E-money institutions (EMI) or electronic money institutions are companies authorized by the Bank of Spain (Banco de España) to issue electronic money coming from funds received from clients and users. The money is stored electronically or magnetically for its use in payment transactions with third parties. Besides, electronic money institutions may also provide additional services.
In other words, electronic money institutions transform their clients’ money into electronic money to use in all kinds of transactions, such as online shopping. Electronic money, therefore, acts as a substitute for physical cash and is stored on an electronic device -a card or mobile phone-, enabling the transactions. One of the most representative examples of this type of institution is Paypal.
Regulation of E-money institutions in Spain
Law 21/2011 of July 26, Electronic Money and Royal Decree 778/2012 of 4 May govern this type of institution in Spain.
The Bank of Spain, following a report from its Executive Committee, is responsible for authorizing the creation of this type of institution. To do so, the interested entity must submit an application to the Bank of Spain accompanied by extensive documentation. The formal deadline to decide on the application is three months since the successful documentation presentation.
Requirements to operate as an E-Money Institution
The main requirements to run an electronic money institution include:
- The shares, participations, or contribution titles of the share capital must be nominative
- The company must have its registered office in Spanish territory
- The company must have a minimum share capital of 350,000 euros
- The members of the Executive Board of the electronic money institution and those of the executive board of the parent company must be persons of recognized commercial and professional reputation, possess appropriate knowledge and experience to perform their duties, and be capable of good governance of the institution.
Main Activities of E-Money Institutions
Once the company has obtained its license as an electronic money institution, it will be able to:
- Issue electronic money
- Issue and acquire payment instruments, such as cards
- Provide users with payment accounts for the deposit and withdrawal of cash
- Provide payment services, such as direct debit payments, make transfers, or pay online or physical purchases by card or other devices.
However, electronic money institutions may not collect deposits and other repayable funds, as this activity is limited to banks, saving banks, and credit unions with a banking license. In other words, the money received by e-money institutions does not have the consideration of a deposit, but of non-interest-bearing electronic money.
This article is not considered as legal advice