Licensing Models

Licensing models for e-money and similar digital financial services (hereinafter, “e-money”) tend to fall into one of four categories:

Licensing Models

Country Examples

Countries have implemented different licensing models in practice, with licensing for specific e-money institutions being the most prevalent.

Link to Bangladesh case studies
Link to India case studies
Link to Mexico case studies
Link to Uganda case studies
Link to Brazil case studies
Link to European Union case studies
European Union
Link to Ghana case studies
Link to Kenya case studies
Link to Malaysia case studies
Link to Myanmar case studies
Link to Peru case studies
Link to Rwanda case studies
Link to Sri Lanka case studies
Sri Lanka
Link to Tanzania case studies
Link to Colombia case studies

Safeguarding Customer Funds

Liquidity Risk

Financial authorities could require e-money issuer (EMI) to set aside funds equal to 100% of outstanding e-money liabilities in licensed banks and/or other safe, liquid investments.

Issuer Insolvency Risk

Financial authorities could require e-money issuer to hold funds set aside to repay customers in trust (or similar fiduciary instrument) in the name of the e-money issuer’s customers. These funds should only be debited for settlement of customer obligations and should not be used as collateral in credit agreements. Also, authorities could consider following direct deposit insurance to protect customer funds in case of the failure of the e-money issuer.

Bank Insolvency Risk

Ideally, financial authorities could provide for customer funds to be covered by direct or pass-through deposit insurance. If not possible in the short term, authorities could take other measures to mitigate bank insolvency risk, such as:

  • Requiring float to be privately insured;
  • Requiring a guarantee from the bank’s parent group;
  • Mandating diversification of float across multiple banks; and/or
  • Applying proportional ongoing capital adequacy requirements.
Possible Solutions
  • Prefunding

    Funds equivalent to e-money liabilities held in licensed banks or other safe, liquid investments​

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    E-money issuers must hold 100% reserves as required Prefunding
  • Trust Arrangements

    Funds set aside in trust (or similar fiduciary instrument) to repay customers in case of insolvency

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    E-money issuers must protect customer funds Trust Arrangements
  • Deposit Insurance

     Direct or pass-through deposit insurance to provide for customer funds via deposit insurance system

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    E-money issuers use deposit insurance systems Deposit Insurance
  • Other Solutions

    Other mechanisms ​for mitigating bank insolvency risk

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    Alternate mechanisms Other Solutions

Capital Requirements

Capital requirements for DFS providers such as e-money issuers are essential to safeguard customer funds. These include minimum requirements for initial capital as well as ongoing capital.


Distribution of Interest

Customer funds held in pooled accounts often generate interest. Deciding how to distribute this interest has been a subject of considerable debate.


Systemic Risk

DFS providers such as e-money issuers may present systemic risk to the financial sector based on

  1. Number and type of customers served.
  2. Volume and value of transactions.

Other factors such as size, substitutability and interconnectedness of DFS providers may also contribute to systemic risk.


Reconciliation and Settlement

Frequent reconciliation of the total amount held in banks and/or other safe, liquid investments against the total e-money balance in the e-money issuer’s system is a crucial check to ensure that the customers’ funds are safeguarded.


Supervisory Tools