Electronic Money Institution (EMI) in Poland

1. Electronic Money Institution (EMI) or National Payment Institution (KIP)?

A common question for businesses entering the Polish e-money market is: what distinguishes an Electronic Money Institution (EMI) from a National Payment Institution (KIP), and which license offers more flexibility?

1.1. Definition of E-Money in Poland

Under Article 2(21a) of the Polish Payment Services Act (UUP), electronic money is defined as a monetary value stored electronically—including in magnetic form—that is issued in exchange for funds and intended for payment transactions. Crucially, it must be accepted by parties other than the issuer.

E-money typically comes in two forms:

• Stored Value Instruments such as electronic wallets or prepaid cards (e.g., magnetic stripe or chip cards with payment functionality), and
• Network or Server-Based E-Money, including blockchain-based digital money accessible online via hard drives or cloud storage.

The Polish Financial Supervision Authority (KNF) takes a conservative stance on the definition of e-money. According to KNF communications:

• E-money is distinct from bank deposits and must involve storage tied to a specific device or IT infrastructure.
• It is issued in exchange for fiat currency (cash or bank funds).
• Its sole purpose is to enable payment transactions.
• It does not carry universal acceptability—only merchants within the issuer’s closed system are obligated to accept it.

1.2. EMI Licensing in Poland and the EU

The Polish interpretation of electronic money is more restrictive than the broader EU definition under Directive 2009/110/EC. According to Article 2(2) of that Directive, e-money refers to electronically stored monetary value issued upon receipt of funds and accepted by third parties for the purpose of making payment transactions.

1.3. Entities Authorized to Issue E-Money in Poland

The following entities can legally issue electronic money in Poland:

• Domestic banks and branches of foreign banks
• Credit institutions and their branches
• Electronic Money Institutions (EMIs), including EU-based branches
• National Payment Institutions (subject to limits)
• Central banks (e.g., NBP, ECB) when not acting as monetary authorities
• Public administration bodies

Among these, a dedicated corporate form—the Electronic Money Institution (EMI)—is designed specifically for issuing e-money and offering unrestricted payment services.

1.4. Issuing E-Money via a National Payment Institution (KIP)

While a KIP is permitted to issue e-money under Polish law, it faces notable limitations:

• Value Restriction: The average monthly issuance must not exceed the PLN equivalent of EUR 5,000,000.
• Territorial Limitation: KIPs are restricted to issuing e-money exclusively within Poland. They are not allowed to issue or redeem e-money outside the country.

This is supported by Articles 73a(2) and 91 of the UUP. While Article 91 allows EMIs to operate in other EU Member States via branches or agents, it does not extend that right to KIPs for e-money services.

1.5. What Is an EMI?

To overcome these restrictions, companies may apply for full authorization as a domestic Electronic Money Institution (EMI) under Section VIIA of the UUP.

Key requirements include:

• Initial Capital: At least EUR 350,000 (in PLN equivalent), nearly three times the EUR 125,000 required for KIP authorization.
• Licensing Requirements: EMI applicants must submit documentation similar to that required for KIP, but the license allows broader and unrestricted provision of payment services, including across borders.

Importantly, an EMI is not limited in its scope of payment services—it can provide them freely throughout the EU, making it a more robust and flexible option for businesses seeking to scale.

2. Services Offered by Electronic Money Institutions (EMIs)

2.1. Issuing and Redeeming Electronic Money

The primary function of an Electronic Money Institution (EMI) is the issuance and subsequent redemption of e-money. Once the EMI receives funds from a user, it is obligated to immediately issue e-money of equivalent value. In practice, this means that new digital value is created by recording the monetary equivalent as e-money on the user’s account.

This process results in the creation of electronic money—an entirely new digital representation of value—which can then be used in payment transactions. Importantly, issuing e-money inherently includes the obligation to redeem it, meaning the user can exchange it back into traditional currency (e.g., PLN or EUR) upon request.

However, under Poland’s regulatory approach, particularly as interpreted by the KNF (Polish Financial Supervision Authority), electronic money may only be used within a predefined, closed ecosystem. This means that e-money can only be accepted by recipients who have a legal arrangement with the issuer and possess the technical means to receive and process such payments.

Redemption must be available at any time, at face value, in standard currency. EMIs may charge a redemption fee, but only if this is explicitly detailed in the user agreement. These terms must be transparent and clearly communicated to the customer before the agreement is signed. If the user is not a consumer, the redemption rules may be negotiated more freely.

