How to get EMI authorisation

What is EMI authorisation and who needs it

Electronic money is monetary value stored electronically, including magnetically, that represents a claim on the issuer, is issued on receipt of funds and is accepted by persons other than the issuer. Firms that issue this kind of value, such as prepaid card programmes and e-wallet providers, generally need permission from the FCA before they can operate.

The Electronic Money Regulations 2011 create two routes. A firm can seek full authorisation as an authorised electronic money institution, or, if it stays within defined limits, it can register as a small electronic money institution. Both allow the firm to issue electronic money, but they carry very different capital, reporting and passporting implications.

Deciding which route fits depends on projected volumes, funding, appetite for regulatory obligation and growth plans. A firm expecting to scale quickly or to hold large customer balances will usually need full authorisation, whereas an early-stage venture testing a narrow product may start as a small EMI. Specialist support such as Nasara Authorise can help a firm assess which permission matches its business model.

Authorised EMI vs small EMI: the key thresholds

The central distinction is scale. Under regulation 13 of the Electronic Money Regulations 2011, a firm can only register as a small EMI if its total business activities do not generate average outstanding electronic money that exceeds EUR 5,000,000, and if the monthly average of relevant payment transactions over the preceding 12 months does not exceed EUR 3,000,000.

A small EMI also cannot provide account information services or payment initiation services, and it cannot passport its permissions. If a firm expects to breach the outstanding electronic money threshold, it must apply for full authorisation before it does so, because the small EMI category is a genuine limit rather than a soft target.

Full authorisation removes these ceilings but brings a materially higher capital requirement and closer prudential supervision. The table below summarises the headline limits, all taken from the regulations.

Initial capital and own funds requirements

Capital is one of the most scrutinised parts of an EMI application. Schedule 2, paragraph 2 of the Electronic Money Regulations 2011 states plainly that an applicant for authorisation as an electronic money institution must hold an amount of initial capital of at least EUR 350,000. This must be in place at the point of authorisation, not simply promised for later.

On an ongoing basis, an authorised EMI must also maintain own funds. For the activity of issuing electronic money, Schedule 2, paragraph 23(2) sets the own funds requirement at an amount equal to 2% of the average outstanding electronic money of the institution. The firm must hold the higher of its initial capital and this calculated figure.

Own funds are defined by reference to the capital requirements regulation and must be of appropriate quality. At least 75% of Tier 1 capital must be Common Equity Tier 1 capital, and Tier 2 capital cannot exceed one-third of Tier 1 capital. In practice this means the FCA expects genuine, loss-absorbing capital rather than lower-quality instruments.

Small EMIs are treated more lightly, but they are not exempt. Schedule 2, paragraph 14 requires a small EMI to hold own funds of 2% of its average outstanding electronic money where that basis applies, so growing balances translate directly into a higher capital expectation even before full authorisation becomes necessary.

Safeguarding customer funds

Safeguarding is a defining obligation for electronic money institutions and a frequent focus of FCA supervision. Regulation 20 of the Electronic Money Regulations 2011 requires that funds received in exchange for electronic money that has been issued must be safeguarded, and that this be done in accordance with either regulation 21 or regulation 22.

The segregation method in regulation 21 requires an EMI to keep relevant funds segregated from any other funds it holds. Where funds are still held at the end of the business day following receipt, they must be placed in a separate account with an authorised credit institution or the Bank of England, or invested in secure, liquid, low-risk assets held in a separate account with an authorised custodian.

Crucially, no person other than the electronic money institution may have any interest in or right over the safeguarded funds or assets, and the designated account must be used only for holding those funds. This ring-fences customer money so that, in an insolvency, it is protected and returned to holders ahead of general creditors.

The alternative method under regulation 22 relies on an insurance policy or comparable guarantee from an authorised insurer or credit institution that is not in the same group. Whichever method is chosen, the FCA expects clear reconciliation processes, appropriate governance and evidence that the arrangement works in practice, not merely on paper.

The EMI authorisation application journey

The application itself is submitted to the FCA through its Connect system. A complete application must include a detailed business plan with financial projections for at least the first three years, governance and internal control arrangements, safeguarding measures, an assessment of financial crime and money laundering risk, and details of directors and those holding qualifying holdings.

Timing is governed by regulation 9, which requires the FCA to determine a completed application for authorisation within three months beginning with the date on which it received the completed application. For an incomplete application the clock can run for up to 12 months, which is why quality and completeness at submission are so important.

The steps below outline the typical journey from initial scoping to authorisation. Firms often find that the preparation phase, gathering evidence and stress-testing the business plan, takes considerably longer than the FCA's formal assessment window.

Ongoing obligations after authorisation

Authorisation is the beginning of a firm's regulatory relationship, not the end. An authorised EMI must continuously meet its own funds requirement, recalculating the 2% of average outstanding electronic money figure and holding the higher of that amount and its initial capital as the book grows.

Safeguarding must be maintained daily, with regular reconciliations and independent oversight. The FCA also expects firms to submit regulatory returns, notify material changes, and keep governance and financial crime controls current as products and volumes evolve.

Small EMIs carry lighter but real obligations, and must monitor their outstanding electronic money against the EUR 5,000,000 ceiling. A firm that approaches the limit needs a plan to apply for full authorisation in good time, since operating beyond a small EMI's scope without authorisation is a serious breach. Ongoing compliance support such as Nasara Authorise can help firms keep pace with these duties.

Conclusion

EMI authorisation opens the door to issuing electronic money in the UK, but it demands genuine capital, disciplined safeguarding and a well-evidenced application. The EUR 350,000 initial capital rule, the 2% own funds requirement and the segregation duties are not obstacles for their own sake; they exist to protect customers and the integrity of the payments system.

Firms that treat the application as a chance to build a sound operating model, rather than a box-ticking exercise, tend to move through the FCA's three-month assessment more smoothly. Whether you start as a small EMI or apply for full authorisation, understanding these primary-source requirements from the outset is the surest way to a credible, resilient business.

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