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All you Need to Know about E-Money

E-money (electronic money) is defined as monetary value stored electronically. E-money exists only on a technical device (cards, computers, mobile phones etc.) and is not held in any physical form.  E-money can be exchanged electronically, traded, stored and used to pay and receive funds. Physical currency is becoming progressively obsolete as more and more businesses are opting for the electronic alternative: e-money.

What is an E-money Account?

An e-money account is held with an electronic money institution, e-wallet or payment company. With an e-money account you have all the services of a conventional bank account but with certain advantages. E-money accounts offer you rapid electronic transactions; highly encrypted security; convenience; low or no charges and access anytime anywhere. Using an e-money account you don’t need to give out your credit card details every time you make a transaction as the card is linked to your e-money account.

How do You Open an Electronic Money Account?

Opening an e-money account is simple and can take just a few minutes. Select a trusted e-money provider. Register for an electronic money account by filling out a simple online form with basic details name, e-mail and mobile phone number. Link your bank account or credit card with your e-money account.  From that point on you can make transactions simply by logging in with your username and password.

What is an E-money Mobile App?

An e-money mobile app is downloaded onto your smartphone and used as an access point to all your accounts anytime anywhere. An e-money app gives you an e-wallet on your smart phone where you can concentrate all of your accounts – credit cards, bank accounts and e-money account. You can even send or receive funds from people who don’t have an e-money mobile app by using their mobile phone number or email address. With an e-money app business people can track their finances, make instant mobile money transfers (MMT), make mobile payments, access accounts via their smartphone and be in control wherever you are. It is similar to money transfer app buy with much more functionality and additional services like currency conversion, cards, bank transfers and more.

What is an e-wallet?

An e-wallet stores e-money in the same way that a regular wallet stores cash. It can also store multiple credit card and bank account details in a secure electronic environment. For businesses adding an e-wallet payment option to your system can improve sales. Thanks to the high-level of encryption on e-wallets your business also gains added security.

E money accounts and EMI Accounts vs. Conventional Banking

If you are looking for an alternative to your traditional  corporate bank account we can help you find the solution which best meets your banking needs.

Electronic Money Institutions can issue electronic money; supply payment services; in some cases grant loans linked to payment services; offer operational services and additional services like management of your payment system or commercial activity.

What is an Authorized Payment Institution?

A Payment Institute (often called financial institution) is a type of payment service provider which was created as a result of the enactment in 2009 of the EU Payment Service Directive (PSD). The Directive set out regulations for all payment service providers that would allow businesses and individuals to make safe, cost efficient, timely payments easily. By removing the legal barriers to the provision of Europe payment services the Directive opened the market up to newcomers in the Europe payments market including payment institutions.

Authorized Payment Institutions

 

What payment services can PDS authorized payment Institutions provide?

Schedule 1 of the Regulations defines “an authorized payment service” as a service that can:

  1. Implement cash deposits in a payment account and all the operations necessary for running the payment account.
  2. Implement cash withdrawals from a payment account and all the operations necessary for running a payment account.
  3. Implement payment transactions such as fund transfers on a payment account with a payment service provider:

(i) Implement a direct debit such as a one-time direct debt

(ii) Implement a payment transaction via a payment card or other similar device

(iii) Implement a credit transfer such as a standing order

  1. Implement a payment transaction where funds are covered by a credit line for a payment service user:

(i)Implement a direct debit such as a one-time direct debit

(ii) Implement a payment transaction via a payment card or other similar device

(iii) Implement a credit transfer such as a standing order

  1. An authorized payment institute can issue payment instruments or acquire payment transactions.
  2. Conduct fund remittance.
  3. Payment services institutions can implement transactions authorized by the payer via any digital, IT device or other form of telecommunication. The payer consents to the transaction via these devices and the payment is also made via the IT system, network operator or telecommunication system that acts as an intermediary only.

 

What are payment services regulators and payment services regulations?

The payment institutions are regulated and supervised under the same conditions as the Central Bank’s general supervision procedures. The aim is to make sure that all of the financial service providers are upholding their responsibilities and have strong internal controls and management. The payment institutions must also comply with standard procedures and insure that all the employees, at every level of the organization are acting with integrity and competence. All authorized payment services providers, whether operating internationally or domestically must abide by best practice standards.

