Electronic Money and Authorized Payment Institutions– A game changer to the banking system.
Updated: Jan 18
What is an Electronic Money Institution (EMI)?
In simple terms, an EMI is a legal entity authorized by a central supervisory body to issue and distribute e-money and provide payment services. We could say that an EMI is a digital and efficient alternative to the traditional banking system.
What is an Authorized Payment Institution (API)?
Just like EMIs, APIs are legal entities authorized by a central supervisory body to provide payment services. The only difference is that APIs cannot issue e-money. With that being said, APIs can offer the exact same services as an EMI in respect to execution of transactions, money remittance, IBAN accounts etc.
What services do EMIs and APIs offer?
EMIs and APIs provide a vast selection of services, including but not limited to:
- Execution of money transactions such as credit and debit transfers and money remittance.
- Foreign exchange services
- IBAN accounts
- Payment cards
Why choose an EMI/API over a traditional banking institution?
1. They accept high-risk clients
Most European banks will not accept any clients coming from high-risk jurisdictions (as per the FATF, EU Tax and EU High Risk Lists) or high risk industries (such as gaming, gambling, Forex, financial services etc.).
On the other hand, EMIs/APIs have the technology and expertise to perform adequate due diligence checks and service such clients on a satisfactory level while also offering multi-currency accounts to cover all their clients’ needs.
2. Onboarding and maintenance costs
The onboarding and running costs of an EMI/API account are significantly lower in comparison to a traditional bank account. Furthermore, many banks apply a negative interest rate to all deposit accounts whereas this does not apply to EMIs/APIs. Due to the fact that an e-money licence or payment institution licence is significantly cheaper than a bank licence, there is a higher number of EMIs/APIs which in turn, creates competition between the operators. What does this mean for the end customer? Better service at a lower cost!
3. 24/7 Customer Support
While most traditional banking institutions offer customer support during normal business hours either by phone, email or walk-in service, most EMIs/APIs offer 24/7 online customer support. This means that if you encounter any problems with your EMI/API account, platform or if you simply have a query, a dedicated team is at your fingertips ready to respond!
4. Multi-currency accounts and foreign exchange
Most banking institutions offer accounts in a selection of currencies. This means that in case of a payment in a different currency, the client is charged exchange rates. This does not usually apply to EMIs/APIs, as they offer accounts in a multitude of currencies and even multi-currency accounts to hold funds of various currencies under one account.
5. Digital accessibility, flexibility and adaptability
We are living in a fast-paced digital era and therefore we expect everything in our lives to be digitalized and as easy, fast and efficient as possible. Conventional banks, even though they try to catch up with the recent technological advancements, lack when it comes to digital services. EMIs/APIs are designed to provide all their services online via user-friendly platforms. The account holder could send and receive money, check their balances and pay their employees simply by using their smartphone. An EMI/API can also offer advanced and custom-made solutions tailored to a client’s need.
Additionally, EMIs/APIs are flexible and adaptable as their respective regulations and legislations are not as strict as the ones fencing-in the conventional banks. Thus, EMIs/APIs can offer a vast selection of options to their customers in order to transfer money as swiftly as possible and offer various choices when it comes to cards and wire transfers.
*DISCLAIMER: This article and its publication are intended to provide a brief introduction and act as a general guide. This is provided for information purposes only and cannot be utilized as a substitute for professional advice. This document does not represent a legal opinion and one must not rely on it without receiving independent advice based on the particular facts of its own case. No responsibility is accepted by the author or the publishers for any loss suffered from acting or refraining from acting based on the contents of this publication.
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