Updated
GL-P-05
01 / In 30 seconds
The short answer
- What it is
- A licensed institution providing payment services
- What it does
- Transfers, acquiring, payment initiation, accounts for settlements
- What it does not do
- It does not take deposits or make loans as a bank does
- Difference from an EMI
- It does not issue electronic money — it mainly carries out payments
- Who it suits
- For businesses and individuals for settlements, not for holding capital
02 / In plain words
What Payment Institution means
A payment institution (PI) is a licensed non-bank institution that provides payment services: transfers, receiving payments, acquiring, initiating payments on the client’s instruction. Put simply: a service for moving money, not for holding it.
A PI differs from a bank in that it does not take deposits or lend from clients’ funds. It differs from an EMI in that it does not issue electronic money: whereas an EMI may hold a balance in the client’s account as electronic money, a payment institution is focused on carrying out transactions. Such institutions must keep clients’ money separate, but deposit insurance does not extend to it.
In practice these three statuses — bank, EMI, payment institution — increasingly look the same: an app, a card, an IBAN. The difference emerges when it comes to a large sum, holding capital or paying a state fee: there the receiving party looks at the licence, not the interface.
A case from practice
An entrepreneur’s settlements with contractors went through a payment service — convenient and cheap. For the programme investment, a payment from a bank account in their name was required. We separated the channels in advance: the settlements stayed with the service, and the investment went from the bank — without rush or redoing anything.
Where payment institutions are found
- Accepting payments for an online shop
- Settlements for an online business
- Bulk payouts to contractors
- Currency transfers and exchange
- Initiating payments from an app
- A back-up payment channel
03 / What it covers
Bank, EMI and payment institution
Bank
- Deposits and loans
- Deposit guarantee
- A full range of services
EMI
- Electronic money
- An account with an IBAN and cards
- No deposits or loans
Payment institution
- Payments and transfers
- Acquiring
- No electronic money
Common to non-banks
- Separate holding of funds
- Regulatory supervision
- No deposit insurance
04 / How it works
How to choose a payment provider
Define the task: payments or holding
Check the licence and jurisdiction
Compare limits and tariffs
Pass the check and open an account
Separate the channels by purpose
05 / Key facts
What you need to know
01
A PI is a licensed non-bank institution
02
Its main function is carrying out payments
03
It does not provide deposits or loans
04
It does not issue electronic money — that is what an EMI does
05
Deposit insurance does not apply
Common mistakes
- Confusing a payment institution with a bank
- Holding large capital in a payment service
- Not checking the licence and supervisory authority
- Planning to pay a programme from a non-bank service
- Not taking into account limits on transactions and currencies
06 / Expert advice
How to prepare in advance
First define the task: to make payments or to hold money. For holding capital and large transactions, choose a bank; for settlements, a payment institution or an EMI. In either case check the licence, the supervisory authority and the limits, and before paying under a programme confirm with the receiving party what type of account it accepts.
What we do for you. We help separate payment channels by purpose: where to keep capital, what to pay the programme from, what to use for everyday settlements. This removes the risk of finding out at the worst possible moment that a payment from your account will not be accepted.
Dmitry NagyTax consultant, international taxation and compliance (ex-Big4)
07 / Questions
Frequently asked questions
It does not take deposits or lend. Its job is to carry out payments. The state deposit guarantee does not extend to such accounts.
An EMI may issue electronic money and hold its balance in the client’s account. A payment institution is focused on carrying out transactions.
Client funds are held separately from the institution’s own money and under regulatory supervision. But this is not deposit insurance — the risk is different from a bank’s.
Often not. State programmes and notaries usually expect payment from the applicant’s bank account. This is confirmed before filing.
For speed, tariffs, multiple currencies and convenience in operational settlements. As a business working tool it is very effective.
In the public register of the regulator of the country where the institution is licensed. The list of services it is permitted to provide is shown there too.
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