E-money institution

What is an e-money institution?

An e-money institution is a regulated entity authorised to issue electronic money and provide selected payment services. In EU law, electronic money is generally understood as electronically stored monetary value that represents a claim on the issuer, is issued on receipt of funds for the purpose of making payment transactions, and is accepted by persons other than the issuer. This model is commonly used for digital wallets, prepaid cards, online payment accounts, and embedded payment solutions offered through apps or platforms.

In practice, an e-money institution operates within the broader payments sector but does not have the same status as a bank. It may receive funds from users in exchange for e-money, execute payment transactions, maintain payment accounts, and support services linked to cashless transfers. At the same time, its activities are limited by financial regulation. An e-money institution is not allowed to take deposits in the banking sense or use client funds in the same way as a credit institution. Its business model is therefore based on regulated payment and e-money services rather than traditional lending funded by deposits.

The legal framework for e-money institutions in the European Union is shaped mainly by Directive 2009/110/EC on electronic money institutions and Directive (EU) 2015/2366 on payment services, commonly referred to as PSD2. In Poland, these rules are implemented primarily through the Act on Payment Services and supervised by the Polish Financial Supervision Authority. Depending on the jurisdiction and licence scope, an e-money institution may operate domestically or, subject to applicable cross-border rules, provide services in other EEA markets.

What does an e-money institution do?

An e-money institution typically enables users to store value in digital form and use that value for payments. This may include issuing prepaid payment instruments, operating e-wallets, processing card or account-based transactions, enabling online merchant payments, supporting mobile applications, or facilitating payouts and collections for business clients. Many fintech companies choose this model because it allows them to build regulated payment products without becoming a bank.

Its activities may cover both consumer and business services. For individuals, this can include payment accounts, payment cards, money remittance, peer-to-peer transfers, and app-based spending tools. For companies, services may include merchant acquiring arrangements, settlement tools, mass payouts, marketplace payment flows, white-label payment infrastructure, and cross-border transaction support. Some e-money institutions also combine regulated payments with technology services, for example by offering APIs for platforms and online sellers.

However, the exact scope of permitted activity depends on the licence obtained and the local implementation of EU rules. Legal analysis is often required to determine whether a planned product involves issuing e-money, providing payment services, distributing regulated instruments through agents or distributors, or entering an area reserved for banks or other licensed entities. The answer may affect licensing, compliance, outsourcing structure, safeguarding arrangements, governance, and customer documentation.

When is legal support in relation to an e-money institution advisable?

Legal support is often needed at the design stage of a fintech or payment product. A business planning to launch a digital wallet, prepaid solution, marketplace settlement model, or embedded payments feature should assess early whether its operations fall within the e-money and payments regime. The same applies to foreign firms entering the Polish market, technology providers partnering with licensed institutions, and investors evaluating a regulated payments business.

Support may also be important when applying for authorisation, extending an existing licence, preparing regulatory policies, drafting framework agreements, or building an outsourcing model. In regulated payment activity, formal issues such as safeguarding of client funds, AML procedures, governance, complaints handling, security, incident reporting, and consumer disclosures are not merely operational matters – they are part of the legal and supervisory framework.

For established businesses, legal assistance may be needed during inspections, supervisory inquiries, internal reviews, corporate restructuring, or transactions involving regulated entities. Mergers, acquisitions, changes in shareholding, cross-border expansion, and cooperation with agents or distributors can all trigger specific legal duties. The same is true where there is uncertainty as to whether a particular flow of funds constitutes e-money issuance, a payment service, or an unregulated technical service.

Early consultation can help identify regulatory risk before a product is launched or a business model is scaled. In this area, mistakes may lead to delays in licensing, contractual disputes, supervisory measures, restrictions on operations, or financial exposure linked to non-compliance. Prompt legal review often reduces the risk of building a commercially attractive solution on assumptions that are difficult to defend from a regulatory perspective.

Law firm support in matters relating to e-money institutions may include in particular:

assessment of whether a planned activity qualifies as e-money issuance or a regulated payment service,
advice on licensing and authorisation requirements in Poland and the EEA context,
support in preparing application documentation, internal policies, and governance documentation,
drafting and reviewing contracts with clients, merchants, agents, distributors, and outsourcing providers,
advice on safeguarding of funds, compliance structure, AML, and consumer-facing documentation,
legal support in supervisory proceedings, inspections, and regulatory correspondence,
transactional support in acquisitions, restructuring, or investment processes involving regulated payment entities.

Need legal support in relation to an e-money institution? Contact us.

E-money institution