EMI vs. PSP Licenses in Estonia: Choosing the Best Fit for Your Business

By Urmas Rooba

Understanding EMI and PSP Licenses in Estonia

Estonia has become a popular destination for fintech companies due to its progressive regulatory environment and innovative digital infrastructure. Two types of licenses that businesses often consider in this Baltic state are the Electronic Money Institution (EMI) license and the Payment Service Provider (PSP) license. Choosing between these options can significantly impact your business operations and growth potential.

The EMI license allows a company to issue electronic money and provide payment services. This license is ideal for businesses looking to offer digital wallets, prepaid cards, and similar e-money solutions. On the other hand, the PSP license is suited for companies providing payment services like online payment processing without issuing e-money.

estonia fintech

Benefits of an EMI License

An EMI license in Estonia gives your business the ability to issue electronic money, which can be a significant advantage if you plan to offer customers the convenience of digital wallets or prepaid cards. It also allows you to provide a wide range of financial services across the European Economic Area (EEA), giving your business access to a vast market.

Another benefit of obtaining an EMI license is the increased trust and credibility it brings to your business. Customers tend to trust companies regulated under stringent financial guidelines, which can lead to higher adoption rates of your services.

Considerations for EMI License

While the benefits are substantial, obtaining an EMI license involves meeting rigorous capital requirements and compliance standards. Businesses need to maintain a minimum level of initial capital and adhere to strict anti-money laundering (AML) and consumer protection regulations. This process can be resource-intensive, requiring a dedicated compliance team.

compliance team

Advantages of a PSP License

A PSP license is a more straightforward alternative for businesses that do not need to issue electronic money but wish to provide payment services. It allows companies to facilitate transactions between buyers and sellers, offering services such as payment gateways or merchant accounts.

One of the key advantages of a PSP license is the lower capital requirement compared to an EMI license. This makes it an attractive option for startups or smaller businesses looking to enter the fintech space without significant upfront investment.

Considerations for PSP License

While acquiring a PSP license is generally easier than an EMI license, it still requires adherence to certain regulatory standards. Businesses must implement robust security measures and ensure compliance with AML directives. The scope of services is also more limited compared to an EMI license, which may affect long-term growth prospects.

payment processing

Which License is Right for Your Business?

Deciding between an EMI and a PSP license depends largely on your business model and strategic goals. If your business plans involve issuing electronic money or offering comprehensive financial services across the EEA, an EMI license may be the best fit. However, if your focus is on facilitating payments without issuing e-money, a PSP license could be more suitable.

It’s crucial to weigh the pros and cons of each option in relation to your business needs. Consulting with legal experts or financial advisors familiar with Estonian regulations can provide valuable insights and help streamline the licensing process.

Final Thoughts

Choosing the right financial licensing path in Estonia is a strategic decision that can influence your business’s success in the competitive fintech landscape. Understanding the differences between EMI and PSP licenses, alongside careful planning and compliance management, will position your company for growth and innovation in the digital economy.