Starting a payment or e-money institution in the European Union is one of the most strategic ways to build a regulated fintech business. For companies that want to offer payment accounts, digital wallets, money transfers, merchant payments, card products, currency exchange or embedded finance, the EU provides a strong regulatory environment and access to a large financial market.
However, launching this type of business is not simply a matter of registering a company and building a website. A payment or e-money institution must be properly authorised, operationally ready, technologically prepared and able to meet ongoing compliance obligations. The business needs a clear regulatory plan, reliable software, banking relationships, safeguarding arrangements and access to payment infrastructure.
For many fintech founders, the licensing process may seem complicated at first. In practice, it becomes much more manageable when divided into clear stages: defining the business model, selecting the right jurisdiction, preparing the application, implementing compliance, choosing software, opening accounts and connecting payment rails.
This article explains the main steps of launching a payment or e-money institution in the EU, using Malta as an example jurisdiction. It also looks at the role of fintech software, including payment processing software, acquiring software, remittance software and core banking software.
Understanding Payment and E-Money Institutions
Before starting the licensing process, founders need to understand the difference between a Payment Institution and an E-Money Institution.
A Payment Institution is typically authorised to provide payment services. These may include money remittance, execution of payment transactions, issuing payment instruments, merchant acquiring, payment initiation services or account information services. This model is often used by companies that want to process payments, support merchants, transfer funds or provide payment-related services.
An E-Money Institution can issue electronic money and usually provide related payment services. The MFSA describes payment institutions and electronic money institutions as financial institutions undertaking payment services and/or the issuance of electronic money under Malta’s Financial Institutions Act.
This model is often suitable for digital wallets, stored-value accounts, prepaid products, multi-currency platforms, card programmes and embedded finance solutions. Electronic money is generally linked to monetary value stored electronically and represented as a claim on the issuer.
Choosing between these two models depends on the product. A company that only transfers funds may not need the same permissions as a business issuing e-money balances to customers. That is why regulatory analysis should happen before technology development, fundraising or partnership discussions.
Why Malta Can Be Considered for EU Licensing
Malta is one of the EU jurisdictions that fintech companies may consider when applying for a Payment Institution licence or E-Money Institution licence. The country has an established financial services sector, English is widely used in business, and the regulatory framework is aligned with EU requirements.
The Malta Financial Services Authority is responsible for supervising financial institutions authorised under the Financial Institutions Act, including payment institutions and electronic money institutions.
For fintech businesses, Malta may be attractive because it combines EU membership with a recognised regulatory environment. A company authorised in an EU jurisdiction may also be able to expand into other EU or EEA markets through the passporting process, provided the correct regulatory notifications and requirements are followed. The European Banking Authority notes that passporting rules cover information exchange between home and host authorities for payment and e-money institutions operating in more than one EU Member State.
However, Malta should not be viewed as an easy or informal route. The licensing process still requires a serious application, experienced management, sufficient capital, a real business plan, compliance policies, technology documentation and proper operational substance.
Building a Licence Application
A successful application starts with a detailed explanation of the business model. Regulators want to understand what services the company will provide, who the customers will be, where transactions will flow, which partners will be involved and how risks will be controlled.
The application normally includes a programme of operations, business plan, financial forecasts, organisational structure, governance arrangements, risk management policies, AML/CFT documentation, IT security framework, outsourcing arrangements and safeguarding procedures.
The European Banking Authority has also issued guidelines covering the information that applicants should provide when seeking authorisation as payment institutions and electronic money institutions under PSD2.
This means that a generic application is rarely enough. The documents must reflect the real company, the real software, the real payment flows and the real compliance setup. For example, a remittance company, merchant acquiring business and e-wallet platform will each require different descriptions of customer journeys, risk controls and transaction monitoring.
Founders should also prepare for regulatory questions. Authorities may ask for clarification about ownership, directors, outsourcing, safeguarding, AML procedures, IT controls, financial projections or customer fund flows.
Compliance, AML and Safeguarding
Compliance is one of the most important parts of launching a regulated fintech company. Payment and e-money institutions must be able to identify customers, monitor activity, detect suspicious behaviour, screen against sanctions lists, maintain records and report where required.
