Let's first look together at the definitions and fields of activity of a payment institution and an electronic money institution:
Payment Institution:
A payment institution is a legal entity authorized under the Law to provide and carry out payment services.
Electronic Money Institution:
It is a legal entity authorized under the Law to issue electronic money.
An electronic money institution can carry out the activities of a payment institution. However, a payment institution has no authority to issue electronic money.
For this reason, we can say that while a payment institution can do some of what an electronic money institution is authorized to do, it cannot carry out the activities of an electronic money institution because it has no authority to issue electronic money.
What does this difference lead to in practice?
Issuing electronic money means holding the money received from the user as electronic money and letting the user spend it through tools such as an account or a wallet. This activity is subject to a strict license and higher capital requirements.
A payment institution, on the other hand, offers payment services, such as transmitting payment orders or collecting bills, but cannot hold electronic money on behalf of the user. For this reason, a venture that will build an app holding wallet balances cannot start with a payment institution license.
When choosing their business models, ventures should first clarify which service will be offered, and who will hold the funds and for how long.
