EMI
Electronic Money Institution
EMI (Electronic Money Institution) is a non-bank organization licensed to issue electronic money and provide payment services. Client funds are held separately from the company's own funds.
What is EMI (Electronic Money Institution)?
## What it is
An EMI issues electronic money: a client deposits funds and receives an electronic balance that they can use to pay and transfer money. Electronic money is issued at par value and redeemed at par value on the holder's request. In most jurisdictions, including the EU, where the basic rules are set by the Electronic Money Directive (EMD2), an EMI does not take deposits like a bank and does not extend loans from client funds.
## How it works
Client money is usually placed in protected accounts at banks or held as safeguarded assets, so that it can be returned if the EMI goes bankrupt. The EMI itself obtains a license from the national regulator and undergoes checks on capital, risk management systems, and AML/KYC procedures. An EMI often works through a partner bank or connects payment providers that give clients the interface.
## Where it is used
In fintech and payments, EMIs underpin e-wallets, prepaid cards, payout services, and embedded finance. In high-risk verticals, the EMI partner often determines which payment and payout scenarios are allowed at all, and which restrictions on geography, MCC, and transaction type will apply.
## What it affects
An EMI's status determines which services can be legally offered, which limits apply, and how transparent the protection of funds is. If a provider operates without a suitable license or through an implicit agent, the risk of frozen funds and blocked payouts is significantly higher.
## Common mistakes
Confusing an EMI with a bank: deposit protection and the range of services differ between them. Not checking which regulator the EMI is registered with and whether its license covers the required country. Underestimating client verification and source-of-funds requirements, which cause payouts to be delayed.
FAQ
Is an EMI a bank?
No. An EMI issues electronic money and provides payment services, but usually does not accept deposits or extend loans. A banking license gives a broader set of operations.
How does an EMI differ from a PSP?
A PSP is a provider that accepts and processes payments for businesses. An EMI is a licensed organization that issues electronic money and holds client funds. Many PSPs operate on top of EMIs or obtain their license from them.
How can I check whether an EMI has a license?
Check the register of the regulator in the country where it is registered. The regulator publishes a list of licensed electronic money institutions with the services each is permitted to provide.