Frequently asked questions

What is e-money meaning? What is e-money issuers? What is e-money directive? What are e-money examples? What is fintech meaning?

What is e-money

Electronic money is a digital store of a medium exchange. Where the medium exchange is being the key.

E-money can be used for payment transactions with or without bank accounts.

Let’s expand on a medium of exchange.

A medium of exchange is any item that is widely acceptable in exchange for goods and services.

It is a pre-paid stored value in exchange for funds.

Example:

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Oyster card / London Tube – you top up the card and use it to pay for the service of transportation. Oyster cards in not a bank card.

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Any closed loop virtual pre-paid card (for example travel voucher, gift card like Uber-eats, Amazon, Apple and etc.)

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Crypto currency – non FIAT currency, acquired in exchange for a set value with FIAT money or mined. It is stored in a digital wallet, outside the banking infrastructure.

! Opening/issuing a bank account ( IBAN) is not the same as issuing an e-money.

! Issuing a debit card (bank card) attached to an IBAN is not the same as issuing an e-money or pre-paid card.

When opening an Iban, you do not issue digital currency like EUR or GBP, USD.

Only central bank of Europe can issue EUR/ digital or paper for that matter.

Only US department of Treasury can issue USD and etc.

Fun fact: Anyone who will try to” issue” USD digital or paper will be convicted for felony. It’s a federal crime.

Below are some of the key services payment Institution/financial Institution (FIs) offer:

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Payment accounts (IBANs), payment transactions, such as credit transfers and direct debits via payment cards or similar devices.

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Disbursement of payment instruments; (like debit card)

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Money transfer services (SEPA, SWIFT, Ripple and other payment rails)

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Currency exchange services and other ancillary services associated with their principal services;

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Loans (with FIs own money)

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Money remittance

EMI vs Financial Institution (FI): Differences between electronic money institutions and payment institutions Now that we are familiar with both EMIs and FIs, let’s peek at some of the disparities between both concepts:

• Money issuing The ability to issue e-money is the ground difference between EMIs and FIs. Only electronic money institutions are allowed to issue e-money, while FIs aren’t. At the same time, EMIs can provide all the services that PIs do (but it doesn’t mean they are automatically allowed to do so – this area is strictly regulated, so they need authorization from a national regulatory agency to provide specific kinds of payment services.

• Safeguarding specifications

electronic money institutions and Financial Institutions must follow the special safeguarding measures set out in EMD2 and PSD2. There is no difference, it’s the same for both.

• Accounts According to Article 4(12) of PSD2, a payment account is used to make payments in the name of one or more users of a specific payment service. Article 2(3) of Directive 2014/92/EU also states that a payment account is held in the name of one or more clients and used to perform payment transactions. In basic terms, when funds are transferred to a payment account held by a payment institution, that money must be accompanied by a specific payment transaction (See BIC regulation). Same rules for EMI and FI.

• Start-up capital requirements Authorized Financial Institutions have considerably curtailed start-up capital requirements than electronic money institutions.

• Costs of licensing There is a variation in the different application costs that should be paid by EMI and FI aside from the start-up capital requirement and other capital requirements connected to the licensing.

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