Licensing of electronic money

Progress in technology contributed to the development of a new type of payment instrument – electronic money.

Electronic money (E-money) can be defined as a digital form of cash, since it has many characteristics of cash, plus, unlike crypto currency, means electronically stored monetary value in a given currency, for example, UAH or EUR.

The exchange of electronic money takes place with the help of technical devices such as a telephone, a computer. In the modern world, gadgets are widely used to meet human needs, especially in business. The device acts as a prepayment tool for bearer, which is not necessarily linked to bank accounts in transactions.

The customer buys an electronic equivalent of coins and banknotes. The client, in fact, exchanged cash for another payment method. Instead of using a debit card (which requires a bank account) or a credit card (which requires a contract), the customer has purchased non-monetary means of payment that can be used in much the same way as cash or other forms of card payment, but without the requirement of third-party authorization.

The issuance of electronic money is a regulated activity.

Payment license for electronic money EMI or PSP (PI)

You can become a provider of payment services, having passed the certain licensing:

• The license of the “Electronic Money Institution” (EMI), also called the e-money license;
• License “Payment institution” (Payment Institution – PI or PSP, Payment Service Provider).

License for payments, differences

The main difference between the E-money license and the payment institution license (PI/PSP) is that the electronic money institution license, in addition to the services provided by the PSP, has the right to issue electronic money. This also means that in E-money institutions the client’s money is saved for a longer period, for the customer, payment cards and payment instruments are issued.

The E-money license is the right solution for Fintech companies that are planning a wider range of services rather than simply processing payments.

Thus, in this area, the EMI license has the most comprehensive range of services. Only banking license can provide more opportunities.

In any case, this or that payment license has its own limitations, which, as a rule, concern the amount of services provided. You can always get more detailed information by contacting our specialists.

In our next article, we will examine the jurisdictions that are most favorable for obtaining a payment license.