and risk procedures. Customers who have accounts with EMIs receive a superior user-experience, compared to the one of traditional banks.[22]

The advantages are created by state-of-the-art core banking systems and enhanced UX and UI with the electronic accounts. At the same time, EMIs have modernized internal systems, which ensures that all customer’s activity are closely monitored in order to prevent the execution of suspicious transactions. There are also advanced risk prevention and mitigation mechanisms in place.[20]

Future perspectives

The European financial ecosystem is being subject to significant upgrades and improvements, which facilitates competition and drives innovation forward through such actors as non-banking finance businesses, FinTech companies, financial institutions, startups and existing large technology businesses.[23] More and more newcomers are entering the market in order to develop and offer alternative options to those looking for efficient finances’ management.[24] These new tendencies are projected to continue decreasing the popularity of traditional banking institutions that are not able to comply with the new standards at the same level. The future might bring along new challenges for traditional players but might also bring a variety of new opportunities for them to modify and evolve.[23]

Current Challenges for Traditional European Banks

Among the key challenges for the old-school members of the banking industry are adoption of innovative technological developments, integration of systems and shifting towards the digital in order to provide end-to-end solutions to customers.[25]

Relevant changes must be adopted in order to overcome the existing issues and create a harmonized ecosystem in the world of finance. Besides, technical standards must also be updated in order to conduct efficient liquidity management and set proper procedures for reporting. As there are more and more operations that involve data movement, security becomes another matter of concern. Traditional banks will have to create solutions that will help them to ensure high-level security of customer data and protection from scams and other similar hacking activities.[25]

Benefits of EMIs

There are various reasons for individual and corporate customers to choose banking with EMIs these days. The main ones include:

  • More services – EMIs exhibit flexible core banking systems that allow them to constantly integrate new services and enrich their service range. In comparison with traditional banks, these companies are successful in increasing their value proposition for the customers by upgrading their AML and KYC procedures, as well as adding alternative payment methods. For instance, the providers were able to develop and start offering such innovative solutions as cards and prepaid products, online and mobile payments, e-wallets and international remittance.[11]
  • Convenience – an account with EMI allows users to transact 24/7, 365 days a year and from any location. The only requirement is Internet access.[11]
  • Simplicity – EMIs aim to make the interface of their apps and websites comprehensible even for those, who don’t have much experience with similar services. The navigation is intuitive and user-friendly and does not require specific technical knowledge. Besides, if a customer is struggling with operation there is always the option to contact customer support that processes inquiries 24/7 via live chat, forums, email and phone.[11]
  • Time-efficiency– one of the main goals of an EMI is to provide seamless money remittance that requires minimum effort and time. Transfers between electronic accounts are much more time-efficient than traditional wire or postal transfers, which tend to take a few days. EMIs give customers the option to instantly exchange money online, regardless of the physical location.[26]Customers of EMIs may be certain about the security of their funds and transactions, as the companies are supervised by financial authorities in the country of registration. EMIs are also obliged to follow EU regulations, in particular the ones on anti-money laundering, fraud prevention, terrorist financing and so on. Providers must comply with all applicable laws and regulations and offer only trustworthy solutions to their clients.[26]

