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ARTICLE · 26 OCTOBER 2026

How Do Funds Differ Between Payment Institutions And Electronic Money Institutions?

MK Fintech Partners
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Payment Institutions and Electronic Money Institutions handle customer funds differently under EU law. While Payment Institutions use payment accounts for short-term transaction processing, Electronic Money Institutions store monetary value indefinitely in digital wallets. Understanding the legal distinction between these account types is crucial for fintech companies navigating PSD2 and EMD2 compliance requirements.

MaltaFinance and Banking
Kane Sammut Henwood
Kane Sammut Henwood
Justine Scerri Herrera
Justine Scerri Herrera
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What are the Differences between ‘funds’ in a Payment Account offered by a Payment Institution and “funds” in an Account issued by an Electronic Money Institution?

A Payment Account offered by a Payment Institution is a short-term, transactional tool. Under Article 4(12) of the Second Payment Services Directive (“PSD2”), it is an account used for the execution of payment transactions. Article 18(2) and (3) confines it to payment services and provides that funds received by a PI do not constitute a deposit, other repayable funds or electronic money. Typical examples are an acquirer’s settlement balance owed to a merchant and remittance funds held between receipt from the payer and delivery to the payee. In both cases the Payment Institution merely processes the payment and does not offer a place in which to store money.

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