E-money Provider in the UK: All There Is To Know

As the global financial infrastructure becomes increasingly digitalised, electronic money is popular method of financial management for both individuals and businesses. Defined as a ‘digital store of a medium of exchange’ e-money is essentially a digital form of currency that can be sent and received via electronic systems.

But how do you go about accessing electronic money and who issues it? In this article, we’ll take a closer look at e-money providers in the UK and explain how the system works and why electronic money could be a viable option for you.

What Is an E-money Provider in the UK?

An organisation that has been authorised to issue electronic money is known as an Electronic Money Institution (EMI). If they are based in the UK, like PayAlly, you can think of them as an e-money provider in the UK.

When you open an account with an EMI, you can deposit funds into your account, and they will issue e-money in return. Technically, you have a claim against the EMI for the amount in your account and this can be used to send electronic money to other recipients.

What Services Does an EMI Offer?

An EMI, or e-money provider in the UK, generally offers a wide range of services, such as:

• Holding electronic money
• Facilitating e-money payments and transactions
• Currency conversions
• Processing and storing data
• Payment services

However, it’s important to note that there are different types of EMI licenses, so not all Electronic Money Institutions will be authorised to provide all of these services.

E-money vs Online Banking: What’s the Difference?

Today, many bank accounts can be controlled digitally via online banking systems. You can even use apps and smartphones to pay for goods and services in-store, transfer funds from one account to another or pay online with your credit or debit card, so does this make them e-money?

Surprisingly, the answer is no. Although banks may offer electronic management of your funds, this doesn’t mean that they are e-money accounts. With a bank account, your funds remain in fiat currency (such as GBP) and the bank can retain ownership of the funds (if you have a savings account, for example), with you having the right of repayment as a creditor.

In contrast, e-money is issued on receipt, and fiat currency is transferred into e-money when you want to deposit funds into your e-money account. Once the e-money has been issued by the EMI, the Electronic Money Institution has financial liabilities towards you, which ensures you can redeem the funds at any time.

Another important difference between EMIs and banks is the additional services that banks typically offer. A bank may offer credit facilitates or investment services, for example, whereas an Electronic Money Institution, or e-money provider in the UK, will not.

In addition to this, EMIs and banks are regulated differently and must ensure compliance with varying laws and directives. Although EMIs are heavily regulated, banks are typically more regulated due to the higher volume of funds they hold and process, as well as their credit issuance.

While these differences may seem technical and complex, they highlight how an e-money provider in the UK varies from banks. By knowing how e-money accounts work, you’ll be able to decide if working with an e-money provider in the UK is right for you.

How Is Electronic Money Issued and Spent?

Once you’ve opened an electronic money account (also known as an e-wallet), you can choose how much you want to deposit into your account. Your EMI will simply issue e-money into your account in the desired volume once you’ve made a deposit in fiat currency.

So, the issuance process is simple and straightforward, but what about spending your e-money? To maximise flexibility and ensure e-money delivers optimal convenience, there are various ways e-money can be used to make payments. However, there are two distinct categories to be aware of:

E-money Hardware

As the name suggests, e-money hardware is a physical entity that can be used to facilitate transfers. This could be a physical pre-paid card with a magnetic strip, similar to a regular debit or credit card, or even your smartphone. Dedicated devices, such as ‘hard e-money wallets’ are also available and innovative tech companies are also making functional e-money hardware devices that are designed as accessories.

E-money Software

If you don’t want to use a physical card or device to make e-money transactions, you have the option to rely on software instead. This software works on laptops, PCs, tablets, and phones, although you will need to be connected to the internet to check your account or send a payment.

Although e-money hardware and software seem fairly distinct, there is some overlap. Many EMIs enable users to make payments via third-party e-wallets, such as Apple Pay, for example. As you pay by tapping your smartphone against a point-of-service (POS) terminal, this is technically e-money hardware, although many people assume it’s a software-based product.

In a real-world environment, choosing to use e-money hardware or software comes down to preference and convenience. If you’re running a business account and you want to enable your employees to pay for company expenses, for example, pre-paid e-money cards could be the ideal choice. Alternatively, if you’re making payments online, then a software-based solution might be all you need.

What Are the Benefits of Working with an e-money Provider in the UK?

Individuals, companies, and even financial organisations, like payment service providers, can derive benefits by opening an e-money account with an EMI. To learn more, take a look at the benefits an e-money account can offer:

Uninterrupted Revenue Streams

When you’re running a business, your revenue streams are what keeps you afloat and ensures your company remains operational. However, traditional forms of banking often take hours or days to facilitate transactions, which can delay your incoming revenue. In contrast, an e-money provider in the UK can offer instant payments.

Whether you’re accepting payments from customers or sending payments through your supply chain, the real-time functionality of the e-money infrastructure ensures your revenue remains uninterrupted and your financial management is simplified.

Lower Expenditure

Taking care of your finances can be a costly endeavour, particularly if you rely on traditional forms of banking. Making payments abroad via international transfers can quickly rack up expensive fees, for example, and companies can be stuck paying high account fees for business bank accounts.

In contrast, an e-money provider in the UK gives you access to low-cost solutions that enable you to send and receive fees with nominal fees. As a result, you can reduce your expenditure and retain more of your funds.

Global Reach

Technology has made the world more interconnected, which gives individuals and businesses the opportunity to engage with people and companies in different countries, territories, and regions. Now that e-money accounts are available, you can easily send and receive money anywhere in the world, without incurring high fees or frustrating delays.

Regulatory Compliance

When you choose an EMI as your e-money provider in the UK, you’ll have peace of mind that they’re regulated by the Financial Conduct Authority (FCA). The Payment Services Regulations 2017, the Electronic Money Regulations 2011, and many other rules govern how EMIs can operate, so you can be confident that your Electronic Money Institution is properly regulated and closely monitored.

What’s more – layers of security are used to protect every e-money transaction, so you won’t have to worry about the security of your funds either.

Fast Account Setup

Opening an account with an e-money provider in the UK is easy and efficient. In fact, you can launch an e-money account in minutes. While it can take days or weeks to open a standard bank account, EMIs are adept at simplifying and accelerating the account creation process to meet your needs.

Being able to complete the application process quickly and entirely online means it never takes long until you’re able to deposit funds into your account and begin using e-money to send and receive payments.

Futureproof Your Finances

We’re heading towards a ‘cashless society’ and there’s no doubt that electronic money represents the future of financial management. By embracing e-money now, you can get ahead of the trend and ensure that you’re using the latest solution to manage your or your company’s finances.

As e-money continues to grow in popularity, businesses that fail to offer e-money payment options will run the risk of losing custom. Conversely, introducing e-money payment solutions now can give you a competitive edge and provide more flexibility to your customer base.

Working with an e-money Provider in the UK

With so many benefits associated with electronic money, it’s easy to see why many individuals and businesses are choosing to work with an e-money provider in the UK. As an authorised EMI, PayAlly provides a wide range of e-money services and we’re always happy to help our clients explore new financial solutions. To find out more about our e-money accounts and services, contact the PayAlly team now.