EMI license obtainment in 2024

An EMI (Electronic Money Institution) license is a regulatory authorization that allows an entity to issue electronic money and provide related payment services. This license is crucial for businesses that want to operate in the financial technology (fintech) sector, offering services such as money remittance, digital wallets, prepaid cards, and online payment processing.

Electronic money, or e-money, refers to the digital equivalent of cash, which can be stored on electronic devices or remotely at a server. It is a convenient and secure way for consumers and businesses to manage and transfer funds without relying on traditional banking methods.

The process of obtaining an EMI license involves meeting stringent regulatory requirements set by financial authorities, which vary by jurisdiction. These requirements typically include demonstrating sufficient capital reserves, implementing robust anti-money laundering (AML) and counter-terrorism financing (CTF) measures, and ensuring the security and integrity of the electronic money system. Securing an EMI license enables fintech companies to gain credibility, expand their services, and operate legally within the regulated financial environment. It also provides customers with assurance that their funds are protected under regulatory oversight, promoting trust in the burgeoning digital payments industry.

Obtaining an EMI license signifies a high standard of compliance and regulatory requirements, making it a respected credential in the payment industry. Holding such a license brings respect and recognition from clients, investors, and the community. The EMI license is more than just a regulatory formality, it reflects the reliability and trustworthiness of the licensed entity’s operations. An EMI license offers numerous benefits and opportunities. This page will cover the various aspects of the EMI license, showing how it can be used to its fullest potential.

Who Needs an EMI license?

Entities involved in electronic money services or offering related financial activities are required to obtain an EMI license to operate legally. The specific activities permitted under this license may vary depending on the regulatory framework of the country or region. Generally, an EMI license is essential for businesses looking to engage in:

1. Payment Service Providers (PSPs)

Companies that offer payment processing services, including payment gateways for credit card processing and money transfer services.

2. Payment Remittance Platforms

Platforms that facilitate domestic and international money transfers, typically used by individuals to send funds to friends, family, or businesses in other countries.

3. Foreign Currency Exchange

Businesses that provide currency exchange services, allowing customers to convert one currency into another at prevailing exchange rates.

4. Payment Processing

Companies involved in processing payments for merchants, including authorization, settlement, and clearing of transactions.

5. Intermediaries

Entities that facilitate payment transactions between buyers and sellers, such as online marketplaces, escrow services, and payment aggregators.

6. E-Money Issuers

Companies that issue electronic money, often used for prepaid cards, mobile wallets, and online transactions.

7. Card Issuing Solutions

Fintech companies that provide card issuing solutions, including debit cards, credit cards, and prepaid cards, typically require licenses to legally issue these financial instruments to customers.

Securing your EMI License

Obtaining an Electronic Money Institution (EMI) license is a critical step for fintech companies and payment service providers looking to issue electronic money and offer related financial services. The process can be complex and demanding, requiring careful preparation and compliance with regulatory standards. Here’s a guide to help you navigate the key steps involved in securing your EMI license.

1. Understand Regulatory Requirements

Each jurisdiction has specific regulations governing the issuance of EMI licenses. It is essential to thoroughly understand these requirements, which typically include:

Minimum Capital Requirements: Demonstrating that your company has sufficient capital reserves to operate sustainably.
Compliance Framework: Establishing robust anti-money laundering (AML) and counter-terrorism financing (CTF) measures.
Risk Management: Implementing comprehensive risk management policies to mitigate financial and operational risks.
Consumer Protection: Ensuring the safety and security of customer funds and personal data.

2. Prepare Detailed Documentation

Gather and prepare all necessary documentation required for the application process. This typically includes:

Business Plan: A detailed plan outlining your business model, target market, revenue projections, and operational strategy.
Organizational Structure: Information about your company’s structure, including key personnel, their roles, and responsibilities.
Compliance Policies: Documentation of your AML and CTF policies, data protection measures, and risk management procedures.
Financial Statements: Audited financial statements demonstrating your company’s financial health and stability.

3. Engage with Regulatory Authorities

Initiate contact with the relevant regulatory authority in your jurisdiction. This might involve:

Consultations: Engaging in preliminary discussions to clarify requirements and expectations.
Submission of Application: Formally submitting your application along with all required documentation.
Responding to Queries: Providing additional information or clarification as requested by the regulatory body.

4. Implement Robust IT Systems

Ensure your technological infrastructure is secure and capable of handling electronic money transactions. Key considerations include:

Cybersecurity: Implementing strong cybersecurity measures to protect against data breaches and cyber-attacks.
Data Protection: Ensuring compliance with data protection regulations, such as GDPR, to safeguard customer information.
Transaction Monitoring: Setting up systems for real-time monitoring and reporting of transactions to detect and prevent fraudulent activities.

