EMI - Electronic Money Institutions - Khalid Zafar & Associates

EMI or Electronic Money Institution means a non-banking entity duly authorized by State Bank of Pakistan to issue means of payments in the form of electronic money. Electronic Money Institutions are entities that offer innovative, user-friendly and cost-effective low value digital payment wallets, prepaid cards, contactless payment instruments and wearables etc. for promoting cashless payments like merchant checkouts, e-commerce, transportation and toll payments etc.

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Electronic Money Institutions

Electronic Money or E-money is defined in law as monetary value stored on an electronic device or payment instrument issued on receipt of funds and accepted as means of payment by the undertaker other than an issuer. E-money includes electronic store of monetary value on an electronic device that may be used for making payments or as may be prescribed by the State Bank of Pakistan (“SBP”).
In the year 2019 the SBP fostered innovation in payment industry with an objective to promote digital payments. Regulatory framework to non-banking entities were provided for Electronic Money Institutions (the “EMIs” or “EMI”) under the powers conferred on it by Payment Systems and Electronic Fund Transfers Act, 2007 in order to offer interoperable and secure digital payment services to end users.

Activities of EMIs

E-money platforms shall only be used for permissible activities. The EMIs in Pakistan may engage in the following activities:

a) Issue e-money payment instruments.
b) Distribute e-money payment instruments.
c) Redeem e-money payment instruments.
d) Acquire payment instruments of other EMIs and banks/microfinance banks.
e) Multilateral routing, switching and/or processing of payment transactions.
f) Any other activity permitted by SBP.

E-money shall be used to make payment services i.e. payments for goods and services, bill payments, fund transfers and cash deposits and withdrawals from e-money accounts. Electronic Money Institutions shall not conduct the business of banking including the acceptance of funds from public for the purpose of lending, investments or any speculative activity except as provided in EMI regulations.

Every Electronic Money Institution shall take approval from SBP before offering cross-border e-money products/services. EMIs shall neither pay interest/returns to customers nor offer anything that adds to the monetary value of e-money, however, EMI may offer discounts etc. on goods and services provided such discounts are not linked to the amount or length of time e-money is held by the customer.
THE EMI shall not issue e-money payment instruments at a discount i.e. issue e-money payment instruments that has a monetary value greater than the funds received from customers. The existing payment system operators or payment system providers authorized under the relevant rules who intend to function as an EMI may upgrade their respective authorization to EMI license after fulfilling necessary conditions laid down in these Regulations. The SBP may require such payment system operators or payment system providers to establish a subsidiary/separate entity for the purposes of EMI business.