Currently, Polish regulations do not include provisions for e-money distribution by third parties. As such, if a distributor handles e-money on behalf of an EMI, it is considered an outsourced operational activity governed by Article 86 and related provisions of the Polish Payment Services Act (UUP). E-money cannot be issued by agents or intermediaries, and any right to redeem it expires five years after the termination of the issuance agreement.

2.2. Payment Services

In addition to issuing e-money, EMIs in Poland are also classified as payment service providers under Article 4(2)(4) of the UUP. This entitles them to offer the full range of payment services listed in Article 3(1), including:

• Accepting deposits and enabling withdrawals from payment accounts
• Executing various types of payment transactions such as
  • Direct debits (including one-time transactions)
  • Card-based payments
  • Credit transfers (including standing orders)
• Providing payment services based on credit (in limited cases, under Article 74(3) or Article 132j(3))
• Issuing payment instruments (like cards or digital wallets)
• Facilitating payment acceptance and transaction processing for merchants (acquiring services)
• Offering money remittance services
• Providing payment initiation services (PIS)
• Offering account information services (AIS)

These services allow EMIs to function similarly to banks in many respects, though without engaging in deposit-taking activities.

2.3. Ancillary and Non-Payment Services

As outlined in Article 132j(1) of the UUP, EMIs may also engage in additional activities closely connected to their main business operations. These may include:

• Currency exchange services
• Safe custody of funds pending payment execution
• Data storage and processing services
• Operation of payment systems
• Other commercial activities permitted under applicable law

Furthermore, under Article 132j(3), EMIs may offer short-term credit in connection with certain payment services. This credit must:

• Be limited to a maximum term of 12 months
• Not be funded from customer money held for payment transaction execution

These provisions allow EMIs to offer a wide array of financial services while remaining within a strictly regulated and prudentially supervised framework.

3. Regulatory Requirements for Electronic Money Institutions (EMIs)

3.1. Shareholders, Beneficial Owners, and Directors

When applying for a license to operate as an EMI in Poland, applicants must disclose detailed information about the company’s ownership and management structure. This includes identification data for shareholders, beneficial owners, and board members, along with the size of their shareholdings.

In addition to identification, the applicant must submit documentation proving that the individuals involved are capable of managing the institution in a responsible and stable manner. These materials include:

• Proof of educational background and relevant professional experience for management board members
• Information about past criminal convictions, tax offenses, or disciplinary actions, as well as details on any completed civil, administrative, or regulatory proceedings
• Disclosure of ongoing criminal, administrative, or disciplinary cases, except for privately prosecuted matters

To assess whether these individuals meet the required standards, the KNF (Polish Financial Supervision Authority) relies on documentation listed in the Ministry of Finance’s regulation on licensing for domestic payment institutions (13 November 2020, Journal of Laws 2020, item 2225), which also applies to EMIs. Required materials include personal records, CVs, certificates of clean criminal records, and declarations related to supervisory actions at other affiliated entities.

Approval from the KNF regarding the suitability of key shareholders and directors is mandatory for license issuance.

The KNF’s Corporate Governance Principles (adopted July 22, 2014) outline additional expectations for shareholders, including:

• Acting jointly to support the institution’s objectives
• Avoiding undue influence over internal operations
• Supporting proper governance practices
• Maintaining transparency and acting in the EMI’s best interests
• Ensuring recapitalization and liquidity support when needed
• Avoiding misuse of EMI assets or engaging in below-market transactions

3.2. Key Management and Internal Structure

EMIs must establish a clear and competent internal structure based on the KNF’s Corporate Governance Principles. The board should function as a collective body with each member possessing the appropriate:

• Knowledge: Acquired through education, training, or professional qualifications
• Experience: Gained through holding similar positions or roles
• Skills: Needed to fulfill executive duties effectively

It is recommended that the management board include members fluent in Polish and familiar with the domestic financial market. A common model is a three-member board, with at least two members meeting these criteria.

