Electronic money (e-money) is a payment instrument which can be considered as a digital form of cash. Electronic money means a monetary value stored electronically, issued on receipt of funds for the purpose of making payment transactions, and accepted by a natural or legal person other than the electronic money issuer. Strickly speaking, an electronic money institution (EMI) is an undertaking that has been authorised to issue e-money. Compared to traditional and even direct banks EMIs have a lot of advantages: EMIs do not have to comply with capital requirements, do not have to participate in deposit guarantee schemes and do not have to implement strict KYC/AML requirements applied to banks.
There are currently 392 electronic money institutions (EMIs) operating in Europe.
EMIs can be grouped by the country of registration:
EMIs offer a wide range of products, services and solutions in payment processing and alternative banking, ranging from merchant accounts and cross-border money transfers to elite payment cards and private banking approach to corporate clients. Due to simplified regulatory requirements, EMIs provide their products and services at reduced prices compared to banks and employ easier onboarding procedures. Usually EMIs focus on providing particular products and services for particular customer groups; some of the most popular products and services offered by EMIs are listed below:
On June 26 2020, Financial Conduct Authority of the United Kingdom (FCA) ordered Wirecard Card Solutions Ltd to cease all regulated activity after its parent company, Wirecard AG, filed for insolvency in Germany. E-money institutions using Wirecard Card Solutions services were affected by the FCA's decision and had to suspend customer cards transactions and make customer accounts temporarily inaccessible.
E-Money Institutions (EMIs) specialized in alternative banking are becoming an ever-growing competitive force to traditional retail banks and even direct online banks, especially when considering business banking. While banks prefer to deal with domestic business customers, EMIs are more flexible: they serve international business customers with some restrictions applied on countries and industries.
Personal current accounts offered by EMIs usually provide customers with the same facilities as traditional bank accounts while giving benefits of reduced costs and simplified opening procedure: such accounts are opened online, supporting documents are submitted online, authentication is also performed online. Account opening procedures vary in terms of required documents and identity verification.
Electronic money is a relatively new payment instrument, emerged with the progress in technology. Electronic money's popularity has been driven by a number of factors including growing complications in opening current accounts and getting payment cards from traditional retail banks, changes in the population's social structure, and evolution of the Internet into a digital workplace.