Electronic Money Institutions (EMIs) are not banks, however they are often publicly confused to be so. Banking regulation and operations are very different from that of an EMI. In this article we will highlight the regulation behind Electronic Money Institutions and the operations they can carry out.
EMI Licences and Regulation in Malta
An Electronic Money Institution, in Malta is regulated by the Financial Institutions Act, which is Chapter 371 in the Laws of Malta. The regulatory body for EMI licenses in Malta is the MFSA.
According to the Financial Institutions Act,
“electronic money institution” means a financial institution that has been licensed in accordance with this Act and authorised to issue electronic money or that holds an equivalent authorisation in another country in terms of the Electronic Money Directive to issue electronic money.’’ (Source: Financial Institutions Act Chapter 376 /Page 6. Read more)
A further consideration for EMI’s is the startup requirements attached to an EMI license. The application itself is around €4,000, and the minimum capital requirement which must remain on account at all times is €350,000.
Alongside this regulation we also see the Payment Services Directive which regulates Payment services providers/institutions. It is important to note that EMI’s are different to PSP. (Comprehensive article highlighting differences)
As with most regulations within the EU, national laws are often based on European Union Laws. In the case of e-money issuance, this is covered in the Directive 2009/110/EC of the European Parliament and Council whilst regulation around payment services in covered in Directive (EU) 2015/2366 better known as (PSD2)
More info: (EU e-money Directive) & (EU payments Directive)
Finance Malta highlights that: ‘’Payment Institutions (PIs) licensed in Malta has seen enormous growth over the last few years, and are nationally regulated under the Financial Institutions Act. However, Payment Institutions are not allowed to receive deposits or other repayable funds from the public and must use funds exclusively to provide payment services’’
EMI services
For its customers, regulated EMI’s in Malta and the EU can offer the following services:
· Transfer of money to third parties
· Debit cards for customers
With that said it is important to highlight that, they do not offer: (source)
- bank accounts as they are not authorised to received deposits
- deposit guarantees. In other words customers funds are not protected up to €100,000 under the European Deposit Insurance Scheme)
- money transfers can be restricted to particular jurisdictions and particular currencies;
We continue to observe an increase in e-money institutions as displayed in the image bellow by Thebanks.eu
As a customer it is important to understand the difference between the licence obligation the entity has, along with the difference in provision the entity can provide. Read how Banks are licensed and what services they can offer here
