EMI license UK

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If you wish to obtain an EMI license in the UK, you will need to apply to the FCA for authorisation as an EMI license holder and become an electronic money institution.

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Below you will find the key information about obtaining an EMI license in the UK, formally known as the electronic money institution license. If you wish to become an EMI license holder, you must meet the FCA's threshold conditions.

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Buckingham Capital Consulting can help you become an EMI licensed firm in the UK by offering a full end-to-end service, from company formation to complete EMI license preparation and management.

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EMI license UK services

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An EMI license in the UK enables the license holder to offer a number of services:

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• Issuing electronic money e.g. prepaid cards and electronic wallets.

• Services enabling cash to be placed on a payment account and all of the operations required for operating a payment account.

• Services enabling cash withdrawals from a payment account and all of 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.

  • Execution of credit transfers, including standing orders.

• Issuing payment instruments or acquiring payment transactions.

• Money remittance.

• Payment initiation services.

• Account information services.

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Definition of E-money in the UK

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As per Article 2(2) of Directive 2009/110/EC, “e-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.

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The UK laws and regulations for EMI license holders

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The following laws and regulations are applicable to EMI licensed firms in the UK:

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• The Financial Services and Markets Act 2000

• The Payment Service Directive (Directive 2015/2366)

• The Electronic Money Regulations 2011

• Directive 2009/110/EC of the European Parliament

• The Payment Service Regulations 2017

• Payments in Euro (Credit Transfers and Direct Debits) Regulations 2012

• Regulation (EC) No 924/2009

• The SEPA Regulation (Regulation (EU) 260/2012)

• The Payment Accounts Regulations 2015

• EU Payment Accounts Directive

• Data Protection Act 2018

• Guide to the UK General Data Protection Regulation (UK GDPR)

• Proceeds of Crime Act 2002 (POCA)

• Terrorism Act 2000

• Money Laundering, Terrorist Financing and Transfer of Funds 2017

• Regulation on interchange fees for card-based payment transactions (EU) 2015/751

• The Money Laundering and Terrorist Financing Regulations 2019

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Time-frame to obtain the EMI license in the UK

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The Financial Conduct Authority is required by the European Banking Authority to assess and make a decision on an EMI license application within three months of receiving a complete application. In reality, it takes, on average, around 6 months for an application to be assessed and a decision to be made.

 

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Initial capital requirement for the UK EMI license

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The initial capital required for an EMI license is €350,000.

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Ongoing capital requirement for the UK EMI license

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The ongoing capital required for an EMI license is calculated at 2% of the outstanding electronic money a firm has issued.

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Reasons for choosing the UK for the EMI license

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• World’s fifth-largest economy

• Low corporation tax

• Low business costs

• Business tax relief of up to 230% on research and development

• Access to a highly-skilled workforce

• Strong fintech growth and investment

• Strong reputation in financial services

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Key requirements to obtain the UK EMI license

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• A minimum capital requirement of €350,000 to establish an EMI business.

• The requirement to safeguard client funds either with a segregated client bank account or with an insurance policy.

• The management body of the EMI license must be of good repute and possess the relevant qualifications and experience to perform their duties.

 

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Documents required to apply for the UK EMI license

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As part of your EMI license application, you will be required to provide the following information:

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• Company identification details

• Programme of operations

• Business plan and financial forecasts

• A description of your business’s organisation structure

• Evidence of your initial capital

• Measures to safeguard the 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 your qualifying holdings (shareholders)

• Details of any outsourcing arrangements

 

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How much is the FCA fee for an EMI license application in the UK?

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The application fee for the EMI license application is £5,000. The fee is paid when you submit your license application online. The application fee for the small EMI is £1,000.

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FAQs relating to the EMI license  

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1. What is an EMI license?

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An EMI license allows companies to issue electronic money and provide related payment services. This includes managing digital wallets, issuing prepaid cards, and processing online payments. EMIs are regulated to ensure they operate safely and protect customers' funds. For example, companies like PayPal and Revolut operate under an EMI license, allowing them to offer these financial services securely and efficiently.

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2. How does an EMI differ from a traditional bank?

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EMIs, focus on electronic money and payment services, unlike traditional banks that offer broader services such as loans, savings accounts, and investments. EMIs cannot lend money or offer savings accounts, making their services more specialised. For instance, an EMI like Revolut provides digital wallets and payment services but doesn't offer personal loans or mortgages like traditional banks such as Barclays or HSBC.

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3. What are the requirements to obtain an EMI license?

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To obtain an EMI license, a company must meet several requirements:

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• Initial Capital: A minimum of €350,000.

• Business Plan: A detailed plan outlining the company's operations and financial projections.

• AML Measures: Effective anti-money laundering (AML) controls.

• Internal Controls: Strong governance and risk management systems.

• Fit and Proper Management: Directors and key personnel must pass a fitness and propriety assessment, demonstrating their skills, knowledge, and experience in managing an EMI.

• Shareholders: Major shareholders must also pass fit and proper tests to ensure they can uphold regulatory standards. The application process involves submitting detailed documentation to the relevant regulatory authority, such as the Financial Conduct Authority (FCA) in the UK, which will review and approve the application based on these criteria.

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4. How long does it take to get an EMI license?

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The process of obtaining an EMI license typically takes around six months, though this can vary depending on the complexity of the application and the regulator's workload. This timeline includes preparing the application, undergoing regulatory reviews, and making any necessary adjustments based on feedback.

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5. What services can an EMI provide?

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EMIs can offer a variety of services, including:

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• Issuing Electronic Money: Providing digital wallets and prepaid cards.

• Payment Services (usually falling under a payment institution): Facilitating online payments, money transfers, and direct debits.