5. Develop a Strong Compliance Culture

Fostering a culture of compliance within your organization is crucial. This can be achieved by:

Training Programs: Regularly training employees on compliance requirements and best practices.
Internal Audits: Conducting periodic internal audits to ensure adherence to regulatory standards and identify areas for improvement.
Compliance Officer: Appointing a dedicated compliance officer responsible for overseeing and maintaining compliance efforts.

6. Prepare for On-site Inspections

Regulatory authorities may conduct on-site inspections as part of the application process. Be prepared to demonstrate:

Operational Readiness: The functionality and reliability of your systems and processes.
Compliance Implementation: The effectiveness of your AML, CTF, and risk management policies in practice.
Record Keeping: Accurate and up-to-date records of all transactions and compliance activities.

7. Stay Updated on Regulatory Changes

Regulatory environments are dynamic and can change frequently. Stay informed about any updates or changes to regulations that may impact your operations. This can involve:

Continuous Monitoring: Regularly reviewing regulatory websites and publications.
Industry Associations: Joining industry associations to stay connected with peers and receive updates on regulatory developments.
Legal Counsel: Engaging legal counsel to ensure ongoing compliance with current and future regulations.

Choice of Jurisdiction for obtaining EMI License

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Lithuania

Lithuania, overseen by the Bank of Lithuania, is well-known for its efficient and transparent regulatory framework. This jurisdiction offers EU market access via passporting rights, a competitive tax environment, and a supportive fintech ecosystem. Lithuania was a top choice for UK EMI licensed companies after the Brexit in 2020 to continue serving EU based clients.

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Cyprus

Cyprus, under the oversight of the Central Bank of Cyprus (CBC), provides a strategic advantage for obtaining an EMI license. Benefits include access to the EU market through passporting rights, a competitive 12.5% corporate tax rate, and a prime location for international trade. The CBC’s offers solid regulatory standards, business-friendly environment and modern financial infrastructure. From 2023 were issued more than 10 EMI licenses.

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Netherlands

For business owners seeking an EMI license, the Netherlands, regulated by De Nederlandsche Bank (DNB), offers various advantages. These include access to the EU market via passporting rights, a strategic position in the heart of Europe, and a reputation for regulatory excellence. The DNB is known for its stringent and transparent standards, ensuring a reliable licensing process. The Netherlands also benefits from a well-developed financial infrastructure and a dynamic fintech ecosystem.

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United Kingdom

The UK offers access to one of the world’s most significant financial markets. Despite Brexit, the UK remains a global financial hub with strong international ties regulated by the Financial Conduct Authority (FCA). This provides EMIs with opportunities to access a large and influential market, as well as to expand their services globally.

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Making the right Choice

Selecting the appropriate jurisdiction for obtaining Electronic Money Institution (EMI) license is a critical decision that can influence the success and operational efficiency of your financial services project. Here are key factors to consider:

Taxation and Profit Distribution

Choosing a jurisdiction with favorable tax policies is crucial for scaling your business. For example, Cyprus offers a 12.5% corporate tax and 0% tax on dividends, making it easier to distribute profits to shareholders without additional tax burdens. In contrast, some jurisdictions have higher corporate taxes, which can impact profitability and resource allocation.

Application Timings

The volume of EMI applications in a jurisdiction can affect processing times. High-demand areas may have longer timelines due to the complexity of the process, which includes multiple rounds of questions and reviews. Detailed feedback and thorough evaluations are necessary, potentially extending the overall timeline.

Infrastructure for EMI Projects

Countries with advanced infrastructures for EMI projects offer numerous advantages, including safeguarding solutions, KYC/AML providers, insurance, banking, and counterparties. For instance, Lithuania’s success with fintech companies like Revolut has led to substantial government investment in fintech infrastructure, enhancing project value and user experience.

Industry Friendliness

Some countries are more accommodating to certain industries based on regulatory risk appetites. For example, Cyprus and Lithuania are more welcoming to crypto projects compared to the UK or the Netherlands, where AML requirements are stricter. This openness can be advantageous if your project involves the crypto industry.

Cost of Obtaining the License

Application and legal fees vary by jurisdiction and are influenced by local salary levels. For instance, the cost of living and professional services in the Netherlands can be significantly higher compared to Lithuania or Cyprus, affecting the overall cost of obtaining the license.

At Legalaes, we believe that choosing the most suitable solution for your business can define its future success. Through our extensive cooperation with various regulatory bodies, we have developed successful strategies to ensure your project is launched on time.

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Questions & answers

Can I issue IBANs for clients with a full EMI license?

