Electronic Money Institutions in Malta
Malta is a vibrant hub and offers a favourable environment for financial services providers.
Other than “physical” banks, offering a range of services, including accepting deposits, providing loans, and offering current, savings or other interest-bearing accounts as well as investment products among others, Electronic Money Institutions (EMIs) can be used for online transactions and purchases; they primarily focus on electronic transactions, payment processing, and digital wallets.
In terms of the EU Electronic Money Directive (2009/110) an Electronic Money Institution (EMI) is defined as a financial institution licensed to issue electronic money or that holds an equivalent authorisation in another country to issue electronic money.
EMIs may pursue the below key activities, apart from issuing electronic money:
1. Provision of Payment Services.
2. EMIs can provide credit related to certain payment services, as long as the credit is not drawn from funds received in exchange for electronic money.
3. EMIs can deliver services associated with electronic money issuance and payment services.
4. Payment Systems Operation.
5. EMIs may engage in additional business activities, provided they comply with applicable laws.
EMIs and Payment Service Providers (PSPs) are distinct entities. EMIs are characterized by the prepaid nature of electronic money and the ability to transfer this money to third parties. This distinction helps simplify compliance by regulating both payment services and electronic money issuance under the same legal framework.
Main Features of EMIs:
- Minimum Capital Requirement: EMIs must maintain a minimum initial capital of €350,000 and ensure their own funds do not drop below this amount.
- At least two individuals must effectively direct the EMI’s operations in Malta. These individuals must possess a good reputation and sufficient experience, as determined by the MFSA.
- All board members, senior managers, and shareholders undergo a thorough due diligence process to assess their fitness and propriety.
- They can issue debit cards, but not credit cards, as they cannot engage in lending or other banking activities.
- EMIs may outsource certain services, subject to evaluation by the MFSA.
- Whereas bank deposits are typically insured by government regulated depositor schemes, funds deposited with EMIs are generally not insured in the same way, so customers may face higher risks if the EMI fails.
Currently over 20 EMIs operate in Malta, some include: FinXP Limited; Andaria Financial Services Limited; Ballinger EU Limited and C2D Payment Solutions Ltd.
Licensing procedure for EMIs in Malta
In Malta, applications must be submitted to the MFSA. This process consists of two main components: analysing the business plan (including financial projections) and conducting due diligence on directors, senior managers, and shareholders.
Once the license is granted in Malta, the EMI gains the right to passport this license into other EU Member States. This allows the EMI to offer its services in those Member States as well, either by establishing a branch or providing services remotely.
Passporting for EMIs
EMIs having been licensed by the competent Authority of another EU Member State, may passport their relevant license to Malta by notifying the MFSA.
Given that Malta has developed into an attractive hub for EMIs due to the favourable regulatory environment, its strength when it comes to online-shop driven businesses working from and via the island and its strategic location within the EU, a substantial number of EMIs, licensed in other EU jurisdictions, also operate in Malta, some of which include: Bankera, Revolut, Nium, Payeer, Aion and Instarem.
For more information on Electronic Money Institutions, either as someone interested in the application for an MFSA license or as customer, seeking advice on specific parameters to open an account with an EMI, please contact us at [email protected].