This article looks at obtaining an Authorised Electronic Money Institution (e-money) or Authorised Payment Institution license in Europe. If you are planning upon offering payment services such as issuing debit cards, money transfer service, merchant services or electronic wallets and prepaid cards, you will need to apply with the European regulator, such as the Financial Conduct Authority in the UK.
The second Payment Service Directive (PSD2)
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.
Its main objectives are to protect the consumer and make payments both safe and secure. At the same time, it aims to contribute to a more competitive payments landscape.
What is electronic money (e-money)
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.
Let’s look at the payment services you are able to provide with the e-money EMI licence.
1. Payment accounts. Examples of a payment account include debit cards and payment cards. The user is able to place and withdraw cash on such accounts as well as use the account card to make a payment transaction, using the card to buy goods and services. Users are also able to set up direct debits standing orders as well as transferring funds.
2. Merchant services. Holders of the payment institution license are able to provide merchant services. This can include acting as a master merchant and offering merchants the ability to accept card payments.
3. Money remittance. Money remittance or transfer is another service payment institutions are able to offer. This service enables the payment service provider to enable users to make cross border payments, internationally.
4. Payment initiation services. Under this model, an initiator I.e. as a payment service provider under the payment institution license, subject to the user's consent, is able to initiate a payment directly from the user's bank account and transfer the amount directly to the merchant retailer’s bank account, removing the Visa and Mastercard networks from the payment process.
5. Account information services. Under this permission, subject to the user's consent, a payment service provider is able to provide access to a user’s accounts and enable them to view consolidated account information in one place.
How to prepare a strong e-money EMI license application
You will need to demonstrate that you have your mind and management as well as operational setup and presence in the European country in which you are applying for the license. 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.
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 licenses 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 Lithuania, you would be able to provide regulated services within the above countries without requiring additional licenses in those countries. To achieve this, you would need to apply for a ‘passport’ to do so.
How long does it take to obtain the license?
European regulators such as BaFin and the FCA must make a decision within three months of receiving a complete application. In reality, it takes around 4-5 months to obtain the license.
Initial capital requirement
The following will apply with regards to the initial capital.
Authorised Electronic Money Institution - €350,000
Buckingham Capital Consulting is a leading international consulting firm, specialising in payment services, electronic money, banking and investment services. We are able to advise you on the best course of action and strategy based upon your business plan and financial product or service. We can you with licencing, compliance, operational setup and related services, including, obtaining banking facilities. For more information, visit our website on www.buckinghamcapitalconsulting.com
Call us today on 02078662512 or 442078662512 if you are calling from abroad. Alternatively, please send an email to email@example.com to arrange a telephone call or to discuss your requirements and plan. We are also able to arrange calls or conference calls using Skype. Our Skype ID is BCC54321. If you wish, we can arrange a meeting at one of our offices.
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