• Account Information Services: Offering consolidated views of customer accounts from different banks. For example, PayPal allows users to store money electronically, make online purchases, and transfer money to other users.

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6. What are the fees for an EMI license application?

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In the UK, the application fee for an EMI license is £5,000. This fee covers the cost of processing the application and conducting necessary regulatory checks. The fee for a small EMIs is £1,000.

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7. What is the difference between a small EMI and an authorised EMI?

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A small EMI has certain operational limits, such as:

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• Transaction Limits: Limited to €5 million in outstanding e-money and €3 million in payment transactions per month.

• No Passporting: Cannot operate in other EU countries without additional authorisation. An authorised EMI does not have these restrictions and can operate on a larger scale with fewer limitations but must meet higher regulatory standards and maintain higher capital reserves.

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8. Can EMIs passport their services across the EU?

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UK-based EMIs cannot passport their services across the EU. This means they cannot operate in multiple EU member states without obtaining separate licenses for each country. In contrast, European-based EMIs have the advantage of passporting, which allows them to expand their services widely and efficiently across the EU with a single license. However, small EMIs, regardless of their location, cannot passport their services and are restricted to operating within their home country. 

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9. How do EMIs safeguard client funds?

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EMIs are required to safeguard client funds by:

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• Segregation: Keeping client funds separate from the company’s own money.

• Insurance/Guarantees: Obtaining insurance or guarantees to cover client funds.

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10. What ongoing obligations do EMI have after obtaining a license?

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After obtaining a license, EMIs must comply with ongoing obligations such as:

• Regular Reporting: Providing financial statements and other required information to the regulator.

• Maintaining Capital Requirements: Ensuring sufficient capital reserves are maintained.

• AML Compliance: Continuously monitoring and updating anti-money laundering measures.

• Internal Audits and Controls: Regularly auditing internal processes and controls to ensure compliance. These obligations ensure that EMIs operate safely, transparently, and in the best interests of their customers.

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11. What documentation is required for an EMI license application?

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To apply for an EMI license, you need to submit various documents, including:

• Business Plan: Detailed description of your business model, target market, and financial projections.

• Organisational Structure: Information about the company's structure, including key personnel and their roles.

• Capital Requirements: Proof of initial capital (€350,000 minimum).

• Risk Management Procedures: Outline of procedures to manage financial and operational risks.

• AML and Compliance Policies: Detailed anti-money laundering policies and compliance procedures.

• IT Systems and Security: Description of IT systems and measures to protect customer data and transactions.

• Fit and Proper Documentation: Evidence that key personnel and major shareholders meet the fitness and propriety criteria, showcasing their skills, knowledge, and experience in the financial sector.

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12. How can I ensure my EMI license application is successful?

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To increase the chances of a successful EMI license application, you should:

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• Prepare Thoroughly: Ensure all documentation is complete, accurate, and aligns with regulatory requirements.

• Meet Regulatory Requirements: Demonstrate compliance with all regulatory standards, including capital requirements, risk management, and AML measures.

• Engage with the Regulator: Maintain open communication with the regulatory authority to understand their expectations and promptly address any queries.

• Seek Professional Advice: Consider hiring compliance consultants or legal experts with experience in EMI license applications to guide you through the process and ensure all aspects of your application are robust.

• Showcase Management and Shareholders: Clearly document the skills, experience, and propriety of key personnel and shareholders, demonstrating their capability to manage an EMI effectively.

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13. What common pitfalls should I avoid in an EMI license application?

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Common pitfalls to avoid when applying for an EMI license include:

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• Incomplete Documentation: Ensure all required documents are provided and fully completed.

• Inadequate Capital: Verify that you meet the minimum capital requirements.

• Poor Risk Management: Develop robust risk management and compliance procedures.

• Unclear Business Plan: Be clear and concise in your business plan, providing all necessary details to avoid delays or rejections.

• Suitability of Key People: Ensure that key personnel, such as the CEO and MLRO, have the necessary skills, knowledge, and experience, and that they meet fit and proper criteria.

• Inadequate Resources: Demonstrate that the company has adequate financial and non-financial resources to operate effectively.

• Appropriate Systems and Controls: Implement and maintain appropriate systems and controls to meet regulatory requirements, including those for risk management and consumer protection.

• Threshold Conditions: Ensure compliance with threshold conditions, which include having a viable business model, appropriate governance, and effective risk management systems.

• Consumer Duty Requirements: Meet all consumer duty requirements, ensuring that customers are treated fairly and their interests are protected.

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14. How does the FCA assess an EMI license application?

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The FCA assesses an EMI license application based on several factors:

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• Financial Stability: Ensures the applicant has sufficient capital and financial stability.

• Business Model: Evaluates the business plan and model for sustainability and compliance with regulations.

• Governance: Reviews the organisational structure and the fitness and propriety of key personnel.

• Risk Management: Assesses the adequacy of risk management and AML procedures.

• Operational Readiness: Checks the IT systems and security measures to ensure they meet regulatory standards.

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15. What are the minimum staff requirements for obtaining and maintaining an EMI license?

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The minimum staff requirements for obtaining and maintaining an EMI license depend on the complexity and scope of the firm's operations. For an EMI offering fewer e-money and/or payment services, such as one issuing only prepaid cards, the operational needs are less demanding compared to an EMI offering a range of services like digital wallets, cards and payment services combined. However, all EMI license holders must ensure they have a core team of qualified individuals to meet regulatory standards. This includes a Chief Executive Officer (CEO) who provides strategic direction and oversight, and a Money Laundering Reporting Officer (MLRO) responsible for anti-money laundering (AML) compliance. Both the CEO and MLRO, along with all other staff, must possess the necessary skills, training, knowledge, and experience to perform their roles effectively.