Skip to content
Solutions
Products
Why Us
Resources
Pricing
Contact
Sign in
Get started
Back to Glossary
Modulr glossary

Electronic Money Institution (EMI)

An Electronic Money Institution (EMI) is authorised to issue e-money and provide payment services. Modulr is an example of an EMI. EMIs are authorised by the regulator (e.g. the FCA in the UK) to issue electronic money and electronic money accounts. EMIs can offer payments as a service as an alternative to the traditional wholesale and commercial transaction banking infrastructure. They are not licensed to charge interest so are unable to offer credit/lending facilities directly. This constitutes the main difference between an EMI and a bank, however a significant point is also how the EMI must safeguard all funds in accounts. In the UK, all money converted into e-money must be stored securely in its entirety by the EMI and safeguarded in case of insolvency – ensuring that the total sum of funds is recoverable. This level of safeguarding is in contrast to the required level of the Financial Services Compensation Scheme, for instance, which provides consumers protection of their bank deposits up to a maximum of £85,000, or £170,000 for a joint account, in the event of a bank failure. The Electronic Money Directive (EMD) sets out the rules for the business practices and supervision of e-money institutions. The directive aims to lay the foundations for a single market for e-money services in the EU.

Applications

E-commerce:

Reduces fraud in online card payments by verifying the cardholder's identity

Banking and fintech:

Helps issuers and payment providers comply with Strong Customer Authentication (SCA) requirements.

Advantages

  • Enhanced security: Reduces unauthorised transactions by verifying that the genuine account holder is authorising the payment
  • Fraud prevention: Helps reduce chargebacks related to fraud.

Challenges

  • User Experience: Additional authentication steps can cause friction and increase checkout abandonment
  • Implementation complexity: Requires integration with card schemes and issuer systems.

Related Terms

OTP Compliance Strong Customer Authentication PSD2
Item created by Modulr, Updated on
Search glossary
Subscribe to our newsletter
More Glossary Articles
Press Release
Wire Transfer / Telegraphic Transfer
July 24, 2025
Press Release
Counter Terrorism Financing (CTF)
July 24, 2025
Press Release
Straight-Through Processing (STP)
July 24, 2025
Press Release
Loan Disbursement
July 24, 2025

Sign up to our newsletter for our latest news and insights