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Innovation In Financial Services
An E-Money Institution (EMI) is a non-bank deposit taking institution. EMIs usually offer payment accounts with unique, personalised IBAN for EUR and many also offer other currencies such as GBP and USD.
Client funds must be held in secured, segregated accounts.
EMIs, like all non-bank financial institutions in the EU/EEA, are regulated by the local financial services authority where they are based. The license can be passported across the EU/EEA, meaning the services can be rendered across the entire region under a single license.
Payment Institutions (PI) are another EU/EEA standard which allows you to collect money on behalf of companies and persons, which must be held in a secure, segregated account.
PI licensing is ideal for payment processors and payment service providers.
Obtaining a PI license is similar to an EMI but since the services are bit more narrow, the requirements are slightly more relaxed.
In addition to a PI license suitable for payment processors and payment service providers, there are three additional types of PI licenses:
Account Information Service Provider (AISP)
Payment Initiation Service Provider (PISP)
Account Information (AISP)
With the introduction of EU PSD2 (Payment Service Directive 2), banks and some other financial institutions are required to, through Open Banking APIs, provide access to Account Information (X2A or Access To Account).
The intent behind this has been to create new financial products such as KYC solutions, credit scoring, source of wealth checks, and much more.
An AISP is a company which has obtained authorisation to act as an Account Information Service Provider. It is a subset of a Payment Institution (PI), with more lenient requirements than being a full-scope PI since an AISP does not hold the money.
Payment Initiation (PISP)
Before PSD2, many payment service providers were using screen-scraping to assist payers into logging into their bank accounts and take actions (create payments).
With the introduction of PSD2, there has been a push towards Payment Initiation Services
To obtain authorisation to act as a Payment Initiation Service Provider (PISP) is much less involved than becoming a Payment Institution. The main difference is that a PISP does not physically hold the funds. It just initiates payments from a source to a destination.
Money Service Operator (MSO)
Money Service Operator (MSO) is a type of licensing popular in Hong Kong but also available in for example Singapore.
In EU/PSD2 terminology, an MSO is comparable to both PI and EMI in terms of what it is authorised to do but with different licensing requirements and conditions.
In Hong Kong, MSOs are regulated by the Customs and Excise Department.
Stored Value Facilitator (SVF)
Stored Value Facilitator (SVF) is a financial service license popular in Singapore but also available in Hong Kong.
It has similarities with MSO and is comparable to EMI and PI.
In Singapore, SVFs are regulated by the Monetary Authority of Singapore and in Hong Kong, they are regulated by the Hong Kong Monetary Authority.
Money Service Business (MSB)
Money Service Businesses (MSB) is a term commonly seen throughout North America and the Caribbean and can refer to a wide range of financial services.
While MSB licenses are most commonly used for money remittance, an MSB can in some jurisdictions conduct additional services similar to an MSO or PI.
Forex (FX) is a broad term that can include buying and selling currencies, commodities, securities, and other financial assets including CFDs.
Having a license is paramount for a forex business to be able to access the financial systems, through bank accounts and accepting payments (deposits) from clients.
At its core, money remittance is the act of taking funds from one source and giving it to a predetermined destination.
There is often a currency exchange aspect to money remittance, especially for popular corridors such as US, UK, EU, or UAE/GCC to India, Philippines, Bangladesh, and Sri Lanka.
Under EU PSD2, money remittance can also refer to bill payments services and collection of funds for immediate dispersal to predetermined beneficiary.