Enabling you to gain access to 512 million consumers across Europe and offer electronic money, including electronic wallets and prepaid cards
Electronic Money Institution (EMI) Germany
If you wish to become an electronic money institution in Germany, then you will need to apply to BaFin for authorisation as an electronic money institution. Below you will find key information and requirements to become an electronic money institution in Germany.
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 wallet. The legal framework for electronic money was established by Directive 2000/46/EC.
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.
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Services provided by an Electronic Money Institution License in Germany
An Electronic Money Institution license in Germany enables the license holder to offer a number of services:
- Issuing of electronic money e.g. prepaid cards and electronic wallets.
- services enabling cash to be placed on a payment account and all the operations required for operating a payment account;
- services enabling cash withdrawals from a payment account and all the operations required for operating a payment account;
- the execution of payment transactions, including transfers of funds on a payment account with the user’s payment service provider or with another payment service provider, including, execution of direct debits, including one-off direct debits; execution of payment transactions through a payment card or a similar device; execution of credit transfers, including standing orders;
- the execution of payment transactions where the funds are covered by a credit line for a payment service user, including, execution of direct debits, including one-off direct debits; execution of payment transactions through a payment card or a similar device; (iii)execution of credit transfers, including standing orders;
- issuing payment instruments or acquiring payment transactions;
- money remittance;
- payment initiation services;
- account information services.
Definition of electronic money
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 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 to modernise the framework for the issuance of electronic money and enable innovation in doing so.
The German regulator for Electronic Money Institutions
BaFin regulates firms that provide regulated services, including, consumer credit, payment services, e-money, lending, insurance and investment services.
The Payment Services Supervision Act (ZAG) regulates the supervision of payment services in Germany.
If you wish to issue electronic money services in Germany, such as prepaid cards or electronic wallets, you will require an Electronic Money Institution license from the German regulator, namely, BaFin.
Advantages of obtaining an Electronic Money Institution (e-money) license in Germany
- The largest economy in Europe and 4th strongest in the world.
- Ranked 15 according to market size, business sophistication, innovation and financial development.
- Online and e-commerce sales valued at €60 billion.
- Strong regulatory environment
Key features of the Electronic Money Institution (e-money) license in Germany
- A license issued in Germany is recognised in all other EEA (European Economic Area) member states. Through ‘passporting’, this enables the electronic money institution to operate across all EEA countries with a single license.
- Issue e-money, such as prepaid cards, electronic wallets and payment accounts with IBAN codes, across Europe.
- Join payment schemes such as SEPA.
- Issue Visa or Mastercard payment cards for both individual and business users.
The regulations for Electronic Money Institutions in Germany
The Payment Service Directive 2 or PSD2 for short, is an EU Directive (Directive 2015/2366) which sets requirements for businesses wishing to provide payment services in European countries, including Germany. It applies to banks, building societies, payment institutions, e-money institutions and their customers.
The PSD2 directive aims to promote innovation within the payments sector and improve protection for consumers, whilst making payments both safer and more secure. The PSD2 directive came into force on 13 January 2018.
The key objectives of the PSD2 directive 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
- Protect consumers
Key requirements to become an Electronic Money Institution in Germany
- A minimum capital requirement of €350,000 to establish an electronic money institution (e-money) business.
- The requirement to safeguard client funds either with a segregated client bank account with a credit institution or with an insurance policy.
- The management body of the electronic money institution must be of good repute and possess the relevant qualifications and experience to perform their duties.
- Establish local mind and management.
- Both agents and distributors of e-money or payment service firms must also abide by the laws relating to money laundering as stipulated in the German Money Laundering Act (Geldwäschegesetz – GwG). They must ensure that their contracting parties and beneficial owners are identified.