In accordance with the payment services regulations the authorized payment institutions must have a system implemented which monitors compliance and mitigates risk. The company’s internal policies and procedures must be geared towards insuring compliance with the regulations and lessening the likelihood of risk.

How is consumer protection implemented? The Supervision Division oversees the quality of the payment services institutions’ internal control systems, risk management and corporate governance.

How are authorized payment services institutions supervised?

The supervisory process involve multiple  approaches to insure the payment services institute is abiding by regulations and maintaining the high standard of business practices expected of them.Actions taken by the supervision division may include:

  • Inspections, either of a general nature or aimed at a specific aspect.
  • Review meetings.
  • Risk assessment.
  • Regular fit-and-proper tests.
  • On-going correspondence and contact with the supervised companies.
  • Analysis of returns submitted to the Central Bank.

What is a Virtual bank Account?

A virtual account system is comprehensive, cost effective and centralizes funds. Businesses can design a network of shadow accounts (virtual accounts)for their physical bank account. You client receives the details of your virtual account, pays into the virtual account and the funds are automatically transferred to your physical bank account. You can have a unique virtual account number for each client, business unit or incoming and outgoing transactions. This way you know where the money is coming from yet all funds arrive in your one physical bank account. No physical movement of funds actually happens between the accounts and the comprehensive account network is usually administered by a Virtual Account Management (VAM) solution.

What is a Virtual IBAN Account?

With a virtual IBAN you have unique “dummy” International Bank Account Numbers issued by a bank so that incoming funds can be rerouted directly to your “real” IBAN account in a physical bank. A virtual IBAN allows you to do virtual worldwide international business transactions where the funds end up in your physical bank account. As far as the customer is concerned your bank details look like any other regular IBAN. When the customer pays into your virtual IBAN account the funds transfer automatically to your IBAN account in a physical brick and mortar banking establishment associated with the virtual account. You can have several virtual IBAN accounts all collecting funds from various sources but all reroutes to the same physical account. The business can allocate a different virtual IBAN number to each supplier or client. When the electronic payment is made the bank system automatically clears the funds to the correct physical account. By using the virtual IBAN numbers listed on the account statements companies can identify the source of the payment and the manual reconciliation process is simplified.

The EU Payment Services Directive to:

  • Create a single payment market in the Europe
  • Establish a regulatory framework for an EU single payment market
  • Level the playing field and encourage competition
  • Assure consistent client protection and improved transparency
  • Set the groundwork for more efficient payment systems in the EU

Contact us for additional information regarding EMI – Electronic Money Institution accounts, click here if you are looking for an E money license,

Why are E money accounts / Electronic Money companies such a Break Through?

The e-wallet and transfer services provided by E money license holders are similar to those of traditional banks but differ in significant ways:

Innovation – The overall customer experience in small Fintech companies is superior to that of traditional banks. At small Fintech companies customers benefit from state-of-the-art core banking systems and enhanced UX and UI with their e bank account.

Advanced AML and Risk Procedures – Electronic Money Institution’s modern banking methods and advanced internal systems have the capacity to monitor online activities for any suspicious transactions. This sophisticated ability is rare (or non-existent) in traditional banking and their internal systems.

Is Electronic Money the future of banking as we know it?

With EMI Fintech companies booming at the moment and the rapidly expanding market there are many EMI – Electronic Money Institution, start-ups to choose from. However each Electronic Money company uses a different business model, specific technology and operates on a particular scale. EMoney Is range from sophisticated e-wallet systems accessed through a mobile app to simple E-Money companies offering basic transfer and remittance services. With the wide range of Emoney  available any company or individual can find an Emoney account to meet his banking needs and replace his traditional banking.

What to Expect from Corporate Banking in the Future – e money

With the European banking world going through a period of change we are seeing the emergence of new competition in the market like non-banking finance businesses, Fintech companies, financial institutions, start-ups and existing large technology businesses entering the financial industry all offering alternative finance solutions to bank customers. These new alternatives are drawing customers away from traditional banks with options that most conventional banks don’t offer or are not able to offer to the same standard with their old systems. This presents a challenge to conventional European banks.