References

  1. ^“Electronic Money Institutions”. centralbank.ie. Retrieved 18 May 2019. Italic or bold markup not allowed in: |newspaper= (help)
  2. ^Shakhil Shah,“Sonect acquires EMI license in Lithuania”. emerging-europe.com. 30 April 2019. Retrieved 18 May 2019. Italic or bold markup not allowed in: |newspaper= (help)
  3. ^“Swiss fintech Sonect obtains e-money licence in Lithuania”. finextra.com. Retrieved 18 May 2019. Italic or bold markup not allowed in: |newspaper= (help)
  4. ^“Google granted EU electronic money institution license in Lithuania”. xinhuanet.com. 21 December 2018. Retrieved 18 May 2019. Italic or bold markup not allowed in: |newspaper= (help)
  5. ^Hogan Lovells,“The Lahore of cryptocurrencies: Pakistan issues rules for electronic money providers”. lexology.com. 21 December 2018. Retrieved 18 May 2019. Italic or bold markup not allowed in: |newspaper= (help)
  6. ^Kate Fitzgerald,“7 ways emerging fintech hubs are taking on the giants”. paymentssource.com. 24 April 2019. Retrieved 18 May 2019. Italic or bold markup not allowed in: |newspaper= (help)
  7. ^Lucian Constantin,“What is the EU’s revised Payment Services Directive (PSD2) and its impact?”. csoonline.com. 22 April 2019. Retrieved 18 May 2019. Italic or bold markup not allowed in: |newspaper= (help)
  8. ^“E-money EU rules foster competition and innovation in e-money services”. ec.europa.eu. Retrieved 18 May 2019. Italic or bold markup not allowed in: |newspaper=(help)
  9. ^Christian Gauci“Electronic Money: Another Form of Cash”. theaccountant.org.mt. Retrieved 18 May 2019. Italic or bold markup not allowed in: |newspaper= (help)
  10. ^“Register of payment and electronic money institutions under PSD2”. eba.europa.eu. Retrieved 18 May 2019. Italic or bold markup not allowed in: |newspaper= (help)
  11. ^ Jump up to:ab c d e “E-money And Virtual Bank Accounts Are Advantageous to Businesses”. businessblogshub.com. Retrieved 18 May 2019. Italic or bold markup not allowed in: |newspaper= (help)
  12. ^Justin McCarthy, “The Difference Between E-Money, Mobile Money & Mobile Banking”. medium.com. 22 January 2018. Retrieved 18 May 2019. Italic or bold markup not allowed in: |newspaper= (help)
  13. ^Janine Firpo, “E-Money – Mobile Money – Mobile Banking – What’s the Difference?”. blogs.worldbank.org. 21 January 2009. Retrieved 18 May 2019. Italic or bold markup not allowed in: |newspaper= (help)
  14. ^ Jump up to:ab “The Electronic Money Institution – The short overview of the latest financial trends and tendencies” (PDF). satchelpay.com. 21 January 2009. Retrieved 18 May 2019. Italic or bold markup not allowed in: |newspaper= (help)
  15. ^“Definition of ‘E-wallets'”. economictimes.indiatimes.com. Retrieved 18 May 2019. Italic or bold markup not allowed in: |newspaper= (help)
  16. ^“What is an eWallet?”. worldpay.com. Retrieved 18 May 2019. Italic or bold markup not allowed in: |newspaper= (help)
  17. ^“EMI license, its advantages and features”. medium.com. 17 July 2018. Retrieved 18 May 2019. Italic or bold markup not allowed in: |newspaper= (help)
  18. ^“Obtaining Electronic Money Institution License In Lithuania”. bulotalegal.eu. 17 October 2018. Retrieved 18 May 2019. Italic or bold markup not allowed in: |newspaper= (help)
  19. ^“Understanding the new Payment Services Regulations”. burges-salmon.com. 12 September 2017. Retrieved 18 May 2019. Italic or bold markup not allowed in: |newspaper=(help)
  20. ^ Jump up to:ab c “Regulations For Electronic Money Institutions (EMIs)” (PDF). sbp.org.pk. Retrieved 18 May 2019. Italic or bold markup not allowed in: |newspaper= (help)
  21. ^“Electronic Money Institutions (EMIs), Payment Institutions (PIs) and Credit Institutions (Banks)”. multilaw.com. 12 September 2017. Retrieved 18 May 2019. Italic or bold markup not allowed in: |newspaper= (help)
  22. ^“Cyprus: Electronic Money Institutions (EMIs), Payment Institutions (PIs) and Credit Institutions (Banks)”. mondaq.com. 16 May 2019. Retrieved 18 May 2019. Italic or bold markup not allowed in: |newspaper= (help)
  23. ^ Jump up to:ab “Development of Electronic Money and Its Impact on the Central Bank Role and Monetary Policy” (PDF). iisit.org. Retrieved 18 May 2019. Italic or bold markup not allowed in: |newspaper= (help)
  24. ^“EMIs and modern trends in worlds financial environment”. thefintechlab.com. Retrieved 18 May 2019. Italic or bold markup not allowed in: |newspaper= (help)
  25. ^ Jump up to:ab “E money license for global payment processing and payment cards issue. Electronic money institution emi licensing in european union”. ecovis.lt. Retrieved 18 May 2019.Italic or bold markup not allowed in: |newspaper= (help)
  26. ^ Jump up to:ab “Electronic Money Institution”. ecovis.lt. Retrieved 18 May 2019. Italic or bold markup not allowed in: |newspaper= (help)

Ofer Abarbanel online library

Ofer Abarbanel online library

Ofer Abarbanel online library