An EMI license (Electronic Money Institution) lets a company issue electronic money, hold customer funds in electronic wallets long-term, and issue individual IBAN accounts. A PSP license (Payment Service Provider, also called a Payment Institution license) allows a company to process and route payments, but it cannot hold customer funds for more than 24 to 48 hours. Incluence helps clients choose the right license and guides them through the full application process.
That difference in fund storage is what separates the two licenses in practice. An EMI can issue IBAN accounts and cards, prepaid or debit, because it is built to hold value; a standard PSP license does not permit issuing stored-value accounts or cards, because it is built to move value through. An EMI license suits business models that accumulate customer funds in digital wallets, such as neobanks and marketplaces. A PSP license suits payment gateways, instant payment platforms, and payout aggregators, where funds pass through rather than sit.
What Is an EMI License
An Electronic Money Institution (EMI) license is a legal authorization from a national regulator, such as the FCA in the UK, that lets a company issue electronic money, collect customer funds electronically, and deliver payment services globally.
A few features define how an EMI operates. It cannot lend customer deposits or invest them for profit. Customer holdings must be fully safeguarded, or ring-fenced, typically in segregated accounts at a mainstream commercial or partner bank. Electronic money functions as a digital equivalent of cash, moving and settling value anywhere in the world. And because EMI holdings are not bank deposits, they carry no government-backed deposit insurance such as FDIC coverage; safeguarding legislation is what protects customer funds instead.
What Is a PSP License
A PSP (Payment Service Provider) license is official authorization to process payments: collecting funds on behalf of merchants, facilitating customer transactions, and settling with banks. It is mandatory for payment gateways, aggregators, and most fintech startups that do not issue e-money themselves.
A PSP license typically covers online acquiring for card payments (Visa, Mastercard), digital wallet account opening and custody services, cross-border transfer and bulk payout settlement, and, in some cases, fiat-to-digital currency exchange. Getting one requires passing a fit-and-proper test on beneficial owners, maintaining a genuine office in the country of registration, and running strict AML/KYC screening for suspicious transactions.
Core Differences Between EMI and PSP
Capital and Compliance Requirements Compared
EMIs carry meaningfully higher capital and compliance requirements than PSPs, largely because they hold client money indefinitely rather than passing it through in days.
Under the EU standard (PSD2/PSR/EMD2), commonly used globally as a reference point, an EMI needs a fixed €350,000 minimum initial capital regardless of service mix. A PSP's capital requirement scales with the services offered: €20,000 for money remittance only, €50,000 for execution of payment transactions, or €125,000 for the full range of payment services. Ongoing capital works the same way: EMIs calculate it as a percentage of funds under stewardship, while PSPs calculate it as a percentage of payment volume processed.
Safeguarding obligations follow the same logic. EMIs must keep client money in segregated accounts at commercial banks, or cover it with equivalent bonds, at all times, since balances can sit for months. PSPs only need to safeguard funds during the processing window itself, typically a matter of days. Compliance and reporting requirements diverge accordingly: EMIs face detailed monthly reconciliation of client funds and e-money balances, plus KYC checks, dormant account monitoring, and screening for complex ownership structures, driven by the money-laundering exposure that comes with holding balances long-term. PSPs focus more on transaction-level screening: KYB checks on merchants, sanctions list matching, PCI-DSS compliance audits, and settlement timing reviews, reflecting the high transaction volume that passes through rather than sits.
Can a Business Hold Both an EMI and a PSP License?
There is no need to hold both. An EMI license is a broader authorization that already includes every permission a PSP license grants, so an EMI-licensed company can operate as both an e-money issuer and a payment processor under one entity.
Choosing Between EMI and PSP in Practice
Choose a PSP license when the business runs an e-commerce gateway, processes merchant card payments, or handles pass-through remittance without holding customer value. It requires less upfront capital and carries lighter regulatory friction, which makes it the faster route to market.
Choose an EMI license when the business is building a neobank, a fintech app, or a cross-border wallet system that needs to hold user balances, issue stored value, or provide IBANs. It costs more and takes longer, but it is the only license type that permits actually holding customer funds.
For a full breakdown of what an EMI license costs and how long approval takes by jurisdiction, see the dedicated EMI cost and timeline guide.
FAQ
What's the main difference between an EMI and a PSP license?
An EMI license lets a company issue digital money and hold customer funds in digital wallets indefinitely. A PSP or Payment Institution license only allows processing and routing transactions, without holding client funds for more than roughly 24 to 48 hours.
Can a PSP hold client funds the way an EMI does?
No. Both handle digital payments, but they operate under different regulatory frameworks with different rules on storing and managing client money, and a PSP is not authorized to hold balances long-term the way an EMI is.
Which license is cheaper to obtain, EMI or PSP?
A PSP license. It requires a lower minimum capital, typically €20,000 to €125,000 depending on the services offered, compared to the fixed €350,000 an EMI license requires.
Do I need an EMI license if I only process payments and don't issue e-money?
No. A Payment Institution (PSP) license is usually sufficient authorization for processing payments without issuing e-money, though the exact registration required also depends on where the business is located.
Can a business upgrade from a PSP to an EMI license later?
Yes, but it requires a full new authorization process rather than a simple administrative upgrade, since the EMI license carries its own capital, safeguarding, and compliance requirements that a PSP license does not need to meet.
