FCA Electronic Money Institution Authorisation: What You Need to Know

FCA EMI authorisation under the Electronic Money Regulations 2011 (EMRs 2011) is the regulatory pathway for firms that wish to issue electronic money in the United Kingdom. Electronic money — defined as electronically stored monetary value representing a claim on the issuer, issued on receipt of funds for the purpose of making payment transactions — is a distinct regulatory category from payment services. The Financial Conduct Authority is the competent authority for authorising and supervising electronic money institutions, and any firm issuing e-money must be authorised as an EMI before commencing business. This guide covers the full authorisation process, from regulatory classification to post-authorisation obligations.

What Is EMI Authorisation?

EMI authorisation is the process by which the FCA grants a firm the right to issue electronic money under the EMRs 2011. Electronic money is defined in Regulation 2 of the EMRs 2011 as electronically (including magnetically) stored monetary value as represented by a claim on the electronic money issuer which is issued on receipt of funds for the purpose of making payment transactions, and which is accepted by a person other than the electronic money issuer. In practical terms, any business model that involves customers loading funds into an account, wallet or prepaid card — where those funds represent a claim on the firm — constitutes e-money issuance and requires EMI authorisation. The EMRs 2011 also permit authorised EMIs to provide payment services as defined in the PSRs 2017, meaning an EMI can provide both e-money issuance and payment services under a single authorisation. The distinction between an EMI and a payment institution is fundamental: a payment institution cannot issue e-money. If a firm's business model involves stored value, customer wallets, prepaid instruments or multi-currency accounts where the firm holds the balance, EMI authorisation is almost certainly required.

Who Needs EMI Authorisation?

This requirement typically applies to:

• Digital wallet providers where customers load funds and spend via the wallet
• Prepaid card issuers where the card balance represents electronic money
• Multi-currency account providers holding customer balances in multiple currencies
• Firms providing stored-value gift cards accepted by third parties
• Mobile money platforms enabling customers to store value and make payments
• Corporate expense management platforms where employee cards are funded from a central e-money account
• Remittance firms that issue stored-value accounts to recipients

Firms must determine whether they require Authorised EMI (AEMI) status or Small EMI (SEMI) registration. SEMIs are limited to €5 million in average outstanding electronic money over the preceding six months and face lighter prudential requirements. SEMIs cannot passport into other jurisdictions. Firms exceeding or expecting to exceed the €5 million threshold must apply for full AEMI authorisation.

Key Regulatory Requirements for EMI Authorisation

Capital requirements. AEMIs must hold a minimum of £350,000 in initial capital — significantly higher than the PI capital thresholds. Ongoing own funds are calculated as 2% of the average outstanding electronic money, assessed over the preceding six months. This is a rolling calculation that increases as the firm's e-money float grows. SEMIs have no minimum initial capital requirement but must demonstrate adequate financial resources.

Safeguarding. Safeguarding is the single most scrutinised element of any EMI application. Under the EMRs 2011, firms must safeguard funds received in exchange for electronic money by either: (a) depositing them in a separate account at an authorised credit institution (the segregation method), or (b) covering them with an insurance policy or comparable guarantee (the insurance method). The FCA expects firms to use the segregation method in almost all cases. Under PS25/12, EMIs must perform daily reconciliation of safeguarded funds, maintain detailed records demonstrating the total e-money float at any point in time, submit to an annual independent safeguarding audit, and designate a named senior manager responsible for safeguarding compliance. The FCA assesses the firm's safeguarding methodology with particular rigour — the application must explain precisely how the e-money float is calculated, how funds move from receipt to the safeguarding account, what happens during settlement cycles, and how the firm handles refunds, chargebacks and expired e-money.

AML controls. The AML requirements for EMIs are identical to those for payment institutions under the MLRs 2017. However, EMIs typically face higher AML scrutiny because e-money products — particularly prepaid cards and digital wallets — carry inherent money laundering and terrorist financing risks identified in the FCA's financial crime risk assessments. The AML programme must include a tailored risk assessment addressing the specific risks of the firm's e-money products, customer-type risk scoring, enhanced due diligence for higher-risk customers and ongoing transaction monitoring calibrated to e-money usage patterns.

Governance. The FCA assesses EMI directors and senior managers against the same fitness and propriety standards applied to PIs. Key individuals must complete Individual Questionnaires. The FCA places particular emphasis on the governance structure around safeguarding — the board must demonstrate understanding of safeguarding obligations and active oversight. The wind-down plan for an EMI must specifically address how outstanding e-money will be redeemed and how safeguarded funds will be returned to customers in the event of firm failure.

