TLDR:

A new report commissioned by ClearBank and produced by Celent highlights the growing systemic importance of electronic money institutions (EMIs) in the fintech ecosystem. The report examines the EMI market in the UK and Europe and emphasizes the cooperative partnership between banks and EMIs. The report suggests that banks have an opportunity to capture a greater share of the €35 billion in EMI deposits by considering EMIs as key clients and partners in offering embedded finance.

Key Points:

• Despite holding estimated deposits of €35 billion across Europe, EMIs often struggle to find a banking partner that meets their needs.
• Electronic money institutions (EMIs) are becoming systemically important and play a key role in the growth of fintech.
• EMIs are looking to add new banking partners for risk mitigation and operational resilience.
• Ease of integration and risk appetite alignment are more important than price when an EMI selects a banking partner.
• Regulation is expected to tighten, and EMIs welcome this as a way to increase their reputation and remove barriers to collaboration with banks.

A new report commissioned by ClearBank and produced by financial services analyst Celent explores the growing systemic importance of electronic money institutions (EMIs) in the fintech ecosystem. The report focuses on the EMI market in the UK and Europe and highlights the challenges faced by EMIs in finding banking partners that can meet their needs.

Although EMIs hold an estimated €35 billion in deposits across Europe, their lack of access to suitable banking partners poses a significant obstacle. However, the report suggests that banks have a significant opportunity to capture a greater share of the EMI market by considering EMIs as key clients and partners in offering embedded finance.

The report emphasizes the cooperative partnership between banks and EMIs in the fintech ecosystem. Banks provide safeguarding services, credit and banking services, and act as sponsors for account-to-account payments systems for EMIs. The interconnectedness and complexity of the fintech ecosystem require banks and EMIs to compete and partner simultaneously to capture opportunities in the market.

EMIs are looking to add new banking partners to enhance risk mitigation and operational resilience. When selecting a banking partner, ease of integration and risk appetite alignment are deemed more important than price for EMIs.

EMIs expect regulation to tighten in response to market failures, which they welcome as an opportunity to increase their reputation by demonstrating compliance with higher standards. Tighter regulation also increases confidence in EMIs and removes barriers to collaboration with banks concerned about counter-party risk.

The report concludes that EMIs play a vital role in the growth of fintech and are now systemically important. Cooperation and collaboration between banks and EMIs are crucial for providing better services for consumers and businesses.