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How EMIs Are Transforming Modern Banking

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It’s hard to believe that it’s been over two decades since Electronic Money Institutions, or EMIs, burst onto the scene in the early 2000s. Back then, there was no shortage of scepticism about where this whole e-money trend was headed. People were concerned about where this e-money trend would take banking.

Fast forward to today, and things have definitely changed. Those doubters have been proven wrong. In fact, according to a KPMG report, in Europe (excluding the UK) from 2017 to 2021, an impressive 852 firms were granted authorisation as EMIs, Payment Institutions (PIs), or Account Information Service Providers (AISPs). That’s right – 852!

That’s a marketplace bustling with innovation and competition, indicating that EMIs have firmly cemented their place in the banking mainstream. But what exactly are EMIs? How do they work? And what does this mean for the future of banking? Let’s explore.


What are EMIs?

E-money, or electronic money, is essentially the digital version of the cash you carry in your wallet. Now, an EMI (short for Electronic Money Institution) is an authorised entity that handles this electronic cash. They’re the companies licensed to oversee digital transactions and ensure everything flows seamlessly.

The rise in e-money transactions is absolutely astonishing. Based on insights from a report by Juniper Research, it’s estimated that 4.4 billion people worldwide will be using e-money by 2025.

It’s important to note that EMIs are distinct from banks. Unlike banks, EMIs do not offer investment, deposit, or credit services. Instead, they focus on digital payment services and the issuance of electronic money. However, like banks, EMIs can provide customers with unique IBAN payment accounts. Plus, they often offer debit card options, providing customers with added flexibility in managing their finances.

In addition, while EMIs and traditional banks both operate within the financial sector, their business models and services differ significantly. The primary distinction lies in their approach to customer interaction and service delivery. EMIs are digital-first entities that leverage technology to offer financial services, mainly through online platforms and mobile apps, without the need for physical branches. This digital approach allows for more streamlined, efficient, and often cheaper services compared to traditional banks, which rely on a network of physical branches and are often encumbered by legacy systems and regulations.


Advantages of EMIs

With blockchain, tokenisation, and a future without cash being discussed regularly, there’s never been a better time to consider EMIs over traditional banks. 

But what exactly can EMIs offer that brick-and-mortar banks can’t? Let’s discuss: 


Licence to Adapt, Change, and Innovate

EMIs have a unique advantage over traditional banks: they can quickly adjust to shifts in the market and advancements in technology. This agility enables them to swiftly innovate and introduce cutting-edge solutions that traditional banks might struggle to keep up with.

For example, let’s say there’s a new breakthrough in blockchain technology that promises to revolutionise how financial transactions are conducted. While traditional banks might take months or even years to incorporate this innovation into their systems, EMIs can adapt much more rapidly. They have the flexibility to integrate new technologies into their platforms, allowing them to offer innovative services like instant cross-border payments or decentralised finance solutions in a fraction of the time it would take traditional banks.


Lower Fees for International Payments

Traditional banks are notorious for slapping hefty fees on international transactions, making it costly for businesses to send and receive money across borders. But here’s where EMIs step in to save the day. They usually offer much more competitive rates, making cross-border payments significantly more affordable.

For example, let’s say you’re a high-risk business owner looking to expand your operations overseas. With a traditional bank, each international transaction could eat into your profits due to high fees. But by opting for an EMI, you could save a substantial amount on fees, allowing you to allocate more resources towards growing and scaling your business.

This cost-effectiveness is especially beneficial for all of the businesses out there that frequently engage in cross-border trade or have international clients and suppliers.


Faster Application Process for New and Existing Businesses

EMIs are all about efficiency, especially when it comes to onboarding businesses. Unlike the lengthy and cumbersome application processes often associated with traditional banks, EMIs streamline the entire experience, allowing businesses to get up and running in no time.

Now, this benefit is especially appealing for high-risk businesses. These industries often face hurdles when trying to open accounts with traditional banks due to their perceived risk factors. However, EMIs offer a lifeline to businesses operating in such sectors.

Imagine a startup in the CBD industry looking to establish its online presence and start processing payments. Traditional banks may hesitate to onboard them due to the legal and regulatory complexities surrounding CBD products. However, an EMI specialising in high-risk industries understands the unique challenges these businesses face and can expedite the application process. 


Understanding of the Future Digital Environment

While traditional banks may be stuck in their ways, EMIs are all about embracing the future. They have a deep understanding of the evolving digital landscape, from blockchain to tokenisation and beyond. This forward-thinking approach puts them in a prime position to better serve businesses in an increasingly digital world.

Whether it’s exploring new payment methods, implementing innovative security measures, or leveraging new technologies, EMIs are constantly looking ahead. And that’s exactly the kind of perspective you want in a banking partner, one that’s not just keeping up with the times but shaping the future of finance.

As technology continues to evolve, the role of EMIs in the banking industry is expected to grow. Beyond transforming the way we think about banking, EMIs are also setting the stage for a future where financial services are more inclusive, efficient, and tailored to the digital age.


Safety and security of funds

Beyond their forward-thinking approach, EMIs offer another significant benefit: they ensure the safety and security of customer funds.

In the UK, EMIs are subject to strict regulation by the Financial Conduct Authority (FCA) under the Electronic Money Regulations 2011. This means that every EMI must gain authorisation from the FCA to operate legally. To do so, they must submit detailed applications outlining their program of operations, ensuring transparency and compliance with regulatory standards.

But what sets EMIs apart is their commitment to safeguarding customer funds. EMIs are required to comply with stringent safeguarding requirements, which means that customer funds are held securely and separately from the company’s own funds.


Paving the Way for Modern Banking

So, what does this mean for the future of banking? 

First of all, with more and more transactions happening online, we’re saying goodbye to the days of waiting in long lines at brick-and-mortar banks. It’s all about convenience and efficiency now, and e-money definitely leads the charge in this.

But it’s not just about convenience. No, it’s also about levelling the playing field. With e-money, businesses that were previously excluded from the formal banking system can now access a wide range of financial services. This really helps with financial inclusion, opening up new opportunities for thousands of businesses around the world.

With their innovative digital solutions, EMIs are giving the big banks a run for their money. It’s an exciting time to be in banking, with new technologies and ideas driving competition and pushing the industry forward.

At Capitalixe, we understand the challenges businesses face when navigating the complex world of financial institutions. That’s why we’re here to simplify the process for you. Our team specialises in connecting businesses with the world’s leading financial institutions, ensuring you receive the best possible service without the hassle.

You can leave the searching, negotiating, and relationship maintenance to us. We work closely with a diverse range of service providers, including EMIs, who are experts in supporting industries that are often overlooked by traditional banks. This allows you to focus on growing your business while we handle the intricacies of financial partnerships.

Whether you’re in need of a multi-currency account, access to online merchant account services, or assistance with cross-border money transfers through EMIs, we’ve got you covered. Get in touch and discover how we can help!

Get in touch with our team of experts.

At Capitalixe, we specialize in helping our clients who are often deemed as “high risk” find the perfect banking and payment solution for their needs. We do this by leveraging our network of over 100+ financial institutions, EMI’s and banks worldwide. Our goal is to help save you time and take the pain of finding trustworthy and suitable solutions away from you.   

Feel free to reach out to us for a complimentary consultation. We will be more than happy to help you. 

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