What Is an Electronic Money Institution (EMI), and How Is It Different from a Bank?
Short answer
An electronic money institution (EMI) is a licensed firm that issues electronic money and provides payment accounts, cards and transfers. It is not a bank: the money you hold with it is not a deposit, it is safeguarded rather than covered by deposit insurance, and the EMI may not pay you interest on it or lend it out.
What an EMI is
In the European Union, EMIs are authorised under the e-money directive, Directive 2009/110/EC, as written into each member state's own law. Spain's Law 21/2011 on electronic money shows how the model works: the funds a client hands over are exchanged straight away for electronic money, and those funds are not deposits or other repayable funds from the public (BOE, Law 21/2011, as of November 2026).
That distinction is the whole difference from a bank. A bank takes deposits and lends them out. An EMI holds your balance as e-money and must keep the money behind it protected.
How client money is protected
EMIs protect client money by safeguarding it. In the UK, the Financial Conduct Authority explains that an EMI must either keep client money in a separate safeguarding account with a bank, or protect it with an insurance policy or a similar guarantee (FCA, as of November 2026).
Safeguarding is not deposit insurance. The FCA states that if a non-bank payment provider goes out of business, the money is not protected by the Financial Services Compensation Scheme; clients should get most of it back through safeguarding, but it may take time and may not be the full amount (FCA, as of November 2026). New UK safeguarding rules, with daily checks, monthly reporting and annual audits, apply since 7 May 2026 (FCA, as of November 2026).
| Bank | EMI | |
|---|---|---|
| Licence | Credit institution | Electronic money institution |
| Your balance is | A deposit | Electronic money, backed by safeguarded funds |
| Deposit insurance | Yes, within the scheme's limits | No |
| Interest on the balance | Allowed | Not allowed |
| Lending | Core business | Only credit linked to a payment, never from client funds |
Sources: FCA; BOE, Law 21/2011; as of November 2026.
What an EMI may not do
- Pay interest. Spanish law, following the directive, prohibits granting interest or any other benefit linked to the length of time the e-money is held (BOE, Law 21/2011, as of November 2026).
- Lend client money. An EMI may grant credit only in connection with executing a payment, under conditions, and never from the funds received in exchange for e-money (BOE, Law 21/2011, as of November 2026).
- Take deposits. It may not take deposits or other repayable funds from the public.
Licensed in one country, active in others
An EMI authorised in one EU member state can operate in the others through a branch or by providing services across the border, once its supervisor has notified the supervisor of the other state (BOE, Law 21/2011, articles 11 and 12, as of November 2026). That is why many EU companies use an EMI licensed in another member state. Before you open an account, check the supervisor's public register to confirm the firm's licence and where it may operate.
EMI or bank?
In our experience an EMI is often the faster first operating account for an international company: onboarding is usually quicker, and many offer several currencies with local account details. A bank remains the better fit for credit, for larger balances that should sit within deposit insurance, and for clients whose counterparties prefer a bank. Many companies use both.
Our banking hub explains the options, our Corporate Banking team prepares the application, and our Global FX & Payments service covers multi-currency setups. Which provider fits depends on your industry, your currencies and the countries you trade with.
Frequently asked questions
Is my money safe in an EMI?
It is safeguarded: kept in a separate account at a bank or covered by insurance or a guarantee. It is not covered by deposit insurance, so if the EMI fails you should get most of it back, but possibly not all and not straight away.
Is an EMI a bank?
No. An EMI holds an e-money licence, not a banking licence. It cannot take deposits, may not pay interest on balances and may not lend the money its clients hold.
Can a company use an EMI as its main account?
Yes, many do, especially for international payments and several currencies. Companies that need credit or want balances within deposit insurance usually add a bank account.
Can an EMI licensed in another EU country serve me?
Yes, if it has passported its licence into your country through a branch or cross-border services. The supervisor's register shows where it may operate.
Sources
- BOE (Spain): Law 21/2011 on electronic money (as of 3 November 2026)
- Financial Conduct Authority (UK): Using payment service providers (as of 3 November 2026)
- Financial Conduct Authority (UK): FCA sets out changes to payment safeguarding rules (as of 3 November 2026)
This article is general information, not legal or financial advice. Protection rules differ by country and by firm; check the provider's licence and terms before you hold money with it.
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