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Nonbank E-Money Issuers vs. Payments Banks: How Do They Compare?

A key regulatory enabler for building inclusive digital financial services is creating a special licensing window for electronic money issuers (EMIs). Because EMIs have a lower risk profile than banks, they require less regulatory oversight. A special licensing category that recognizes that their role is to store customer funds converted into e-money held in basic transaction accounts, not to extend credit based on such funds, can open the DFS market to new providers. While many countries have created nonbank e-money licenses to cater for this business, at least three countries have introduced a special banking licensing category – the payments bank license. This technical note analyzes the country context in which the payments banks licenses were crafted, and compares the advantages and disadvantages of the EMI license versus the payments bank license.

CGAP is a global partnership of more than 30 leading development organizations that works to advance the lives of poor people through financial inclusion. Using action-oriented research, we test, learn and share knowledge intended to help build inclusive and responsible financial systems that move people out of poverty, protect their economic gains and advance broader development goals. We research and experiment to achieve proof of concept and extract lessons that can be built to scale by our partners, who apply our insights in the marketplace.