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Electronic Money Institution vs. Payment Institution


9 min read

In the exciting world of fintech, each decision shapes the future of companies desiring to succeed in a rapidly evolving landscape. When companies enter the fintech industry, they must decide between becoming an Electronic Money Institution (EMI) or operating as a Payment Institution (PI).

Now, let’s go back to the late 2000s when vital decisions were accepted and changes happened. The European Commission, like a guide, decided to improve how payments work in Europe. They introduced two directives (legal acts): one about Electronic money and the other about Payment Services.

These directives, or ‘rules,’ changed electronic payment competition, especially with the rise of online shopping and digital money. With new payment service providers, setting rules safeguarding consumers and payment security became essential.

It’s 2023, and the fintech world is changing fast; obtaining a license is just the beginning. So, before your company gets one, you must understand the differences between EMIs and PIs and which suits your business best. Think of it like choosing the right tool for the job. So, let’s explore these two paths, EMIs, and PIs, and see which leads to fintech success and what works for you.

What is an Electronic Money Institution (EMI)?

Imagine you have a virtual wallet. This is what an Electronic Money Institution (EMI) creates for you. An EMI is like a unique company authorized by a specific European country to make virtual money. This virtual money is called electronic money, or e-money for short.

An official definition of An Electronic Money Institution (EMI) is a company or organization authorized by a specific EU Member State to issue electronic money under the Electronic Money Directive 2 (Directive 2009/110/EC).

EMIs are a bit like regular banks, but they have a special focus. When you put real money into your virtual wallet with an EMI, they change it into electronic money. This e-money is just like coins in a video game—you can buy things online or make payments.

But there’s more to the EMI enchantment. With an EMI, your organization lets clients have e-money and provides payment services to send and receive money electronically.

But remember, not all EMIs can do the same things. Some might be limited in their services, depending on the rules they follow. Getting a license to be an EMI is not a one-size-fits-all thing. Each EMI might have particular directions that decide what services they can provide.

So, in a nutshell, an EMI is like a modern-day treasure chest for your digital money. It can help you manage your e-money and do electronic transactions, making online shopping and payments a breeze.

What Is a Payment Institution (PI)?

I can compare Payment Institutions to a trusted financial guide that handles all your money tasks, from paying bills to sending money to friends. So the Payment Institution (PI) is like a money manager.

PIs specialize in managing various payment services, making your financial life convenient. They process payments, offer payment options like cards, transfer money, and even provide credit services. If you need to pay someone or shop online, PIs make it happen.

BUT, here’s the pivotal distinction: while Electronic Money Institutions (EMIs) specialize in issuing electronic money, PIs operate using the funds from your regular bank account. PIs can direct seamless payments and transfers without literally handling your funds.

Operated under rules outlined in the Payment Services Directive (PSD2), PIs safeguard your financial operations. They ensure your money flows securely, connecting your accounts for smooth transactions. Payment Institutions act as your financial bridge, guiding your funds from one place to another.

Comparative Analysis Electronic Money Institutions and Payment Institutions

#1 Scope of services

There are differences in the services they offer regarding Electronic Money Institutions (EMIs) and Payment Institutions (PIs). Let’s explore the range of services by looking at some fictional but practical examples I created for you.

  • Electronic Money Institutions (EMIs). “Fintech Bank Go-Pay” is an institution authorized as an EMI that can issue electronic money that customers can use within their digital ecosystem. 

Clients hold individual accounts within the institution, much like regular bank accounts. They can load money into these accounts by exchanging their traditional currency (like EUR) for electronic money. This electronic money is then safely stored in their digital accounts, accessible for various transactions.

Customers of “Fintech Bank Go-Pay” can effortlessly pay each other using this electronic money, all within the same digital space. Additionally, some no-name debit cards are recognized as electronic money by regulators. It’s crucial to note that electronic money (digital currency) is distinct from virtual currencies like cryptocurrencies, which aren’t legal tender and operate outside regulatory frameworks.

  • Payment Institutions (PIs). Now consider “PayLO” This is a Payment Institution specializing in managing payment processes. Unlike EMIs, Payment Institutions don’t issue electronic money. Instead, they work with customers’ funds in their regular bank accounts. Picture your typical bank’s payment system, but more streamlined.

“PayLO” assists in smooth payment operations. When you make a transaction, the funds move from your bank account through “PaymentPro” to the recipient. Payment Institutions ensure that your funds are transferred securely and efficiently.

Comparing the Services. EMIs have a broader scope, as they can issue electronic money and offer payment services, almost like digital banks. Payment Institutions are more focused on managing transactions, ensuring payments move without a hitch.

In summary, EMIs create a virtual currency ecosystem, while Payment Institutions expertly handle the flow of existing funds. Your choice between the two depends on your business needs and objectives. Remember, no ‘better or worse’ exists since the financial world benefits from EMIs and PIs to harmonize transactions.

Illustration describes Electronic Money Institutions and Payment Institutions scope of services.

#2 Initial Capital requirements

Both EMIs and PIs operate within a regulated framework. They are subject to the mandates of PSD2, the Money Laundering Regulations, and Terrorist Financing Regulations. These regulations ensure financial operations are conducted transparently, securely, and aligned with international standards. Hence, let’s take a closer look at the initial capital requirements for Electronic Money Institutions (EMIs) and Payment Institutions (PIs) to understand better what you should pay for:

Electronic Money Institutions (EMIs): EMIs, as digital banking pioneers, are required to hold a starting capital of EUR 350,000. This substantial capital is a testament to their significant role in creating and managing electronic money systems. It’s like their financial foundation, ensuring they have the resources to address customer funds securely.

