A digital wallet may look straightforward from the customer’s perspective. A user opens an account, completes verification, adds money and starts making payments. Building the business behind that experience is considerably more complex.
An e-wallet company operating in the European Union needs a regulatory structure that permits its activities, a technology platform capable of maintaining customer balances and transactions, and access to banking services that connect the product to the wider financial system.
For founders, these can be treated as three core foundations: regulatory authorisation, core banking technology and Banking-as-a-Service infrastructure. Decisions in one area usually influence the other two, so they should be considered as parts of the same operating model rather than separate projects.
1. Establish the appropriate regulatory status
Before applying for any licence or registration, founders need to determine exactly what the wallet will do with customer money.
There is a meaningful regulatory difference between facilitating payments and issuing electronic value that customers can hold and use later. A wallet offering payment initiation or money transfers can have a different regulatory structure from one in which customers maintain balances and use those funds for subsequent transactions.
Within the current European framework, businesses commonly encounter four broad categories.
Authorised Payment Institution
An Authorised Payment Institution license, or PI, can provide regulated payment services covered by its authorisation.
Depending on the business model, these may include executing payment transactions, money remittance, acquiring or other regulated payment activities. A PI can therefore be relevant where the product is primarily designed to move funds rather than issue electronic money.
Authorisation requires much more than incorporating a company. Regulators examine the business plan, governance, ownership, risk management, safeguarding arrangements, internal controls, AML processes and the technology used to operate the business.
The current EU framework also sets minimum initial capital requirements for authorised PIs according to the services provided. These currently range from €20,000 to €125,000, with additional own-funds requirements applying after authorisation.
Registered or exempted Payment Institution
For smaller payment businesses, some EU jurisdictions provide a lighter regime based on the exemption available under PSD2.
These companies may be referred to as Small Payment Institutions, Registered Payment Institutions or exempted payment institutions, depending on national terminology.
The model can be useful for businesses planning to operate on a limited scale in one market. However, it should not simply be viewed as a cheaper version of full PI authorisation.
Its scope is more restricted, and the cross-border rights available to a fully authorised institution generally do not apply in the same way. The precise requirements also differ between EU Member States.
This means founders should first decide whether they are building a local payment business or a platform expected to expand into several European markets.
Authorised Electronic Money Institution
An Authorised Electronic Money Institution, or EMI, is particularly relevant to many e-wallet models.
The key issue of the E-Money license, for example in Malta is the issuance of electronic money.
An authorised EMI can issue electronic money and can also provide payment services within the scope of its permissions.
Under the current EU Electronic Money Directive, an authorised EMI must have at least €350,000 of initial capital. The actual regulatory assessment extends much further, covering areas such as safeguarding, governance, AML, technology, security, outsourcing, risk management and financial sustainability.
For a fintech planning a full-featured wallet with customer balances, payments and potentially multiple currencies, the EMI route is therefore one of the first regulatory models to assess.
Registered or exempted Electronic Money Institution
There is also a lighter regime for smaller electronic money businesses in jurisdictions that make use of the exemption provided by EU legislation.
These businesses may be described as Small EMIs, Registered EMIs or exempted electronic money institutions.
They remain regulated entities. “Registered” does not mean that the company is free to operate without regulatory oversight.
The regime is intended for smaller-scale businesses and comes with important limitations. Under the existing EU framework, the maximum average amount of outstanding electronic money permitted for the exemption cannot exceed €5 million, although individual countries may apply a lower threshold.
The EBA’s central register separately records authorised payment and electronic money institutions as well as exempted institutions, reflecting these distinct regulatory categories.
A founder should therefore avoid choosing between PI, EMI or a registered regime purely on the basis of application cost. The correct structure depends on what customers will be able to do, whether the company will issue electronic money, expected transaction volumes and where the business intends to operate.
2. Turn the regulatory model into a product with core banking software
Once the regulatory model has been defined, the e-wallet needs a system that can actually run it.
This is where core banking software becomes central.
The customer might interact only with a mobile application or web dashboard, but behind that interface the company needs an accurate record of every account, balance and movement of funds.
Core banking software can maintain customer ledgers, process debits and credits, calculate fees, manage currencies, record internal transfers and provide the operational team with the information required to investigate transactions and reconcile balances.
For regulated businesses, the system also needs to fit into the wider compliance architecture.
A core platform may need integrations with KYC and KYB systems, AML and transaction-monitoring tools, sanctions screening, accounting platforms, card processors and external banking providers.
Reporting and reconciliation are equally important. The institution must be able to compare what its internal ledger records with the money held through external accounts and providers.
The right platform therefore depends on the operating model rather than on the number of features available.
An early-stage wallet offering EUR accounts may eventually need additional currencies, business accounts, payment cards or multiple banking partners. API capability and flexibility become particularly important when those additions need to be made without rebuilding the entire technology stack.
3. Connect the wallet to banking services through Banking-as-a-Service
Core banking software records what happens within the fintech. It does not, by itself, provide access to bank accounts, payment networks or the other regulated infrastructure needed to move real funds.
Many e-wallet companies therefore work with banks, EMIs or specialist Banking-as-a-Service providers.
Banking-as-a-Service, commonly shortened to BaaS, can give a fintech access to selected financial capabilities through a technology and partnership layer rather than requiring the company to establish every connection independently.
Depending on the provider and regulatory arrangement, these capabilities can include payment accounts, virtual or dedicated IBANs, SEPA connectivity, international payments, safeguarding infrastructure, foreign exchange, card issuing or other services exposed through APIs.
A wallet could, for example, maintain its customer ledger within its own core banking system while using a partner to provide IBAN infrastructure and execute external payments. Another provider may support cards, while a separate institution holds safeguarded customer funds.
This illustrates an important point: BaaS does not necessarily mean that one provider supplies the entire financial infrastructure.
Founders still need to analyse which party performs each function, where customer money is held, who executes payments, how settlements occur and what happens when a transaction is rejected or reversed.
Provider selection should therefore consider more than API documentation and pricing.
Relevant questions include which countries and customer types the provider supports, available currencies, payment limits, settlement timelines, safeguarding arrangements, compliance requirements, reconciliation data, service reliability and the process for adding new products or markets.
The regulatory responsibilities also need to remain clear. Using third-party infrastructure does not automatically transfer the institution’s responsibilities to the service provider. EBA outsourcing guidance makes clear that the management of a regulated financial institution remains responsible for its activities and for appropriately managing outsourced arrangements.
This is particularly relevant for e-wallet companies because the final customer experience can depend on several organisations even though the customer sees only one brand.
Build the operating model before building the interface
The visible wallet is only the final layer of a much larger system.
The regulatory structure defines which financial services the company can offer. Core banking software maintains the financial records and operational logic behind those services. Banking-as-a-Service and other financial partners connect the fintech to the banking system and make real transactions possible.
For an EU e-wallet business, the three foundations can therefore be summarised as:
regulatory status → core banking technology → Banking-as-a-Service infrastructure.
They should not be designed independently.
The licence influences the technology. The technology must support the requirements of banking partners. The providers available to the company can, in turn, affect which products, currencies and customer segments it can realistically support.
Planning these dependencies before launch makes it much easier to build an e-wallet that works not only as an application, but as a functioning regulated financial business.
