What is Electronic Money?

Simply put, Electronic Money (or e-money) is the electronic alternative to cash. It is typically stored on a computer or remote server, e-money payment networks like PayPal, or a prepaid debit card.

 

While e-money is an e-currency, the two terms are not interchangeable. The name e-currency also applies to cryptocurrencies, ICO tokens or virtual currencies. Unlike these e-currencies, e-money is backed by fiat money.

 

All handling of fiat-backed electronic money in the UK and EU falls under the Electronic Money Directive (EMD) purview.

 

Like all money in our centralised financial system, e-money maintains its value through stable, well-accepted assets. Electronic money issuers will only accept payments ‘on receipt of funds’, meaning all electronic money in circulation derives from fiat money.

 

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Types of E-Money

Hard vs Soft E-Money

Soft electronic transactions (for example, using PayPal or credit cards), are reversible, meaning users can typically cancel a transaction within a defined period, usually 72 hours. Hard e-money transactions, on the other hand, are non-reversible and typically drawn through a bank. The benefit of this type of e-money is that user can’t cancel hard transactions, so there’s less paperwork involved, which can reduce the operational costs.

Identified vs Unidentified E-money

Identified e-money, such as credit card transactions, allows the e-money issuer to track the payment and the user who withdraws the money. Unidentified e-money transactions resemble traditional payments. This means the user withdraws the money from a bank and uses it like paper money. Once the money is withdrawn, the bank can’t track it. This type of transaction requires a centralised system for exchanging the e-money.

Online vs Offline E-Money

Offline e-money transactions use true digital cash, which doesn't require involving a bank. As offline e-money is generally stored on a chip, card or other media, anyone on the same e-money system can use it. Unlike offline transactions, online e-money transactions require an internet connection. However, this type of e-money also requires a bank to conduct a transaction with a third party.

What are Electronic Money Institutions (EMI)?

Electronic Money Institutions (EMIs) are the digital alternative of banks, operating through an online platform and licensed to manage transactions and issue debit cards. EMI clients can use either the platform or their issued debit card to carry out payment transactions.

A company becomes an authorised EMI after acquiring an electronic money license or an ‘E-Money License’. This license permits the institution to carry out electronic money transactions in addition to the list of Payment Services that an Authorised Payment Institution (API) may conduct.

E-money institutions also have more leeway when it comes to e-money payment than Payment Institutions (PIs) have and can store electronic money for as long as necessary.

Since Moorwand has an UK E-Money licence valid across the EEA, we’re authorised to facilitate the payments you need. We remain at the forefront of payment innovation to offer the best possible electronic money services tailored to your needs.

 

Frequently Asked Questions

  • Why should you work with Moorwand?

    • With Moorwand, you get experienced payment experts trusted by some leading FinTech brands, including StoCard and TradeCore. We're connected with a variety of processors, card manufacturers and schemes in the ecosystem. Our team of payment professionals always take the time to clarify the best options available for every client we work with. We put the power in your hands.

  • Is e-money regulated by the FCA?

    • Yes. Starting with 2020 FCA introduced new e-money safeguarding requirements for the custody of client money at e-money and payments firms, to ensure that customer funds are kept separate from those of the service provider.

  • How does e-money differ from other digital currencies like Bitcoin and cryptocurrencies in general?

    • The main difference between e-money and other digital currencies is that e-money is an electronic component of fiat currency systems, such as dollars, GBP, or euros. As such, e-money is typically regulated and controlled by a government’s central banking system. Cryptocurrency and other digital money are not backed by any fiat currency. Instead, these currencies derive their value from supply and demand as well as trust in the system. Bitcoin is an independent virtual currency that is decentralised and mostly unregulated.

  • What is the difference between e-money and an e-wallet?

    • E-money serves as a payment instrument, while an e-wallet is an electronic service where users store their payment instruments, such as cards and e-money, for payment purposes.

  • What is the difference between e-money and mobile money?

    • Mobile money generally refers to payment services performed via mobile devices and under financial regulation. Meanwhile, e-money is a quantity of monetary value represented on an electronic device like a computer or a remote server.

  • What is the difference between an electronic money institution (EMI) and a payment institution (PI)?

    • The key differentiator is that EMIs are entitled to issue Electronic Money in addition to other PI services. EMIs can also store clients’ funds for an unlimited time, unlike PIs.

  • How safe is e-money?

    • The FCA protects e-money through an internal process known as safeguarding. APIs and EMIs must keep your money separate from their own or keep it safe with an insurance policy or comparable guarantee. EMIs should be able to identify what relevant client funds they hold at any time and without delay.

  • How different are regulations for EMI in the UK vs the EU?

    • The Electronic Money Regulations (EMRs) implemented the second Electronic Money Directive (2EMD) in the UK. Following the UK’s withdrawal from the EU, the FCA made technical standards on strong customer authentication as well as common and secure methods of communication (SCA-RTS) to apply in the UK, together with changes to their Handbook. The EU’s reciprocal regulatory technical standards were revoked. Find out more at FCA.

  • How is pricing determined?

    • Because pricing is determined entirely by the client's specific needs and context, we can't provide information about the costs in advance. Please do get in touch with us for a quick chat about your requirements.

An Electronic Money Institution for modern needs


Electronic Money Institutions are fast, modern alternatives to traditional banks. With decades of legal, regulatory and payment expertise, Moorwand makes it easy for companies to perform electronic transactions and/or facilitate their users to transact electronically.

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