In addition, the EMI must establish several essential compliance and oversight functions:

• Compliance Officer: Responsible for legal and regulatory adherence
• Internal Audit: Ensures ongoing review of internal controls, risk systems, and compliance mechanisms
• Risk Management: Identifies and monitors operational and financial risks
• AML Officer: A designated board member responsible for implementing anti-money laundering and counter-terrorism financing procedures in line with Poland’s AML law

3.3. Capital Requirements

As previously outlined, the minimum starting capital for an EMI is the PLN equivalent of EUR 350,000, calculated based on the official exchange rate published by the National Bank of Poland on the date of authorization (Article 132b(1) UUP).

Beyond this threshold, EMIs must maintain adequate own funds at all times, proportionate to the scale and nature of their e-money and payment service activities (Article 132m UUP).

Own funds include:

• Initial capital
• Revaluation reserves
• Retained earnings
• Current and approved profits (net of foreseeable charges and dividends)
• Statutory and other reserves

Deductions from own funds include:

• Treasury shares held by the EMI
• Liabilities tied to preference shares
• Intangible assets
• Past and current period losses

Under Article 132m(2), the level of own funds must meet or exceed the greater of:

• The required minimum capital, or
• A calculated amount based on the EMI’s operational volume:
  • Capital linked to e-money issuance
  • Capital linked to other payment services, calculated using a formula determined by a future regulation (not to exceed 4% of one-twelfth of annual transaction volume)

Importantly, the KNF has the authority to adjust these capital requirements—either increasing or decreasing them—based on the institution’s risk exposure, quality of internal controls, and overall risk management practices.

4. Licensing Process for Electronic Money Institutions (EMIs)

Under Article 132a(1) of the Polish Payment Services Act (UUP), a license from the Financial Supervision Authority (KNF) is required to legally issue electronic money and provide related payment services as a domestic EMI. Only legal entities established and registered in Poland can apply for such a license.

4.1. Application Requirements for EMI Authorization

To obtain an EMI license, the applicant must submit a formal request along with a range of documentation, including

• Business address and legal formation documents (e.g., articles of association or memorandum of incorporation)
• List of planned services, including e-money issuance and any additional payment services
• Operational strategy and a financial forecast for at least three years, demonstrating the firm’s ability to implement the necessary systems, resources, and procedures. This plan should include projected average outstanding e-money volumes
• Proof of sufficient own funds in line with capital requirements
• Description of the internal control and risk management systems aligned with Article 64(1)(3) UUP
• Details of any close business ties with other companies or individuals
• Identification of key individuals such as directors and shareholders holding a significant interest, including:
  • Personal and business details
  • Ownership percentage
• Supporting information on the management team and shareholders, such as:
  • Academic and professional qualifications
  • Disclosure of past or pending criminal, administrative, fiscal, or civil proceedings
• Details of external auditors, including firm names, registration numbers, and contact information
• If offering payment initiation services, evidence of insurance or financial guarantees for user protection

All requirements are further detailed in the regulation issued by the Minister of Finance on 13 November 2020 (Journal of Laws 2020, item 2225), which applies to EMI applications by analogy.

4.2. Conditions for Granting a License

Articles 64(2)–(10) of the UUP set out conditions that must be met for KNF to issue a license, including:

• Demonstrating adequate own capital
• Having effective internal governance, risk management, and AML/CFT controls
• Being led by individuals who ensure sound and responsible management
• Verifying that the funds used to meet capital requirements are unencumbered and legally obtained
• Submitting a credible business plan that confirms operational readiness
• Ensuring there are no problematic affiliations that would obstruct supervision
• Meeting EU-wide cybersecurity and strong customer authentication requirements under Delegated Regulation (EU) 2018/389
• Providing valid user protection mechanisms for payment initiation services (insurance, bank or financial guarantees)

4.3. Additional Operational Requirements and Licensing Outcomes

Several practical and procedural considerations also apply:

• If acquiring services are to be offered, prior approval from the National Bank of Poland (NBP) may be required
• Insurance or financial guarantees must be secured when offering payment initiation services, as outlined in Article 61b UUP
• During the review process, KNF may request additional documentation or clarifications
• Licensing decisions are typically issued within 3 months of receiving a complete application
• The license will explicitly state which services the EMI is authorized to offer
• Any modifications to services require formal amendments to the license; a written statement may suffice if the original conditions remain unchanged
• The license automatically expires if the EMI fails to start operations within 12 months or ceases activities for over 6 consecutive months
• Grounds for license revocation include:
  • Submission of false information or illegal conduct during the application process
  • Breach of licensing conditions or failure to notify KNF of material changes
  • Persistent non-compliance or operational deficiencies that threaten market stability
  • Unfit management or shareholders
  • Barriers to effective supervision due to foreign affiliations
  • Failure to protect customer funds as mandated under Article 132n UUP

If authorization is revoked, KNF may specify the timeframe and manner for the EMI to wind down its operations. The authority can also withdraw the license upon the institution’s request.

