An electronic money institution (EMI) is a sign of financial services’ progress. The emergence of new financial niches, such as Banking-as-a-Service (BaaS), has resulted in new approaches in fintech. With the fast development and use of blockchain-based digital currencies, neobanking is entering a new iteration. Such financial services, however, need specialized licenses and integration into the worldwide conventional financial and banking system. To adhere with established regulatory norms and regulations, a digital banking business must get an Electronic Money Institute license (EMI). For the relevance, in the United Kingdom, the Financial Conduct Authority (FCA) regulates such services with the issuance of a UK EMI license.
If you are contemplating obtaining an EMI license in the UK, then it is important to note that collaboration with an established service provider in the domain is a quick way to avoid the time-consuming and complex process of getting an EMI license. This sector evolves quickly, and any time wasted waiting for licensing might allow competitors to enter.
Tetra Consultants is an experienced corporate service provider, which helps its international clients with the application process concerning specified payment license like EMI license in UK and ensure expedite industry operation for such entities. The solution also eliminates the need for application administration by using its own licensing capabilities. We are an established player in the sector and a partner trusted by many clients in the market, is ready to serve its clients and enable them to develop their companies abroad. Through this article, our team of experienced consultants has outlined the prevalent steps required to obtain a UK EMI license.
What is an Electronic Money Institute (EMI)?
EMI is a sophisticated and digitally enabled global financial services delivery system. An EMI, as a financial service institution, varies from banks in both regulation and operations. An EMI is essentially a legal company or body that has secured a license to transfer electronic money. The license permits EMI to perform standard PSP services as well as issue electronic money.
What is an Electronic Money Institute (EMI) license?
- An EMI Institution license is a legal document issued by applicable regulatory organizations that authorizes an institution to operate and dispense electronic money. In order to build or develop an electronic money institution (EMI) in the UK, aspiring applicants must receive a UK EMI license from FCA.
- Even though no separate authorization is necessary to conduct payment services, EMIs must notify FCA of the payment services they intend to provide. Additionally, the “small EMI UK” option is also available in the UK, where the entity’s operations are confined to the UK as well as the monthly payment volume and average outstanding electronic money.
- Accordingly, a small e-money institution (Small EMI) has the ability to issue electronic money (e-money) and provide payment services except for Payment Initiation and Account Information services within the UK. In order to conduct business as a Small EMI, there are a series of procedures for registration with the FCA which acts as the regulator of electronic money institutions.
- There are certain limitations related to the operation of a company with a Small Electronic Money Institution license:
- Total business activity of the Small EMI prior to the time of registration must not generate average outstanding electronic money that exceeds €5,000,000 and;
- Monthly averages of the prior 12-month period for the total amount of relevant payment transactions must not exceed €3,000,000.
What services do EMIs provide?
The key services performed by electronic money institutions include the following:
- E-money issuing and distribution (customers keep their funds converted to e-money in the e-wallet (their online account) and perform payments with those funds)
- Currency exchange services
- Direct debit or credit transfers
- Money remittance
- Payment account cash withdrawals and depositing
- Providing account information
Steps to acquire a UK EMI license
Now that you have a much clearer understanding of the UK EMI License, as well as which types of business entities would require such licenses, you may be wondering about what the process of acquiring a UK EMI license is. Well, Tetra Consultants will now be providing 4 simple steps you can follow to obtain your UK EMI license today.
Step 1: Company registration
- To officially begin with the procedure to obtain a UK EMI license, you need to have a company registered and incorporated in the nation. Tetra Consultants’ team of incorporation specialists provides continuous support with the registration of entities in the UK. We will begin with the reservation of the company name and submission of corporate documents including the articles of incorporation for the final registration entity to UK Companies House.
- We typically expect to complete the registration process of an entity in the UK within 1 week.
Step 2: Fulfillment of regulatory requirements
- Simultaneously, our team of licensing experts will ensure that your entity is meeting the minimum regulatory requirements for obtaining an EMI license in the UK.
- Accordingly, depending on your license type and the underlying permissions you are applying for, you will be required to meet initial capital requirements. For the E-money Institution license in the UK or Europe, the initial capital requirement is €350,000.
- Additionally, In order to obtain the Electronic Money Institution license in the UK or Europe, the FCA requires you to establish a local presence in the country by having at least one resident director and money laundering reporting officer (MLRO) to be based in the UK. Further, you must have a local physical office in place.
- Tetra Consultants team will provide assistance with meeting the above regulatory obligations. We will provide assistance with providing a local physical office, resident directors, and a company secretary who will act as the representative in front of the regulatory body.
Step 3: Document preparation
- In order to file for the license application you will need to provide the regulator with the following documentation:
- The company’s proposed area of business in the form of a business plan.
- Proof of internal procedures, for example, the structures in place to run a business effectively people responsible for e-money and payment services businesses- similar to a company’s memorandum of association.
- A detailed description of how the funds of electronic money holders will be effectively safeguarded.
- Documentary evidence that when trading starts, the business will generate a monthly average outstanding electronic money of less than EUR €5 million
- Documentary evidence that the monthly average of payment services transactions from the last 12 months did not exceed EUR €3 million.
- Documentary evidence that initial capital requirements can be met.
Step 4: License application submission
- Tetra Consultants’ legal team will assist with the preparation and submission of the above-mentioned documents. With the above things completed, our team will simultaneously proceed to set the pre-meeting with the regulatory body with the intention of intimating about the setting up of an e-money institution of license in the UK.
- Depending on the application submitted, the regulatory body may require additional documents to support the license application or may the applicant to attend an interview. Tetra Consultants’ team of licensing experts will accompany you through the process. If everything goes well, you will be allotted a UK EMI license and required to act accordingly.
- Navigating the country of the UK’s complex business climate as a firm intending to provide a range of financial services and in need of an E-money Institution License might be a challenging process – a hassle to say the least. As such, Tetra Consultants hopes that this article has provided you with a much better understanding of the key steps to obtaining and registering for a UK EMI License so that you can truly decide on whether you should do so yourself.
- So, what are you waiting for? Contact us to find out more about the process of starting a payment service business in UK, and our dedicated and experienced team will respond within the next 24 hours. Tetra Consultants will not only empower you by helping to navigate the different regulations of the UK but also aid in facilitating the registration of your company there while providing invaluable, nuanced insights into any potential challenges