Current Challenges Facing Traditional European Banks

Traditional banks need to compete with the new contenders in the market by making heavy investments in technology, integrating their systems and going digital so that they can offer customers end-to-end solutions. If traditional banks succeed in making these changes they will be able to implement technical standards for harmonized reporting and conduct efficient liquidity management. Moving into the future banks have to step up their investment in security; once traditional banks are operating on mobile devices and applications they will face a new set of security challenges which must be met.

Changing the Traditional Banking Model with Electronic Banking

Electronic Money Institution regulation may not be a new framework in the financial world but we have seen a dramatic increase in the number of EMI Fintech businesses and their profits in recent years.
Electronic Money Institution offers an alternative legal framework for the traditional banking model both in the business world and for personal accounts. Wherever you go these days you hear about businesses moving from traditional banking and opening an E bank account, this is particularly prevalent among companies which deal internationally.
Where are EMI Licenses (Electronic Money Institution license) Issued?
You will find several European countries taking an active role in helping start-up companies obtain an EMI license. Some of the leading countries in this area are Lithuania, Malta, the Czech Republic and Luxembourg.

If you would like further information feel free to contact us.
Why are Start-Ups and International Companies Choosing an EMI Account over Conventional Banking?
There are many reasons why some companies and start-ups prefer to go with an EMI account and in many ways the pros outnumber the cons when compared to traditional banking:

  • Additional Banking Services – The latest technology offers integration of additional banking options – EMI companies can have flexible core banking systems allowing them to include many more services with just a click on the keyboard; something traditional banks cannot offer (for example AML, KYC and alternative payment methods). The antiquated systems used by old traditional banks cannot cope with new technology and so cannot offer the latest automated services.
  • Convenience – With e bank account your transactions can be made at any time, from any place, all you need is internet access.
  • Simplicity – Web designers strive to make their sites accessible to even the most inexperienced user. The EMI – Electronic Money Institution account services are generally user-friendly and have interface features which are intuitive requiring no technical knowledge. If for any reason the user does not manage to make his transaction smoothly there is always a support team on hand to handle inquiries 24/7 through live chat, forums, email or FAQs.
  • Time Efficient – It is much faster to make a money transfer between virtual accounts than it is to send a wire transfer or a traditional postal transfer which can take up to several days. There is also the time saved by not having to physically get up, go to the bank or post office to make the transaction and wait in endless lines.

Basic Considerations when deciding whether to use Emoney:
1. Do E-money accounts offer customers IBAN? Yes you can get an IBAN with some EMI.

2. What can I do with an EMI account? You can conduct the exact same transactions as you would have done with your business bank account online – currency exchange, send funds, receive funds, issue debit cards, SEPA transfers etc.

According to EU authorities EMI is most definitely the future of banking as we know it.

The Central banks of Malta, Cyprus, Gibraltar, Lithuania and other jurisdictions are encouraging business people to set up new Fintech companies and begin the long Electronic Money Institution license application process (more about the EMI license application process in part two of this post).

In the following chart you can see the total number of EU e-money and payment institutions for the years 2001 to 2014. The information was supplied by the European Central Bank.

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In an effort to boost economic profits; encourage competitiveness and promote the continued adaptation as we move into the digital age the EU has instituted a number of e-commerce innovations.

What are the main features of e-banking?

Electronic banking services are usually available 24/7 and can be accessed from anywhere in the world as long as you have a device and an Internet connection. Other features of e-banking include viewing your account; viewing images of paid cheques; ordering cheque books; fund transfers; paying bills; applying for a loan or credit card and some electronic banking services offer further services. Your online banking account can have special features like uploading bulk payments for employees or suppliers. You can also download and print your bank statements. Electronic banking usually has a customer support service in the form of a live chat, phone number or e-mail address. You can also get financial alerts, view Forex rates,  set up stop-orders for recurring payments and manage your bank account access and authorization.

