List of services provided by a Small EMI / Electronic Money Institution Licence

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A Small Electronic Money Institution / Small EMI licence enables the licence holder to offer a number of services:

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1. issuing of electronic money e.g. prepaid cards and electronic wallets.

2. services enabling cash to be placed on a payment account and all of the operations required for operating a payment account;

3. services enabling cash withdrawals from a payment account and all of the operations required for operating a payment account;

4. 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;

5. 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;

6. issuing payment instruments or acquiring payment transactions;

7. money remittance;

8. payment initiation services;

9. account information services.

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Definition of electronic money

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Article 2(2) of Directive 2009/110/EC, defines “e-money” as “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”. Accordingly, both prepaid cards and electronic wallets are examples of electronic money.

 

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The UK regulator for Small Electronic Money Institutions

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The Financial Conduct Authority is the UK’s regulator for financial services, including, consumer credit, payment services, e-money, lending, insurance and investment services. The Financial Conduct Authority is the regulator for 59,000 financial services firms and financial markets in the UK.

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The following laws and regulations are applicable to Electronic Money Institutions in the UK:

 

 -  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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The UK regulations for Small EMIs

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The Payment Service Directive 2 or PSD2 for short, is an EU Directive (Directive 2015/2366) that sets requirements for businesses wishing to provide payment services. It applies to banks, building societies, payment institutions, e-money institutions and their customers.

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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.

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Reasons for choosing the UK for your small EMI registration

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     -     World’s fifth-largest economy

     -     Low corporation tax rate

     -     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 become a Small Electronic Money Institution in the UK

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1. Evidence that when you start trading your e-money business will not exceed a monthly average outstanding electronic money of €5m.

2. Evidence that in the past 12 months prior to the application, the monthly average of any payment services transactions did not exceed €3m.

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

4. The management body of the electronic money institution must be of good repute and possess the relevant qualifications and experience to perform their duties.

 

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Documents required for the Small EMI / Electronic Money Institution application in the UK

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As part of the Small Electronic Money Institution (SEMI) licence application, you will be required to provide the following information as part of your application:

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1. company identification details 

2. programme of operations 

3. your e-money business in the form of a business plan and financial forecasts 

4. any payment services you intend to provide

5. a description of your business’s organisation structure 

6. measures to safeguard the funds of your users 

7. compliance & governance arrangements and internal controls 

8. procedure for monitoring, handling, and following up on security incidents and security-related customer complaints 

9. processes for filing, monitoring, tracking and restricting access to sensitive payment data 

10. business continuity measures 

11. the principles and definitions applicable to the collection of statistical data on performance, transaction and fraud 

12. your security policy 

13. internal control mechanisms to comply with obligations in relation to money laundering and terrorist financing (AML/CTF obligations) 

14. details of your qualifying holdings (shareholders) 

15. details of any outsourcing arrangements (where applicable)

 

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Choosing the right consulting partner for your Small EMI / Electronic Money Institution application in the UK

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     1.    Expertise and Specialism in Banking, Payments and E-money

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 licence authorisation. The financial regulator will have conditions and expectations regarding different parts 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 be your consultant’s role to guide and advise you on best practices and 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 and money.

 

     2.    Ability to access banking products and services

Setting up an e-money, payment or banking fintech goes beyond the scope of obtaining a licence. 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 essential 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 can help clients by arranging banking facilities, such as safeguarding accounts, issuing cards, and access to payment infrastructures, such as SWIFT and SEPA.

 

     3.    Communication

Communication between a consultant and their client is extremely important. They should be open to meeting 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 licence authorisation application or related project. This helps the client to understand the progress on their application and be 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 progressing with the operational aspect of their business.

 

     4.    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.