Yes, an EMI license allows you to provide electronic money and payment services, including the issuance of IBANs. Primarily, you can issue IBANs based on the jurisdiction where you have the EMI license, such as LT IBANs for Lithuania.

How long does it take to receive an EMI license?

The timeframe for obtaining an EMI license is influenced by several factors, including the country of incorporation, regulator workload, complexity of the corporate structure or business model, and willingness to cooperate. While obtaining a PI license typically takes about 4-8 months, the EMI process can extend to 8-14 months based on these factors.

Does an EMI license in one European country provide passporting rights across all of Europe?

Yes, being licensed in one EU country gives you the right to offer your services across the entire EEA area and to European residents. While it’s important to indicate primary countries of operation in your business plan, there are no limitations on offering services online in other parts of the EU.

What documentation is required for license obtainment?

Shareholders and board members must complete a clearance process, requiring documentation such as passports, CVs, education certificates, and proof of funds (SoF/SoW). For the company, documents such as a business model description, business plan, IT architecture, and various policies and manuals must be prepared and submitted with the application.

Are there different requirements for EMI based on the country of incorporation?

Generally, requirements for EMIs are set by European E-money regulations, so they are similar across all EU countries. However, national Central Banks can make some adjustments, such as accepting specific risk appetites, raising requirements for local staff presence, and capital adequacy rates. Differences in taxation, acceptance rates, and maintenance costs, influenced by the varying living standards across Europe, should also be considered.

Can I provide debit card solutions to my clients under an EMI license?

Yes, you can provide debit cards to your clients using your EMI license. This can be achieved by becoming a primary member of Visa or Mastercard or by partnering with a white-label provider.

Difference between PI and EMI license

In Europe, there are two types of licenses under the Electronic Money Law:

Services: PIs are allowed to provide a variety of payment services, including remittance, payment initiation, and execution of payments. They facilitate financial and intermediary services, such as opening and closing accounts, account replenishment, and money transfers.
Funds Handling: PIs can only hold client funds temporarily, just long enough to complete their payment operations, typically ranging from a few hours to a few days.
Restrictions: PIs do not have the authority to issue electronic money or store client funds for extended periods. They cannot produce payment instruments like payment cards or e-wallets for long-term fund storage.

Services: EMIs can issue electronic money and provide a broader range of financial services. This includes issuing individual IBANs for both B2B and B2C clients, creating payment cards, and managing digital wallets.
Funds Handling: EMIs have the right to hold client funds for longer periods in segregated accounts, offering a higher level of service compared to PIs.
Innovative Solutions: EMIs can utilize innovative financial technologies to enhance transaction speeds, reduce payment fees, and improve overall customer satisfaction and loyalty.

The primary distinction between PI and EMI licenses lies in the scope of services and the handling of client funds. EMIs have broader capabilities, including the issuance of electronic money and long-term storage of client funds, which PIs are not permitted to do. This makes EMIs more versatile, offering services that closely resemble those provided by traditional banks, with the added benefits of modern financial technologies.

Ready made solutions

A ready-made EMI company is an established entity that is already licensed, operational, and has no prior business activities. When you purchase a ready-made EMI company, you also gain the EMI license it holds, providing a fast and efficient way to enter the market without the lengthy process of applying for a new license.

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Comparison table with EMI licensing options

	Cyprus	Lithuania	Netherlands	United Kingdom
Minimal Share capital Requirement	20 000 EUR – 350 000 EUR	20 000 EUR – 350 000 EUR	20 000 EUR – 350 000 EUR	20 000 EUR – 350 000 EUR
Corporate Tax	12.5%	15%	19%-25,8%	19%-25%
Government fee	5000 EUR	1463 EUR	6800 EUR	5000 GBP
Local Staff members	2 Executive directors, Compliance officer, AML officer	Executive Director, Compliance officer, AML officer	AML/Compliance officer, Executive Director, Financial officer, Risk officer	Executive Director, AML/Compliance officer, IT officer
Physical Office	✓	✓	✓	✓
Local Bank account	✓	✓	✓	✓
Project time frames	4-12 months	4-12 months	9-14 months	9-14 months

Roadmap for registration your EMI license

Define Business Model and Jurisdiction

EMI licenses are issued by various jurisdictions in Europe, each differing in taxation, maintenance costs, and regulatory climate. Clearly defining your business model is crucial, as different countries have varying perspectives on certain activities based on their risk appetite. Choosing the most suitable jurisdiction can be challenging—Legalaes is here to assist you.

Build a Strong Application

This step involves gathering documentation from the applicant and creating a tailored roadmap for the project, ensuring it aligns with the business model. During this step, we organize the necessary documentation efficiently to address regulators’ questions.

