Banks
- Banks are licensed by the respective Central Bank in the country where they operate and are subject to tight supervision. They are required to report to the Central Bank quarterly and keep a predetermined level of liquidity.Banks have to be funded with a large capital base, normally set at a minimum of €5 million or up.
- Banks can offer a wide range of services, including but not limited to checking accounts, overdrafts, mortgages, direct debit functionality, payment services, asset management, etc. and can issue their own debit and credit cards.
Generally, these obligations lead to banks adopting more conservative practices in conducting business.
It is for these reasons that the explosion in the financial services sector has happened since businesses have been changing faster than the banks could accommodate.
Electronic Money Institutions (EMIs)
- EMIs operate under a much more relaxed set of rules and supervision.
- In general, an EMI can be registered with startup capital of €350,000 and the reporting stipulations are less rigorous.
- They offer services of execution of money transactions, such as credit transfers and direct debits, money remittances, foreign exchange services, and can issue electronic money which is a form of cash stored on an electronic device.
- EMI can also provide IBAN accounts, payment cards and e-wallets.
Banks Vs. Electronic Money Institutions (EMIs): Which one to choose?
- EMIs are designed and built for the digital era, however most conventional banks were established in the pre-digital age, and it’s difficult for them to adjust to the new technology and provision of digital services.
- EMIs offer the possibilities that are suitable right now. Electronic Money Institutions don’t spend millions on “bricks-and-mortar” facilities and local offices, which is a function needed for conventional banks to achieve market penetration but instead can use their resources to acquire new business by spending their money where it will achieve the highest value.
- EMIs are flexible in approach to innovation as well as in adaptability, whereas conventional banks are fenced-in by legislation and regulations. EMIs adopt the widest possible spread of options and provide their customers with choices. When it comes to the movement of money, whereas banks work with limited services for card payments and wire transfers, EMIs can have many different payment options that may be better for their clients.
- An E-money license vs a banking license is much cheaper, allowing more competition between the operators, which means better services at lower costs for the end customer.
So, to summarize the differences between Electronic Money Institutions and banks, banks can offer degrees of security and a broader band of service that EMIs cannot at this stage match, but they are relatively inflexible and conservative in terms of accepting customers and slow to introduce modern services.
EMIs, on the other hand, are offering up-to-date and flexible products that are closely following needs in the business world, and are less restricted by regulations.