If banks already exist, why do we need EMIs?

What an EMI does

An electronic money institution, or EMI, is authorised to issue electronic money and can provide payment services within its permissions. Think of a customer paying €100 into a wallet. The EMI records €100 of electronic value that the customer can use for payments or redeem, subject to the applicable terms and rules.

Fintech describes the broader use of technology in finance. It includes banks and EMIs as well as software businesses. The authorisation held by each provider determines which regulated activities it can perform. For a customer choosing a partner, that means checking who is responsible for the money and which services their permission covers.

Sources: Bank of Lithuania: Electronic money institutions

How customer money is protected

Banks take deposits and often use their balance sheet to lend. EMIs specialise in electronic money and payments, with a duty to safeguard the funds received for e-money. One method is to keep those funds separate from the institution's own money in designated accounts. Another permitted method uses qualifying insurance or a comparable guarantee.

Separation is designed to protect customer funds from claims by the EMI's other creditors if it fails. It requires accurate records of what each customer is owed and reconciliation against the funds held. Those checks help identify a shortfall so the institution can address it.

Safeguarding and deposit insurance protect money in different ways. Eligible bank deposits have statutory deposit-guarantee protection; an e-money balance relies on the safeguarding arrangements. Recovering funds after a failure can require an insolvency process, so customers may face a wait while their entitlements are checked. Understanding where funds are held and how balances are reconciled is therefore part of assessing an EMI.

Sources: Bank of Lithuania: EMI prudential and safeguarding requirements · EBA: Electronic money and deposit-guarantee treatment · Bank of Lithuania: EMI governance and safeguarding records

Why banks and EMIs work together

A bank can hold the EMI's safeguarding account or provide access to payment settlement under the agreed arrangement. The EMI can manage the wallet balances, customer checks and software connections used by the digital business. Together, these roles connect the customer's activity in an app to the movement and protection of funds behind it.

Banks also provide digital payment products themselves. A specialist EMI earns its place by adapting the service to a particular use case, such as a platform with many recipients or a business serving customers in several currencies. The choice depends on how well the provider supports the customer's operations.

What the customer gains

Consider a platform paying hundreds of consultants. Its team needs to identify recipients, record what each person is owed and know whether a payment has arrived. If a transfer needs review, the platform must connect that issue to the right customer record and resolve it.

An EMI can expose these functions through APIs, which let the platform's software exchange information with the payment service. A white-label wallet keeps the experience under the platform's brand. Instead of staff updating separate records by hand, payment status can feed directly into the platform's own workflow. The benefit is less administration and a clearer view of each payment.

Where the business value lies

For investors, the useful questions concern the work the service removes and the cost of delivering it. How much effort does integration take? How many payment issues need manual handling? Can customers obtain a decision when a case needs attention? These factors affect both the customer's costs and the provider's ability to grow.

Single Control brings Wallet, Onboarding, Compliance and License as a Service together through a shared back-end. The business case rests on those components working together, with a named contact when a customer needs help. A customer should be able to integrate the service and operate it with fewer separate systems and handovers.