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Understanding Financial Institutions: APIs, EMIs, and PSPs

authorThe Banxe Team
time 3 min read date 19.07.2023
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When it comes to online payments, there are numerous terms and acronyms that can be confusing without proper context. In this article, we will clarify three of the most common types of financial institutions.

Authorised Payment Institution (API):

An Authorised Payment Institution, or API, is an organisation that has the authorisation to facilitate payments across various financial domains. This includes credit card processors, payment account operators, remittance operators, foreign exchange businesses, and payment initiation businesses. To operate as an API, these institutions must obtain authorisation from the relevant regulatory body in their respective countries, such as the Financial Conduct Authority in the UK. By meeting regulatory requirements, licensed APIs provide customers with confidence in their chosen payment provider.

Electronic Money Institution (EMI):

An Electronic Money Institution, or EMI, is a type of API that is authorised to handle electronic money, also known as e-money. E-money refers to monetary value stored in digital form and serves as a digital alternative to physical cash. It is distinct from cash held in a bank card or online bank account, which provides electronic access to real money held by the bank. Determining whether an asset qualifies as e-money can be challenging, but guidance from the European Central Bank can assist in this process.

EMIs can be authorised to operate in various financial areas, including payment services, cash withdrawal and deposit services, remittance services, and direct debit or credit transfers. Customers seeking a provider to handle their e-money must verify the authorisation status of the institution. APIs can only issue and hold electronic money once they have obtained EMI licensing. At Banxe, for example, the cross-border payment services are regulated by the UK's FCA.

Payment Service Provider (PSP):

A Payment Service Provider, or PSP, is a third-party financial institution that performs payment services. APIs and EMIs are two different types of PSPs.

Examples of Payment Service Providers (PSPs):

Any financial institution offering payment services, whether it is an API or an EMI, falls under the category of a PSP. Prominent PSPs include PayPal, Stripe, Square, Klarna, Amazon, Apple, and Google Pay. Additionally, there are numerous smaller Fintech companies that provide payment services either in collaboration with banks or directly to businesses.

Services Offered by Payment Service Providers (PSPs):

PSPs offer a range of financial services. They assist businesses in accepting credit and debit payments by collaborating with banks and acting as a bridge to the broader financial ecosystem. PSPs may also provide transaction reporting features and enhanced security measures.

Cross-border payments are another common service offered by PSPs. It allows processing payments to over 100 countries in a fraction of the time and cost associated with traditional international bank transfers.

Benefits of Using a Payment Service Provider (PSP):

Partnering with a PSP offers several advantages. Firstly, it allows businesses to delegate payment-related tasks, enabling them to focus on core operations. PSPs also enable businesses to accept a wide range of payment methods, thereby expanding their customer base. Moreover, PSPs generally offer greater flexibility compared to traditional counterparts and can assist businesses in improving their services and competitiveness.

The benefits of using Banxe:

Businesses have several benefits to using Banxe. Besides transforming your business’s cross-border payment capabilities and thus reducing costs, Banxe offers unified financial management, where businesses can manage both traditional and cryptocurrency assets in a single place. Supporting over 500 cryptocurrencies allows businesses to flexibly accept payments, pay vendors, and manage their assets in a variety of digital currencies. With Crypto Earn, businesses have the potential to earn interest on their crypto assets, which provides an additional revenue stream. The Banxe GPB Card can be used as a traditional debit card, making it easier for businesses to spend their cryptocurrency and traditional assets. Since Banxe’s services are licensed, an extra layer of trust and security helps businesses to potentially comply with relevant regulations when dealing with digital assets. To learn more about Banxeand its services, please visit Banxe.com.

(Note: This article is for informational purposes and does not constitute financial advice. Readers are advised to conduct their own research and consult with financial professionals before making any investment or banking decisions.)

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