Electronic Money Institution (EMI) United Kingdom
Electronic Money Institution (EMI) United Kingdom
Enabling you to offer electronic money, including electronic wallets and prepaid cards in the UK
Electronic money or e-money is the digital equivalent of cash and can be software or hardware based. Card-based e-money is commonly stored on a prepaid card, an electronic purse or a wallet. Similarly, it may also be stored in a payment account. The legal framework for electronic money was established by Directive 2000/46/EC. More recently, Electronic Money Directive 2 or EMD2 was adopted in an attempt to modernise the framework for the issuance of electronic money and enable innovation in doing so.
In 2017, mobile payments and digital wallets were used by 68% of Europeans. 84% of consumers across Europe are active online users and this is set to grow. Research has shown that 63% of consumers are most likely to use wallets for loyalty programs, whilst 56% for cashless payments. It is estimated that European mobile payments will almost triple by 2021 and grow from €52 billion to €148 billion.
What is an Electronic Money Institution (EMI)?
The Financial Conduct Authority, in accordance with Electronic Money Regulations, defines an electronic money institution as being any person, including a corporate entity, registered as an electronic money institution and included by the Financial Conduct Authority in the Financial Services Register as a electronic money institution.
HOW WE CAN HELP YOU
Full compliance support
End-to-end authorised electronic money institution (EMI) licence application preparation. Full management of communication with the regulator until your licence has been issued.
We focus on your compliance so you can focus on your business and its growth. We offer 2 levels of compliance support packages to support you in areas including risk, compliance and auditing.
Obtaining banking facilities
From helping you obtain operational banking facilities to issuing cards and virtual IBANs, our service has your customer's needs in mind.
Full consulting support
Our partnership with you extends to consulting services, including legal, accounting, recruitment, business development, product development and market strategy.
Application Approval & Licence is issued
We hear back from the regulator who may have further questions. We prepare the response and manage communication on your behalf. Your application is approved and licence issued.
We work closely with you in understanding your organisation and its processes. We project manage your application. Finally, we help you to submit your application.
Planning & Execution
We advise you on business requirements and agree a course of action. We advise you on your regulatory requirements, fees and time-scales involved. We also offer a fast-track service.
Assessment & Suitability
We listen to you to understand your business, your customers and your requirements.
OUR EMI LICENCING PROCESS. STEP BY STEP
Our service extends beyond licencing and compliance. We spend significant time understanding our clients, their culture, ambitions and roadmap. We understand where they are and where they want to be and achieve. We help them achieve this transition. In addition to our above services, we help our clients with related and third-party services, to enable them to offer payment services smoothly.
With our authorised electronic money institution (EMI) licence authorisation service, we will discuss your requirements and the payment services you wish to offer. We will assess your business model, directors and senior management team, their experience and suitability as well as your governance (risk & compliance), operations, structure, business model and viability, to ensure that you will meet the regulator's requirements. Following our assessment, we will provide you with a realistic and honest assessment on application strength, as well as make our recommendations.
The authorised electronic money institution (EMI) application requires careful planning and in-depth preparation. A large amount of documents are required to be drafted for the authorised electronic money institution (EMI) application, including a business plan, programme of operations, risk and compliance policy and framework, security procedures and policies, anti-money laundering etc. We are able to help you prepare all the required policies, procedures, and documents to ensure you achieve authorisation and avoid any delays in doing so.
EXAMPLES OF E-MONEY
enabling customers to store both fiat (£,$,EUR) and digital/cryptocurrency
enabling users to top-up electronic money and use their cards
Under an EMI licence, you can also apply for payment services (as below) rather than applying for two separate licences
As part of your Authorised Electronic Money Institution licence application, you will be required to provide the following information as part of your application:
1. A programme of operations.
2. A business plan including a forecast budget calculation for the first three financial years.
3. Evidence that you hold initial capital.
4. A description of the measures taken for safeguarding electronic money service users’ funds.
5. A description of the governance arrangements and internal control mechanisms, including risk management and accounting procedures.
6. A description of the procedure for monitoring, handling and following up security incidents and security-related customer complaints, including an incidents reporting mechanism which takes account of the notification obligations.
7. A description of the process for filing, monitoring, tracking and restricting access to sensitive payment data.
8. A description of the business continuity arrangements, including clear identification of the critical operations, effective contingency plans, and a procedure for regular testing and reviewing of the adequacy and efficiency of such plans.
9. A description of the principles and definitions used in collecting statistical data on performance, transactions and fraud.
