Electronic Money Institutions (EMIs) have gained popularity in recent years as a convenient alternative to traditional bank accounts. Opening an account with an EMI tends to be a much simpler and quicker process compared to opening a bank account. Know Your Customer (KYC) requirements are typically more basic with an EMI account. This allows accounts to be opened entirely online, without the need to visit a branch.
Additionally, EMI accounts provide users greater convenience for managing money digitally. Features like mobile apps, payments cards, online banking platforms, etc. allow account holders to easily send, receive and track their money. Transactions can be executed both online and in-person through payment cards. This brings greater speed and accessibility over dealing solely in cash.
Compared to banks, EMIs also tend to offer higher interest rates on savings accounts and charge lower fees on transactions. This makes them an attractive option for individuals looking to grow their money or make digital payments while avoiding high overhead costs. The streamlined structure of EMIs allows them to reduce operating costs and pass those savings to customers.
This is something highly important and gives an edge to EMIs over banks. But there are still some questions that come into the minds of a lot of people regarding regulations of EMIs. Banks come under heavy regulations and have a proper check-and-balance system in place.
But is it the same thing that when it comes to EMIs as well? This raises the question: how are EMIs regulated? In this article, you will have a better idea about the regulation process that goes behind EMIs and how you can find the best one with the help of Obtained.
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Getting Relevant Licensing from the Authorities
First and foremost, any EMI that wants to operate in a particular region or country would have to get a relevant license from the authorities. It is a crucial step and every EMI must fulfill this prerequisite before they can start providing their services to the general public.
The rules and regulations might differ from one country to another and that is why the EMIs must comply with them. It is the same as if you want to open a business in the forex market and would have to get approval and a license for the forex market. The EMIs will allow have to go through the same process.
Once they have the relevant licenses, they can start their operations. You must check out if the EMI you plan on working with has the relevant licenses. With the help of Obtained, you might just be able to find the right EMIs for your business. Obtained ensures that you have access to all EMIs that have relevant approvals from authorities.
Capital Requirements
Apart from licenses, there are certain requirements that the EMIs also need to fulfill. This entails having some sort of capital that shows they can run and support their operations for a specific period. Any business operating in different sectors and industries might have sufficient capital to ensure that they can run their operations.
It is a critical element for businesses in the financial sector, including EMIs, as they should have the relevant resources to protect customers’ funds. Therefore, an EMI needs to have sufficient capital to run their business. The capital requirements for starting an EMI may differ from region to region but you can find the right one with Obtained.
Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF)
Another crucial factor that the EMIs must oblige to is the Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF). EMIs must comply and adhere to the set practices as it will ensure that they can spot any suspicious activity that is happening through their domains.
They also need to report it to the authorities so they can take relevant actions against them. Apart from CTF and AML, EMIs also need to comply with the KYC (Know Your Customer) rules. It will ensure that no customer becomes a victim of identity theft.
There are some other rules and regulations that EMIs might have to follow according to the region they are operating in. Either way, these financial institutions have to comply with the different rules and regulations pertaining to the safety and protection of the user’s confidential data and sensitive information.
Audits and Inspections
Last but not least, EMIs also have to carry out regular inspections from time to time. It is highly important and necessary by the laws of most countries. The relevant authorities and shareholders might want to have a look at the financial statements.
Regular audits play a major role in gaining the trust of all the stakeholders of the business. It shows the relevant authorities that you are managing all your finances efficiently. On the other hand, customers will have a clear idea regarding how the EMIs are using their money.
In addition to that, regular audits and inspections can help stop potential issues early on before they become a major challenge in the long run. It allows them to mitigate any potential cyber risks along with identifying, assessing, and managing different risks like operational, financial, etc.
Takeaway
EMIs are a popular choice for business owners and consumers. It provides them with an easy method to make payments and manage their overall finances. As a business owner, you can consider implementing such a solution as a strategic move toward a more user-friendly and efficient payment process, reinforcing trust and loyalty among your clientele. However, you should ensure that the EMI has all the relevant licenses and permissions from the relevant authorities. By taking help from Obtained, you can ensure that you have the right EMI by your side.