EU EMI vs. PI Licensing: Capital and Safeguarding Rules Explained

Choosing between an Electronic Money Institution (EMI) and a Payment Institution (PI) license in the EU isn’t just about paperwork-it’s about what your business can actually do, how much money you need upfront, and how much risk you’re willing to manage. If you’re building a digital wallet, prepaid card service, or neobank, you’re likely looking at an EMI. If you’re just moving money between accounts-like a payment processor for small businesses-you probably need a PI. The difference isn’t subtle. It’s the difference between building a bank-like product and running a payment gateway.

What Exactly Is Electronic Money?

Before you pick a license, you need to understand what sets EMIs apart. Electronic money isn’t crypto. It’s not a digital bank account. It’s money stored electronically that people use to pay others-like the balance on a prepaid card or inside a digital wallet. Under EU law (EMD2), it’s defined as a claim against the issuer, issued when you deposit real money, and accepted by someone other than the issuer. That’s why Revolut, N26, and Wise hold EMI licenses: they let users store value, send it to friends, spend it online, or withdraw it as cash. PIs can’t do that. They can only move money from one place to another. They can’t hold it.

Capital Requirements: The Big Financial Hurdle

The most obvious difference between EMIs and PIs is how much cash you need to start. For a PI, the minimum is as low as €20,000-if you only offer money remittance. If you do more-like card payments, direct debits, or payment initiation-you’ll need €125,000. That’s still manageable for many startups. For EMIs? It’s €350,000. No exceptions. No lower tiers. That’s nearly 3 times more than the highest PI requirement.

But it doesn’t stop there. EMIs also have to keep 2% of their outstanding electronic money as own funds. So if you issue €10 million in e-money, you need €200,000 in extra capital on top of the €350,000 baseline. That’s €550,000 minimum. For a PI, you just need to maintain the initial amount. No ongoing percentage calculations. No surprises.

Safeguarding: Protecting Customer Money

EMIs don’t just need more money-they need to protect it differently. Every euro of electronic money issued must be fully safeguarded. That means it has to be held in a separate bank account, or invested in ultra-safe assets like government bonds. No mixing with company funds. No lending it out. No using it for operational costs. It’s locked away, ready to be returned to customers at any time.

PIs also have to safeguard client funds, but their rules are simpler. They just need to segregate money in client accounts. No 2% calculation. No mandatory investment in low-risk assets. As long as the money isn’t mixed with the company’s own cash, they’re compliant. That’s why many payment processors can operate with leaner teams and smaller compliance budgets.

What Services Can You Actually Offer?

PIs can do a lot: direct debits, card payments, bank transfers, payment initiation, account information services. But they can’t issue electronic money. That’s the wall. If you want to offer a reloadable prepaid card, a digital wallet where users keep a balance, or a loyalty program that stores value, you need an EMI. EMIs can do everything a PI can do-plus issue e-money. That’s why companies like Revolut can offer not just payments, but also crypto trading, budgeting tools, and even small loans. The wallet infrastructure gives them room to layer on services.

Most startups start as PIs. It’s cheaper. Faster. Less complex. But if you later realize you need to hold balances, you’ll have to shut down operations, reapply for an EMI license, and go through the whole €350,000+ process again. According to Aevitium’s 2023 analysis, 41% of companies that begin as PIs end up paying for a costly re-licensing later.

Regulatory Scrutiny Is Heavier for EMIs

After the Wirecard scandal in 2020, regulators got nervous. EMIs, which handle stored value like quasi-currency, are now under far more scrutiny. The European Banking Authority says 63% of national regulators have tightened EMI applications since then. You’ll need rock-solid governance, detailed business plans, and flawless AML/CFT systems. Auditors will dig into your safeguarding accounts weekly now-thanks to new EBA guidelines from January 2024. PIs still face checks, but not this level.

And it’s not just paperwork. The UK’s FCA revoked 17 EMI licenses between 2021 and 2024 for safeguarding failures. Only 9 PI licenses were pulled. The risk of losing your license is higher if you’re holding money, not just moving it.

Costs and Time: It’s Not Just the Capital

Applying for either license takes 6-9 months. But EMIs cost more to prepare. Most successful applicants spend €150,000-€250,000 on legal, compliance, and tech setup before even submitting. EMIs spend 37% more on compliance infrastructure than PIs. In Germany, an EMI application costs €11,900. A PI? Around €6,150. In the UK, the difference is even starker: €5,000 for an EMI vs. €1,500-€5,000 for a PI.

Some jurisdictions are faster. Lithuania’s Bank of Lithuania processes applications in about 5-7 months. France? Over 9 months. If speed matters, location matters.

Who Wins? Revenue Potential and Market Trends

EMIs have higher barriers-but higher rewards. McKinsey found EMIs generate 2.7 times more revenue per customer than PIs. Why? Because they can offer value-added services: interest on balances, foreign exchange margins, subscription fees, embedded finance. A PI is a utility. An EMI is a platform.

Market data shows this. As of Q1 2024, there were 387 active EMIs and 1,214 PIs in the EU. But EMIs control 63.2% of all outstanding electronic money-€1.27 trillion in 2023. PIs handle far more transactions (€184.7 trillion), but each one is a tiny fee. EMIs make money from the balance, not just the transfer.

Gartner predicts that by 2026, 45% of new digital banking entrants will choose EMI licenses-even with the high cost-because wallet-based services are the future. In 2021, that number was only 28%.

What’s Coming Next? EMD3 and PSD3

The rules are changing. EMD3, effective July 2024, requires EMIs to reconcile safeguarded assets daily and meet stricter liquidity rules. The EBA now demands weekly audits of safeguarded funds. That’s a big operational lift.

PSD3, proposed in early 2024, will eliminate the lower PI capital tiers. Soon, all PIs offering multiple services will need €125,000-no more €20,000 options. That narrows the gap between PI and EMI costs, but the 2% safeguarding requirement for EMIs remains unique.

And don’t forget stablecoins. The ECB warned that some crypto-backed payment products may need both an EMI license and a MiCA license. That’s a double regulatory burden no one planned for.

Which One Should You Choose?

Ask yourself two questions:

1. Do you just process payments-like moving money from A to B? → Go with a PI.
2. Do you need customers to store money, reload balances, or use prepaid cards? → You need an EMI.

If you’re unsure, test your model with a PI first. But know this: upgrading later isn’t a simple upgrade. It’s a restart. You’ll lose time. You’ll lose money. And you’ll face new scrutiny.

EMIs are for builders. They’re for companies that want to own the customer relationship, not just the transaction. PIs are for operators. Efficient. Scalable. Lower risk. But limited.

There’s no ‘better’ license. Only the right one for your business.”