Electronic Money Institutions (EMIs) and Payment Institutions (PIs) with Account Information Service Provider (AISP) capabilities represent different regulatory frameworks in the European payments landscape. Understanding these distinctions is essential for fintech entrepreneurs and financial professionals.
What is an EMI?
An Electronic Money Institution, as defined by the European Banking Authority (EBA), is authorized to issue electronic money and provide payment services. EMIs can hold customer funds, issue prepaid cards, and facilitate money transfers across the EU under the Electronic Money Directive (EMD2).
Key EMI Capabilities:
Issue electronic money (e-money)
Hold customer funds in segregated accounts
Provide payment services including money remittance
Issue payment instruments like prepaid cards
Operate across the EU with passporting rights
What is a PI/API?
Payment Institutions are licensed under the Payment Services Directive 2 (PSD2) to provide payment services but cannot issue electronic money. APIs (Account Information Service Providers) specifically access customer account information with consent.
Key PI/API Capabilities:
Execute payment transactions
Provide payment initiation services (PIS)
Offer account information services (AIS)
Money remittance services
Cannot issue e-money or hold funds long-term
Critical Differences
Capital Requirements: EMIs typically require higher minimum capital (€350,000) compared to PIs (€20,000-€125,000 depending on services), according to EBA guidelines.
Fund Holding: EMIs can hold customer funds indefinitely, while PIs generally cannot hold funds beyond transaction execution timeframes.
Regulatory Oversight: Both require authorization from national competent authorities, but EMIs face stricter ongoing supervision due to e-money issuance capabilities.
Business Models: EMIs suit businesses offering digital wallets, prepaid cards, and stored value products. PIs are ideal for payment processing, money transfers, and open banking services.
Choosing the Right License
Your choice depends on your business model. If you plan to hold customer funds or issue prepaid products, an EMI license is necessary. For payment processing or open banking services, a PI/API license suffices.
According to KPMG's fintech licensing guide, obtaining the appropriate license from the start saves significant time and resources compared to upgrading later.
Conclusion
Understanding the distinction between EMI and PI/API licenses is fundamental for fintech companies operating in Europe. Each serves different business models with varying regulatory requirements and capabilities.