10. A security policy.
11. A money laundering and countering terrorism financing policy.
12. A description of the structural organisation, including, agents, branches, and outsourcing.
13. Details of shareholders and their qualifying holding.
14. Details of directors and persons who are or will be responsible for the management of the company.
15. The legal structure of the company.
16. The address of the head office of the applicant.
PSD2 - THE SECOND PAYMENT SERVICE DIRECTIVE
PSD2, or the Payment Service Directive 2, is an EU Directive (Directive 2015/2366) which sets requirements for businesses that provide payment services. It applies to banks, building societies, payment institutions, e-money institutions and their customers.
PSD aims to promote innovation within the payments sector. Furthermore, it aims to improve protection for consumers and make payments both safer and more secure.
The PSD2 directive came into force on 13 January 2018.
Its main objectives are to:
Contribute to a more integrated and efficient European payments market
Improve the level playing field for payment service providers (including new players)
Make payments safer and more secure
DEFINITION OF ELECTRONIC MONEY
As per Article 2(2) of Directive 2009/110/EC, “electronic money” means “electronically, including magnetically, stored monetary value as represented by a claim on the issuer which is issued on receipt of funds for the purpose of making payment transaction, and which is accepted by a natural or legal person other than the electronic money issuer”. Prepaid cards and electronic wallets are examples of electronic money.
AUTHORISED ELECTRONIC MONEY INSTITUTION APPLICATION
As part of your e-money licence application, you will be required to submit a number of documents, policies and procedures, including, a business plan, your safeguarding measures (how you will keep your client's money separated and ring-fenced), your governance arrangements and risk management, your procedures for managing and handling security incidents and customer complaints, your security policy and your measures against financial crime, including AML. These policy and procedural documents must be specific to your firm and adequately address key aspects as set out by the regulator. Submitting templated documents will not be acceptable and will cause delay, and potential rejection of your application. This is why it is important to prepare policies and procedures that are well thought-through and adequately address the regulator’s requirements and what it expects to see.
An important part of your e-money licence application is to ensure you meet the regulator’s basic conditions. Think of the basic condition as the basic requirements you must have in place. For example, your employees must be located in the country in which you are applying for the licence. You will need to demonstrate through your application that you have appropriate resources to operate your business. This includes having sufficient financial, management, staff, and systems to manage your business. Your team should be suitable and competent for their roles.
As part of your electronic money institution licence application, you will need to provide details of your IT systems, including both core systems and any support systems. The regulator will expect to see that you have these in place before it issues you your electronic money institution licence.
HOW TO PREPARE A STRONG ELECTRONIC MONEY INSTITUTION APPLICATION
In order to prepare a strong authorised electronic money institution licence application, not only is it important to prepare a strong and well-balanced application consisting of the policy and procedural documents, you must also ensure that you meet the regulator's basic conditions, known as the 'Threshold Conditions".
You will need to demonstrate that you have your mind and management as well as operational setup and presence in the UK. This means establishing a physical base, including a physical office.
Furthermore, you must have adequate resources in place. This includes financial resources, i.e. possessing sufficient funds to manage and operate the business. You will be required to demonstrate that you have suitable and experienced management and employees to manage the business. Firms must also demonstrate that they adequate IT systems and internal controls to ensure the safety of payments and manage fraud adequately and effectively.
You must ensure that their business plan describes your payment activities and market plan and its execution. Your firm’s financial statements must adequately address your business lines of income, calculations of initial and ongoing capital requirements and provide financial forecasts for the first three years.
You must provide policies and procedural documents that clearly demonstrate that your understand your business risks. Firms should prepare a risk framework and address how they will mitigate their risks, including operational, security and money laundering risks.
If you are authorised as a regulated financial service firm within a country inside the European Economic Area, you can provide your regulated services, as a payment service provider or electronic money provider across the rest of the countries within the European Economic Area without requiring additional licences in those countries.
The EEA states are Austria, Belgium, Bulgaria, Croatia, Cyprus (Republic of), Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain and Sweden.
Accordingly, if you were regulated in the UK, you would be able to provide regulated services within the above countries without requiring additional licences in those countries. To achieve this, you would need to apply for a ‘passport’ to do so.
With passporting, you are able to set up a branch in an EEA state and/or provide cross-border services or advice.
Passporting is only available to authorised firms i.e. authorised payment institutions and electronic money institutions. It is not available to local-level or small firms such as small electronic money institutions or small payment institutions.