E-money institution vs bank: what's the difference, and which does your app need?
By SendPay Business · · 2 min read
Many popular money apps are not banks. They hold customers' money as electronic money, under a different kind of licence with different rules. Knowing the difference helps you explain your app honestly and choose the right partner.
What a bank does
A bank takes deposits and lends them out. That is why a banking licence is the hardest to get, and why, in the UK, eligible deposits are protected by the Financial Services Compensation Scheme (FSCS) up to a limit if the bank fails.
What an e-money institution does
An electronic money institution (EMI) holds customers' money and lets them spend and send it, but it doesn't lend it out. Instead of FSCS cover, UK EMIs must safeguard customer money: keep it separate from their own, usually in a ring-fenced account at a bank, so it can be returned if the firm fails.
Why most money apps use an EMI
Accounts, cards, transfers and currency exchange don't need lending, so an e-money or payments licence covers them. That is far quicker to reach than a banking licence, and many apps don't hold one themselves at all: they run on a licensed partner.
What to tell your customers
The accounts and payments behind a SendPay Business platform are powered by licensed partners.
- Don't call your app a bank unless you hold a banking licence.
- Say who holds their money and under which licence.
- Explain that e-money is safeguarded rather than FSCS-protected, in plain words.
Build it
Create your own financial platform.
Pick a template, name it, brand it, preview every page before you pay. Your brand, your users, your fees.
Build my platform →Questions people ask
How close am I to the SPI limit?
Check your 12-month average payment volume against the €3 million small payment institution limit.
Small payment institution limit calculator →Which business account is cheaper for me?
Compare the monthly and yearly cost of two accounts for your own payments and cash deposits.
Business bank account fee calculator →Is e-money covered by the FSCS?
Generally not. In the UK, e-money is protected by safeguarding rules instead of the FSCS.
Can I call my app a bank?
In most countries "bank" is a protected word you can only use with a banking licence. Call it an account, a wallet, an app or a platform.
Which registration do I need?
The registration guide covers FCA and HMRC registration and when each applies.
FCA and HMRC registration guide →Read next
This guide is general information, not legal or financial advice. SendPay Business is a technology company, not a bank, and does not take deposits; regulated services on the platforms are provided by licensed partners. PayPal, Patreon and Substack are named as reference points only and are not affiliated with SendPay Business.