What is the difference between a payment institution and an electronic money institution?

The regulatory boundary

PI and EMI authorisations are both issued under the Payment Services Directive 2 (PSD2) framework in the EEA, but they cover categorically different business models. The core distinction is straightforward: a PI moves money on behalf of clients, while an EMI both moves money and issues electronic money — a stored-value instrument redeemable as cash.

In practice, if your platform holds a float — a balance that a user can top up, spend, and withdraw — you are issuing e-money and need an EMI authorisation. If your platform merely transmits or initiates payments without holding a redeemable balance, a PI authorisation is likely sufficient.

What each authorisation covers

A PI authorisation permits: execution of credit transfers and direct debits; money remittance; payment initiation services (PIS); account information services (AIS); and acquiring payment transactions. It does not permit the issuance of stored-value instruments.

An EMI authorisation covers all PI-permitted services and additionally permits the issuance of e-money. This includes prepaid cards, digital wallets, and any instrument where the holder can redeem a balance. EMI also permits the granting of credit directly linked to payment transactions.

Capital requirements

PI minimum own funds depend on the category of payment services authorised: €20,000 for money remittance only; €50,000 for payment initiation services; €125,000 for all other payment services including account servicing.

EMI requires a minimum of €350,000 in own funds at all times, with an additional capital buffer calculated on the basis of the outstanding e-money float. The higher threshold reflects the expanded liability of holding redeemable balances.

Safeguarding differences

Both PI and EMI are required to safeguard client funds received in connection with payment transactions. However, EMI carries an additional safeguarding requirement for the e-money float: all outstanding e-money must be covered by either a segregated account or an insurance policy at all times.

For a PI, safeguarding applies only to funds in transit — those received from a payer and not yet delivered to a payee. The safeguarding window for a PI is up to the end of the following business day. EMI has no equivalent time limit on safeguarding because the float may be outstanding indefinitely.

Passporting and cross-border services

Both PI and EMI licences issued in an EEA member state carry passporting rights under PSD2. A firm authorised in Lithuania can passport its services to all other EEA member states via formal notification to its home-state NCA, which then notifies the host-state NCA.

Passporting is not automatic. Each target jurisdiction must be added through the notification process, and some host-state NCAs impose additional local requirements. The passport covers the specific services included in the original authorisation — it cannot be extended without amending the underlying licence.

Choosing the correct route

Apply for a PI if: users cannot redeem a balance from your platform; you are facilitating payments but not holding float; your use cases are limited to credit transfer, remittance, PIS, or AIS.

Apply for an EMI if: users hold a redeemable balance (prepaid wallet, stored-value card); your platform issues an instrument that can be topped up and cashed out; you are building a challenger bank or neobank with a payment account product.

If you are unsure which category applies to your specific business model, a pre-application assessment with a specialist is strongly recommended before committing to a jurisdiction or beginning the application process.