Company Registration

The registered company will serve as the legal basis for your EMI business and is necessary for the EMI application, as the license can only be issued to a local legal entity.

Corporate Account Opening

As required by the central bank, companies need to open a corporate account before submitting the application for review. This account is typically used for share capital purposes.

Clearance of Investors with the Central Bank

This process involves the clearance of Ultimate Beneficial Owners (UBO), team members, and investors with the central bank of the jurisdiction where the license is being obtained. Documentation such as CVs, Education Certificates, Source of Funds (SoF) and Source of Wealth (SoW) will be reviewed by commission members.

License Application Submission

Once the applicant and team members have received formal approval and their documentation has been verified, the application is submitted with the previously prepared documentation pack. Typically, a personal manager from the commission will be assigned to your case.

Rounds of Follow-up Questions

After the initial review by the commission, additional questions may be asked. Legalaes is familiar with the typical questions posed, and we aim to address as many as possible in the initial application to minimize delays.

License Approval and Launch

Upon receiving approval for the license, we will finalize previously made applications with financial institutions for safeguarding purposes and confirm service provider arrangements. If desired, additional services such as obtaining a SWIFT number and setting up with a card provider can also be provided.

A Modern Fintech Solution

The EMI license is an innovative fintech solution, offering a modern alternative to the traditional banking industry while incorporating some of its key principles. This license allows the holder to open accounts for corporate and individual clients, each with a unique IBAN, and to issue electronic money. The platform supports payment processing and remittance services, providing a comprehensive financial service package. Additionally, EMI license holders can partner with credit card service providers, either directly or through white-label solutions, to issue debit cards.

In Europe, an EMI license comes with the added benefit of passporting rights, allowing operation across European countries under a single license. This includes the ability to offer SEPA payments and the right to apply for a SWIFT number.

While multiple jurisdictions offer EMI licensing, some are more popular due to factors such as taxation, application processing times, success rates, and maintenance costs. This page will explore these jurisdictions, providing insights into the best options for obtaining an EMI license

Key Features of an EMI License

Issuance of Electronic Money: EMIs can create digital equivalents of physical money, facilitating seamless electronic transactions.
Payment Services: EMIs can provide various payment services, including payment processing, money transfers, and managing payment accounts.
Customer Fund Protection: EMIs are required to safeguard customer funds by keeping them in segregated accounts, ensuring financial security and trust.

Advantages of Obtaining an EMI License

Obtaining an EMI license is known for its strict compliance standards, but it also offers numerous benefits. Companies with this license can enjoy the following advantages:

Perception of a Project

High compliance standards are highly valued by clients, ensuring the security of their funds. Being licensed by a European Central Bank is a mark of distinction for a payment company, showing stability and long-term commitment.

Infrastructure Variety

From choosing software providers to safeguarding accounts, a wide range of companies will want to onboard you as a client. Being part of a large and reputable network benefits both your company and your service providers.

Competitive Advantage

Companies with prestigious licenses often benefit from lower transaction fees, giving them a competitive edge over other payment solutions. Obtaining an EMI license can provide a competitive edge over unlicensed competitors. It signals to the market that your business is trustworthy and capable of meeting regulatory standards, attracting more customers and business opportunities.

Variety of Services

An EMI license covers a wide range of services under a single license, including payment remittance, opening IBANs for clients, and providing currency exchange services. This flexibility enables you to diversify your product offerings and meet the evolving needs of your customers.

EU Passporting and Global Presence

Entering new markets can be challenging, but an EMI license allows you to operate in 29 European countries under passporting authorization. This enables you to choose the markets that best suit your business model without worrying about legal obstacles.

Great Investment

Investing your time and attention into obtaining an EMI license is worthwhile. The value of the license tends to increase over time, making it a valuable asset for your company.

Regulations for EMI in Europe

The regulatory framework for EMI licensing in Europe is established through several key directives:

I. Electronic Money Directive (EMD2)

The EMD2 establishes the framework for the issuance and operation of Electronic Money Institutions (EMIs). It defines the core standards for EMIs, ensuring that they operate within a structured and regulated environment.

II. Payment Services Directive (PSD2)

PSD2 sets out the regulatory requirements for payment services across the EU. It focuses on making payments safer, more accessible, and enhancing consumer protection, thereby fostering a more integrated and efficient European payments market.

III. Anti-Money Laundering and Counter-Terrorism Financing (AML/CFT) Directive

This directive establishes a single rule book for AML/CFT within the EU, ensuring effective implementation and enforcement of EU-level criminal law provisions and information exchange. It is crucial for EMIs to comply with these standards to prevent financial crimes and maintain regulatory integrity.