Payment Institution
Payment institution
- 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
In plain words
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.
Where payment institutions are found
Bank, EMI and payment institution
- Deposits and loans
- Deposit guarantee
- A full range of services
- Electronic money
- An account with an IBAN and cards
- No deposits or loans
- Payments and transfers
- Acquiring
- No electronic money
- Separate holding of funds
- Regulatory supervision
- No deposit insurance
How to choose a payment provider
- 01Define the task: payments or holding
- 02Check the licence and jurisdiction
- 03Compare limits and tariffs
- 04Pass the check and open an account
- 05Separate the channels by purpose
What you need to know
- A PI is a licensed non-bank institution
- Its main function is carrying out payments
- It does not provide deposits or loans
- It does not issue electronic money — that is what an EMI does
- 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
What this means for a BRIDGES client
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.
Frequently asked questions
01 /How does a payment institution differ from a bank?
It does not take deposits or lend. Its job is to carry out payments. The state deposit guarantee does not extend to such accounts.
02 /And how does it differ from an EMI?
An EMI may issue electronic money and hold its balance in the client’s account. A payment institution is focused on carrying out transactions.
03 /Is money safe there?
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.
04 /Can the programme be paid from such an account?
Often not. State programmes and notaries usually expect payment from the applicant’s bank account. This is confirmed before filing.
05 /Why use a payment service then?
For speed, tariffs, multiple currencies and convenience in operational settlements. As a business working tool it is very effective.
06 /How do you check the licence?
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.
See also
Read next
This material has undergone editorial review by BRIDGES.
Not sure which account to pay from?
We will look at your accounts and suggest which channel suits each task.