Business plan. The regulatory business plan for an EMI must include detailed e-money float projections — the FCA expects to see how the firm projects its outstanding e-money balance will grow over three years, what that means for safeguarding account balances, and how the firm's capital will remain adequate as the float increases. Revenue model projections must distinguish between interchange income, transaction fees, foreign exchange margin and float income where applicable.

The EMI Application Process: Step by Step

Step 1 — Regulatory classification. Confirm that the firm's business model constitutes e-money issuance rather than payment services only. This determination is critical — misclassification leads to applying under the wrong regime. Timeline: 1–2 weeks.

Step 2 — Application preparation. Prepare the full application pack: programme of operations, regulatory business plan with float projections, AML framework, safeguarding methodology and arrangements, governance documentation, financial projections, compliance monitoring programme and Individual Questionnaires. Timeline: 10–16 weeks.

Step 3 — Safeguarding account establishment. Open a designated safeguarding account at an FCA-approved credit institution and obtain written acknowledgement. This must be completed before submission — the FCA will not progress an EMI application without confirmed safeguarding arrangements. Timeline: 4–10 weeks.

Step 4 — Submission via FCA Connect. Submit the application with all supporting documentation and the application fee. The FCA will acknowledge receipt and assign the application. Timeline: 1–2 weeks.

Step 5 — FCA assessment and determination. EMI applications typically involve 3–5 rounds of information requests, with particular focus on safeguarding, float projections and AML controls. The FCA may request meetings with key personnel. Timeline: 6–18 months.

Common Mistakes and Why EMI Applications Fail

The most common EMI application failure is inadequate safeguarding methodology. Firms that present safeguarding arrangements without explaining precisely how the e-money float is calculated — how funds move from customer receipt to the safeguarding account, how reconciliation is performed, how refunds and chargebacks are handled within the safeguarding framework — will face extensive FCA information requests and delays.

Second, firms underestimate the capital requirement. £350,000 initial capital for an AEMI is a significant investment, and the 2% ongoing own funds requirement means capital must grow with the float. Firms that project rapid float growth without demonstrating how additional capital will be sourced face FCA challenge.

Third, generic AML programmes that do not address the specific money laundering risks of e-money products. Prepaid cards and digital wallets carry specific risks — anonymous loading, rapid liquidation, cross-border transfers — that must be addressed in the risk assessment and CDD procedures.

Fourth, weak wind-down planning. The FCA is particularly focused on EMI wind-down viability because outstanding e-money represents a direct obligation to consumers. The wind-down plan must demonstrate how every pound of outstanding e-money will be redeemed and returned.

What Firms Should Do Now

1. Confirm that your business model requires EMI rather than PI authorisation — the distinction turns on whether you hold customer funds as stored value (e-money) or merely transmit them (payment services).
2. Secure £350,000 initial capital if applying as an AEMI, with a clear plan for ongoing capital adequacy as the e-money float grows.
3. Design your safeguarding methodology in detail — document the flow of funds from customer receipt to safeguarding account, the daily reconciliation process, and the treatment of refunds and expired e-money.
4. Open a safeguarding account at an FCA-approved credit institution before commencing the FCA application — this is a prerequisite, not a step to be completed later.
5. Build your AML programme around the specific risks of your e-money products — prepaid cards, wallets and stored-value products carry distinct risks that require tailored controls.
6. Prepare a wind-down plan that specifically addresses the orderly redemption of all outstanding electronic money and return of safeguarded funds.

Regulatory Context and Outlook

The FCA continues to apply heightened scrutiny to EMI applications, reflecting the sector's growth and the increasing volume of customer funds held as electronic money. The FCA's 2024/25 Business Plan identifies e-money safeguarding as a priority supervisory area. PS25/12 introduces the most significant enhancement to safeguarding requirements since the EMRs 2011 were enacted, including mandatory daily reconciliation, annual independent audit and board governance obligations. The upcoming Payment Services Regulation (PSR) at EU level — which merges PSD2 and EMD2 into a single regulation — will also influence the UK framework as the FCA considers equivalence and competitiveness. Firms applying for EMI authorisation in 2026 should build PS25/12 compliance into their application from the outset rather than treating it as a post-authorisation upgrade.

Regulatory Counsel manages FCA EMI authorisation applications from initial regulatory assessment through to approval. Our team has secured authorisations for digital wallets, prepaid card programmes, multi-currency platforms and mobile money providers. Firms seeking specialist support with FCA EMI authorisation can contact Regulatory Counsel for a free initial consultation. See our licensing and authorisation service for details.