Payment Institutions (PIs): On the other hand, they enjoy a spectrum of choices when it comes to initial capital. This flexibility is based on the services they plan to provide. For example:

  • You may have a Payment Institution aiming to facilitate basic money transfers and transactions. For this level of service, they need to show they have a starting capital of EUR 20,000. 
  • Or you want a Payment Institution that offers a broader range of financial services, including handling money remittances, payment cards, and credit services. For this extended scope, their initial capital requirement rises to EUR 125,000.

Illustration describes Electronic Money Institutions and Payment Institutions initial capital requirements.

Additionally, both institutions are subject to regulatory compliance under PSD2, the Money Laundering Regulations, and Terrorist Financing Regulations.

#3 Licensing Costs

Licensing costs for Electronic Money Institutions (EMIs) and Payment Institutions (PIs) can be quite the same and vary. This fee does not include the initial and other capital requirements I mentioned. So, let’s explore these fees for different countries:

Illustration describes application fee for Electronic Money Institutions and Payment Institutions.

Additionally, apart from application fees, obtaining an EMI or PI license involves case-specific legal fees that depend on the scope of work.

These fees depend on the scope of work, which means they’re influenced by the services you intend to provide as an EMI or PI.

  • For instance, you can be a Payment Institution offering payment transfer services. Your case-specific legal fees might differ from other Payment Institutions providing more extensive services like payment card issuance and credit services.

These fees are intricately woven into the fabric of your business plan, reflecting the depth of your financial ambitions. Each fee is an investment in your financial future, shaped by your aspirations and the services you plan to offer.

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#4 Business Models

The great example of differences between Electronic Money Institutions (EMIs) and Payment Institutions (PIs) concerning their business models and services is Wise (or TransferWise as we used to call it earlier).

In the beginning, Wise was operating as a PI. However, as Wise’s popularity surged, they encountered a hurdle. A company couldn’t issue payment cards or effectively manage customer funds without having specific payment orders for each transaction. This limitation prompted a crucial decision.

Wise became an EMI, recognizing the need for a more universal framework. As an EMI, the organization gained the power to issue payment cards and operate multi-currency accounts.

This transition wasn’t just about switching labels. It was a shift in capabilities and services. Just as Wise recognized the need to evolve their model, understanding the complexities of EMIs and PIs can guide you in making the right choices for your journey.

Payment institutions can adopt various business models where they are only required to retain customer funds in payment accounts with identifiable payment orders. Typically, payment institutions focus on payment processing and money transfers, with some offering payment initiation services (PISPs).

For a more comprehensive understanding of the options available between EMIs and PIs, you can consult DashDevs specialists.

Examples of possible business models for both EMIs and PIs

Business Models for Electronic Money Institutions:

  • Neobanks with the capacity to issue their payment cards and manage the processing, along with personalized IBAN codes for SEPA payments.
  • Banking-as-a-Service providers offer complete payment processes through modern API-operated drivers.
  • Fintechs and neobanks embed payment services into customers’ non-financial experiences.
  • International Money Transfer players manage electronic money and sub-accounts/sub-currencies for customers.

Business Models for Payment Institutions:

  • Alternative Payment Methods to address omnichannel needs.
  • Payment-as-a-Service providers with orchestrating platforms and multiple payment services (issuance, acceptance, and acquisition).
  • Payment Services Providers combine payment, processing, and acquisition gateway functions.
  • Payment Processors or Acquirers facilitate transaction routing between card networks and financial institutions.
  • AISPs (Account Information Service Providers) or PISPs (payment initiation service provider) aggregate payment data and initiate bank transfers.

#5 Safeguarding Specifications

Both institutions must adhere to specific safeguarding measures outlined in EMD2 and PSD2. However, safeguarding obligations does not include such PI services as payment initiation or account information.

One more important fact is that EMIs must maintain separate safeguarded accounts for different services to ensure proper fund management and compliance with all regulations.

#6 Accounts

To simplify, let’s break down how accounts work under the regulations. According to PSD2 (Article 4(12)) and Directive 2014/92/EU (Article 2(3)), a payment account serves as a tool for making payments on behalf of one or more users of a particular payment service. It’s an account of one or more clients they use for handling payment transactions.

The difference lies in how funds are managed within the accounts.

  • Electronic Money Institutions (EMIs) can hold the account holder’s funds within their institution directly. This means the EMI can safeguard and manage the account holder’s money.
  • With Payment Institutions (PIs), the funds within an account are specifically designated for particular payment transactions. These funds usually come from the account holder’s source, such as their bank account. This allocation ensures that the funds are exclusively used for the intended payment transactions, allowing for a smooth and dedicated transaction flow.


Getting your fintech license might seem tricky and expensive as you’ve delved into unfamiliar terms and changing rules. This process demands your commitment for about a year after applying. Due to shifting regulations, the fintech scene evolves fast, making it tricky for new players to grab a license.

And even after you get the license, challenges continue—you’ll need to meet ongoing rules set by regulators. But having an excellent legal advisor on your team or getting one to help can make applying for permission easier.

Electronic Money Institutions (EMIs) need more initial money than Payment Institutions (PIs), but remember that you should decide precisely what is better for your business and company. You may consider obtaining EMI, but a PI can be thorough enough for your case.

If you need help deciding whether to go for EMI or PI for your business, DashDevs’ fintech experts can help. Their advice can guide your decision and make the application process smoother and quicker. Your journey into fintech success starts here—seize it!

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