When you look into a multi-currency account, you will often find it is regulated as an Electronic Money Institution (EMI) rather than a bank. This distinction is important to understand.
The difference is not about legitimacy. Both banks and EMIs are regulated financial entities. The distinction lies in the scope of services they are authorised to provide and the framework under which customer funds are protected.
What Is a Bank?
A bank is authorised to accept deposits and use those deposits to lend money. This lending activity is central to the banking model. Banks offer credit facilities such as mortgages, loans and overdrafts, and in many countries they participate in deposit protection schemes that insure customer deposits up to a defined limit.
Because banks lend customer deposits, they operate under capital adequacy rules and are subject to detailed prudential supervision.
What Is an EMI?
An Electronic Money Institution is authorised to provide payment services and issue electronic money. It can hold customer funds for the purpose of executing payments, facilitate transfers and enable currency conversion within the scope of those payment services.
However, EMIs typically do not lend customer deposits in the same way banks do. Instead, they are required to safeguard customer funds.
Safeguarding vs Deposit Protection
This is the central difference between the banks and the EMIs. In many jurisdictions, bank deposits are protected under deposit guarantee schemes up to a specified amount. If a bank fails, eligible deposits are protected within that limit.
EMIs, in contrast, must safeguard customer funds. Safeguarding generally means keeping customer money separate from company operating funds, often in designated accounts held with regulated banks. The aim is to reduce the risk of customer funds being used to pay company debts.
Safeguarding is a regulatory protection mechanism, but it is not the same as deposit insurance.
Why Multi-Currency Providers Often Operate as EMIs
Multi-currency providers are primarily focused on payments and currency conversion. This means an EMI licence covers the business they want to be involved in. But the question is not ‘which is better?’, it is which structure fits how you intend to use the account and what services you want from the bank.
How This Affects Expats
For many expats, a multi-currency account is used as a transaction tool rather than as a long-term savings vehicle. In this case, the EMI structure is entirely appropriate. Others may prefer to retain a traditional bank account for salary deposits or savings while using a multi-currency account for international transfers.
Understanding the regulatory framework helps you make that decision consciously rather than relying on marketing language. Plus, you can easily have both, so you don’t need to choose one or the other.
To find out which multi-currency account would suit you best, please visit our multi-currency comparison table.
