An individual (typically a business) that offers one or more payment services on behalf of an EMI is referred to as an EMD Agent informally.

Which payment services are available from an EMD agent?

A contract between an EMI Agent and an EMI Agency Provider (Principal, having an EMI authorisation) typically defines the services that an EMD Agent can offer. These services include the following: payment transaction execution, payment account operation (i.e., top-up and withdrawal), payment instrument issuance (e.g., card), payment instrument acquisition, money remittance (i.e., transfers without a payment account), payment initiation, and account information service. These services are included in Annex 1 of PSD2.

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The purpose of EMDs

On behalf of an Electronic Money Institution (EMI), EMDs are organisations that distribute or redeem electronic money, or e-money. They serve as middlemen between EMIs and clients rather than issuing electronic money directly.

One of their responsibilities is to facilitate the use of e-money products offered by a licenced EMI, such as digital wallets or prepaid cards.

Enrollment and Adherence:

EMDs have to register with the regulatory authority responsible for financial matters in their country, such as the UK's Financial Conduct Authority (FCA).

They have to abide by all applicable laws, including those pertaining to know your customer (KYC) and anti-money laundering (AML).

EMD Activity Examples:

  • Supplying or selling prepaid cards to customers or companies.
  • Assisting with e-wallet or account top-ups.
  • Helping to exchange electronic money for cash or other payment methods.

Examples of E-Money Distributors

1. Revolut:

Revolut serves as an EMD by distributing e-money via its digital banking platform, even though it is best recognised as a fintech business providing a variety of financial services. Revolut accounts allow users to add more money, effectively saving e-money for use in the future.

2. Prepaid Card Companies:

A lot of businesses provide prepaid cards that may be filled with electronic funds for a variety of purposes, such gift cards or vacation. One such is the Travel Money Card, a prepaid card that can be topped off in a variety of currencies, available via the Post Office in the United Kingdom.

3. Retail Chains:

To offer branded prepaid cards or e-money solutions, certain retail chains collaborate with EMIs. For example, a chain of supermarkets may provide prepaid cards that may be loaded up at the register and used for additional in-store or online purchases.

4. Mobile Wallet Providers:

Although the real e-money is issued by partner banks or financial institutions, companies such as Google Pay or Apple Pay can be regarded as EMDs when they enable the storing and usage of e-money through their digital wallet services.

What distinguishes an EMI representative from a distributor?

In order to deliver electronic money services to clients directly, an EMI agent works on behalf of the EMI. These agents are authorised to handle transactions, process payments, and issue e-money by virtue of the EMI's regulatory structure and branding. They must register, follow strict regulations, including anti-money laundering (AML), and comprehend the KYC needs of your customers. EMIs are accountable for the acts of their agents and have considerable influence over them, making sure they follow operating guidelines and compliance requirements.

A distributor, on the other hand, is primarily responsible for the marketing and sales of e-money goods as opposed to providing direct support. Distributors do not conduct transactions or manage client accounts; instead, they assist in the promotion and sale of goods like e-wallets and prepaid cards. They nevertheless have to abide by some AML and KYC requirements even if they are not directly scrutinised by the government to the same extent as agents. Distributors are more autonomous in their operations, guided by commercial agreements that specify their performance criteria and compliance requirements. The complementary functions that distributors and agents play in the ecosystem of electronic money services are highlighted by this difference.

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We've seen entrepreneurs waste substantial amounts of money, often hundreds of thousands of pounds or euros, on becoming EMD Agents or Distributors without achieving their desired results. Many companies should have opted for the No-Licence Path but instead spent valuable time and resources on becoming a regulated entity when they should have focused on developing their core business. These businesses could have expanded their product and service offerings more efficiently by becoming E-money distributors or EMD Agents.

Don't make the same costly mistakes in the competitive world of FinTech. Contact us for insider information on choosing the right path for your business. Once you've decided on your direction, ABM will assist you every step of the way. We ensure our clients feel confident throughout the rigorous onboarding process conducted by Principal EMIs or any necessary authorization procedures.