A strong AML framework should include customer due diligence, business verification, risk scoring, ongoing monitoring, suspicious activity escalation, sanctions screening and internal compliance controls. For companies working with high-risk corridors, cross-border transfers, crypto-related businesses or complex corporate structures, this part becomes even more important.
Safeguarding is another key requirement. Payment and e-money institutions must protect customer funds and ensure that client money is not treated as the company’s own funds. The MFSA has specifically reminded payment institutions and electronic money institutions of their legal obligation to safeguard client funds through appropriate mechanisms.
In practice, this means that the company needs suitable safeguarding accounts, reconciliation processes, internal procedures and reporting controls. Safeguarding should be planned before launch, not fixed later after the business starts processing customer funds.
Choosing Software for a Payment or E-Money Institution
Technology is one of the biggest operational decisions in the launch process. Even if a company obtains a licence, it cannot operate efficiently without software that supports accounts, payments, onboarding, compliance, reporting and integrations.
Different types of fintech software may be required depending on the business model.
Payment processing software is used to manage payment transactions, routing, transaction statuses, fees, limits and payment provider integrations. It is important for companies that want to process customer payments or connect to external payment rails.
Acquiring software is relevant for businesses that work with merchants. It may support merchant onboarding, payment acceptance, transaction settlement, chargebacks, merchant reporting, risk controls and acquiring partner integrations.
Remittance software is designed for money transfer businesses. It helps manage sender and beneficiary data, corridors, FX rates, transfer fees, payout partners, compliance checks and transaction tracking.
Core banking software is usually the central system for a payment or e-money institution. Core banking can support customer profiles, current accounts, multi-currency balances, payments, currency exchange, cards, fees, statements, AML/KYC workflows, back-office operations and reporting. This is particularly important for companies that want to offer digital accounts, wallets, card programmes, business accounts or embedded finance products.
For modern fintech companies, software may also need to support web banking, mobile banking, APIs, crypto-fiat functionality, card issuing integrations, transaction monitoring and accounting tools.
The right software can reduce manual work, speed up launch, improve customer experience and help the company scale. The wrong system can create operational bottlenecks, compliance gaps, poor reporting and expensive redevelopment later.
Banking Relationships and Payment Infrastructure
After licensing and software planning, the company needs banking and payment infrastructure. This may include operational accounts, safeguarding accounts, correspondent accounts, payment providers, FX partners, card issuing partners and access to payment rails.
Banks and financial partners will carry out their own due diligence. They will review the company’s licence, ownership, compliance framework, expected volumes, customer base, countries of operation and transaction flows. A company with weak documentation may struggle even if it has a promising product.
Payment infrastructure also needs to match the business model. A European e-money business may need SEPA or SEPA Instant access. A remittance company may need international payout partners. A merchant business may need acquiring connections. A card-based fintech may need card issuer processing and scheme-related infrastructure.
This is why infrastructure planning should happen early. Licensing, software, banking and payment rails must work together.
Launching and Scaling the Business
Once the company has regulatory approval, software, banking relationships and payment integrations, it can prepare for launch. Before going live, the business should test onboarding flows, payment journeys, reconciliation, transaction monitoring, customer support, reporting, security and incident management.
A controlled launch is often better than opening the platform to all customers immediately. The company can begin with a limited customer group, monitor operations, fix issues and then scale gradually.
As the business grows, it may add new products, new currencies, new payment methods, card services, merchant services, international transfers or crypto-related functionality. A strong foundation makes this expansion easier.
Conclusion
Launching a Payment Institution or E-Money Institution in the EU requires a combination of regulation, technology and operations. Malta can be considered as one possible EU licensing jurisdiction, but success depends on preparation, not only location.
A fintech company needs a clear business model, strong governance, a complete licence application, AML controls, safeguarding arrangements, suitable software, banking relationships and access to payment infrastructure.
Software is especially important because it becomes the daily operating system of the business. Payment processing, acquiring, remittance and core banking software each serve different purposes, and the right combination depends on the company’s strategy.
For founders planning to build a regulated fintech business in Europe, the best approach is to design the licence, software and infrastructure together from the beginning. This creates a stronger foundation for launching, operating and scaling a sustainable payment or e-money institution in the EU.