Applying to become an Electronic Money Institution in Germany
As part of an Electronic Money Institution (e-money) license application, you must provide the following information:
- programme of operations
- business plan
- a description of your business’s organisation structure
- evidence of your initial capital
- measures to safeguard funds of your users
- compliance & governance arrangements and internal controls
- procedure for monitoring, handling, and following up on security incidents and security-related customer complaints
- processes for filing, monitoring, tracking and restricting access to sensitive payment data
- business continuity measures
- the principles and definitions applicable to the collection of statistical data on performance, transaction and fraud
- security policy
- internal control mechanisms to comply with obligations in relation to money laundering and terrorist financing (AML/CTF obligations)
- details of qualifying holdings (shareholders)
Choosing the right consulting partner
1. Expertise and Specialism within Banking, Payments and E-money
Banking, e-money and payment services are a specialist field, requiring prior expertise, knowledge and a specialist focus. You should ensure that your consultant specialises in this area as opposed to generalising in it. They should be comfortable explaining the technical aspects of this field, such as providing technical and regulatory requirements for license authorisation, particularly in Germany. The financial regulator will have conditions and expectations regarding different aspects of the application. For example, shareholders and management should be fit & proper, of good repute and have relevant experience and knowledge. A good consultant should be able to advise you on the regulatory requirements early-on in order to manage your time effectively and minimise any delays or wrong decisions. It should your consultant’s role to guide and advise you on best practices and the regulatory requirements. For example, we spend time advising clients from an early stage, in fact during the initial meeting and prior to taking on their application, of such requirements so that they can make an informed decision before investing their time.
2. Ability to access banking products and services
Setting up an e-money, payment or banking fintech goes beyond the scope of obtaining a license. You will require specialist banking facilities, such as client safeguarding accounts, and access to payment systems, such as SEPA and Swift. Furthermore, you will require systems and software to manage your business. It is therefore important that your consulting partner has a strong network of connections with banks, technology partners and regulators. For example, by working closely with partners, such as Visa, Mastercard, Wirecard, and central banks, we are able to help clients by arranging banking facilities, such as safeguarding accounts, issuing cards, and access to payment infrastructures, such as SWIFT and SEPA.
Communication between a consultant and their client is key. Your consultant should be open to meet with you if required or to discuss your project during an initial meeting and thereafter have regular conversations with their clients. For example, we have at least a weekly telephone or conference call with our clients to discuss the progress of their license authorisation application or related project. This helps the client to understand the progress on their application and being able to report key information and developments to their management team or board. At the same time, it enables us to understand how the client is coming along in developing the operational aspect of their business.
4. International approach
Banking, electronic money and payment services are international in their very nature. As our clients grow internationally their needs change. Firms, therefore, require licenses, banking facilities, infrastructure and partners in international markets. We often find firms working with multiple legal, accounting and related firms. This can be challenging for such firms and often slows down their international growth. Furthermore, firms then must work with multiple partners within each country to manage different requirements e.g. company formation, accounting, legal, systems & IT, banks, and software vendors. This is further problematic when entering new markets. To manage these problems, our services are offered on an international level with offices strategically located in key jurisdictions across Europe and Asia. Our clients enjoy one point of contact for all their national and international requirements. This helps to remove any language barriers which they would otherwise face. Our services include accounting, legal, administrative and banking, which means that our clients can centralise their requirements with us.
5. Prior authorisation applications experience and success rate
Firms should ensure that their consulting partner has good knowledge and experience within banking, e-money and payment services. They should be able to demonstrate strong knowledge and experience within this area and be comfortable with explaining the legal and regulatory framework concerning banking, payment services, and electronic money. Your consulting partner should be able to share a client reference or provide client testimonials for similar past successful projects. For example, our website provides details of our recent work as well as the names of some of our clients.
What our clients say
"Buckingham Capital Consulting has been a reliable and trusted partner. They spent time understanding our business, people and processes and worked closely with us throughout the process. They completed our licensing application to a high standard and in a timely and efficient manner. We were delighted with how smooth the entire process was from the application preparation and submission but also with the case officer at the FCA. Buckingham Capital Consulting ensured that our licence was obtained in an efficient and smooth manner. The value and expertise they provide became obvious early on in the process. We highly recommend Buckingham Capital Consulting."