What are the different types of e-banking services?

Electronic banking comes in various forms. Internet banking can be done online via your personal computer, laptop or tablet. ATMs also fall into the category of electronic banking as they use a computerized telecommunications system to allow customers to access their bank accounts, withdraw funds and deposit checks without the need for human intervention. Tele banking is a form of e-banking. Customers dial a telebanking number and have access to their account by following the instructions of a user-friendly menu or Interactive Voice Response System. Another form of e-banking is the Smart Card that holds a microprocessor and can “communicate” with a card reader to make financial transactions. For example a reloadable transport card. Even debit cards are a form of e-banking; they function as cash but no cash changes hands at point of purchase. E-cheques are an electronic version of traditional paper cheques.

The Advantages of E-Money

In essence, e-money, or electronic money, is a currency that is available only in digital form, and it is transferred electronically, unlike physical money, such as banknotes or coins. Customarily, e-money or e-currency transactions are conducted via the Internet or with the use of smart cards – that are associated with a bank account. Following the stabilization of e-money as a prominent payment instrument, mobiles are becoming a central apparatus for administering e-money transactions. In what follows we will provide a comprehensive review of e-money, highlighting its most conspicuous and more significant advantages while openly discussing its disadvantages.

Advantages

Cost-effectiveness – E-money transactions are carried digitally, through an online payment gateway which secures the identity and payment information of the person whose funds are transferred. When the electronic money company has accounts at the bank – to which or from which money is transferred – the digital transfer of funds is instantaneous, and therefore also highly economical.

Accessibility – E-money can be used globally, and, in fact, it is a leading form of currency to be used in international transactions; it saves the trouble involved in currency exchange; it is highly reliable and has low transaction fees. Sending a cheque would take several days to clear, yet with an online money transaction, funds are transferred directly – even after your bank’s opening hours or during holidays. The growing popularity of e-money, nowadays, has led to digital transformation in banking, motivating banks to compete one another in order to facilitate account holders with improved deals and reduced transfer costs.

Protection from harm – Carrying a large sum of money always involves the risk of theft or loss. E-money, however, eliminates such possibility, and it is, therefore, a more secure and reliable payment method. Each transaction will necessitate the use of a personal identification number (PIN), as a security measure prior to the completion of any transaction; some additional, yet simple, precautions will ensure the safekeeping of your online account, ascertaining that your card is not misused.

Recording transactions – Each electronic payment transaction has online documentation within the bank’s and the user’s records. A transaction’s record entails all the essential information: names of the parties involved in the transaction along with documentation of the date, time and whereabouts of the transaction. These records are available to users at any given moment.

Disadvantages

Restriction – As a safety measure, banks restrict the number of daily transactions account holders are permitted to conduct, limit the amount of output and specify an upper limit to the account. While most people may comprehend the logic behind such limitations, others might find it too restricting and inconvenient.

Risk of being hacked – Unavoidably, with any online transaction, your personal information, along with the details of your account and credit card, are exposed over the Internet. Whereas chances of your account being hacked or your identity stolen are smaller when following security rules, these risks are indeed viable. Hackers might employ your stolen identity for purposes of any fraudulent activity or transfer funds from your account, potentially causing severe losses.

False identity – It is currently impossible to verify the identity of a person who enters personally identifiable information, online. As oppose to physical transactions – in which the identity of the one making the transaction can be verified by a photograph, a signature or an official document – digital transactions cannot offer such certainty. Electronic cash transactions rely on cryptographic systems: transferred information is encoded by numeric keys as the details of a transaction “travel” across the web. While such systems are less prone to forgery, the numeric keys are somewhat vulnerable and can be hacked.

Different payment systems – Difficulties might arise when transferring money between different electronic payment methods since, often, they are not synchronized. In facing such predicament, the use of e-currency exchange services is required; while it provides a convenient solution, it also prolongs the amount of time necessary for the completion of the transaction.

Whereas the disadvantages of using e-money should be taken seriously and evoke thorough consideration, the advantages of electronic money undoubtedly supersede any fault or temporary inconvenience.

2018-03-19T12:11:52+00:00