5. Supervision of EMIs by the Polish Financial Supervision Authority (KNF)

5.1. Scope of Supervisory Oversight

Under Article 132z(1) of the Polish Payment Services Act (UUP), the KNF is responsible for supervising the operations of Electronic Money Institutions (EMIs). This includes oversight of their core activities—issuing e-money and providing payment services—as well as the activities of their agents, service providers, and outsourced entities as referenced in Article 132v(1).

According to Article 132z(2) UUP, the primary goals of KNF’s oversight are:

• Safeguarding the financial integrity of EMIs
• Ensuring compliance with national regulations, EU directives (e.g., Regulation 924/2009, Regulation 260/2012, and Regulation 2015/751), and license conditions
• Protecting the interests of users and holders of electronic money

KNF’s supervision involves:

• Reviewing the financial health of the institution
• Assessing the quality of its internal governance, including risk management and control mechanisms

KNF officials are protected from liability for any damage arising from lawful supervisory actions taken in accordance with applicable legislation.

As part of its powers, the KNF can:

• Request necessary information from an EMI within a specified deadline, outlining the purpose of the request
• Require regular reporting to evaluate the institution’s financial standing
• Instruct the EMI to prepare and implement a recovery plan to restore financial stability

5.2. On-Site Inspections

The KNF has the authority to conduct audits of an EMI’s operations and financial condition. This includes reviewing activities performed by agents or service providers involved in outsourced tasks. If the primary inspection doesn’t provide sufficient clarity, the KNF can launch direct inspections of those third parties.

Inspections are carried out by KNF staff who present official identification and authorization issued by the KNF Chair or a delegated representative.

Inspectors have the right to:

• Enter the EMI’s premises
• Access dedicated office and communication facilities
• Examine all company documents and request copies or summaries
• Access the EMI’s IT systems and request electronic data extracts

These inspections follow the procedures outlined in Chapter 5 of the Entrepreneurs’ Law Act (March 6, 2018) and relevant executive regulations under Article 103(6) UUP.

5.3. KNF Recommendations to EMIs

As part of its regulatory role, the KNF can issue formal recommendations to EMIs to address specific deficiencies or ensure compliance with applicable laws and EU regulations. These recommendations may include:

• Aligning operations with legal obligations and EU rules on cross-border payments
• Increasing own funds to meet legal minimums or KNF-determined thresholds
• Implementing procedures to maintain adequate capital and monitor it regularly
• Taking corrective action to protect the interests of customers and e-money holders
• Temporarily halting profit distribution or expansion until financial standards are met

The KNF may also publish best practice guidelines to promote sound and prudent management within the EMI sector.

5.4. Sanctions and License Revocation

If an EMI fails to fulfill its obligations—such as ignoring KNF recommendations, withholding information, obstructing inspections, or violating legal standards—the KNF can take disciplinary action, including:

• Requesting the dismissal of management responsible for identified breaches
• Temporarily suspending a manager from decision-making duties
• Restricting the scope of the EMI’s activities or specific business units

These enforcement decisions are immediately applicable and may include specific deadlines or operational conditions.

Further sanctions available to the KNF include:

• Fining responsible managers up to three times their average gross monthly salary (based on the last three months)
• Imposing administrative penalties on the EMI of up to PLN 1,000,000
• Revoking the EMI’s operating license

In serious cases, the KNF may suspend a manager when:

• Criminal or fiscal charges are brought against them
• Their actions result in significant financial losses to the institution

These supervisory powers ensure that EMIs operate transparently, maintain customer trust, and remain compliant with the law.

6. Reporting Obligations of EMIs

6.1. Financial and Statistical Reporting to the KNF

Electronic Money Institutions are required to regularly submit financial reports to the Polish Financial Supervision Authority (KNF) in accordance with the Accounting Act. This includes:

• Annual Financial Statements (standalone and consolidated, where applicable), accompanied by:
  • An independent auditor’s report
  • A copy of the resolution or decision from the approving body confirming the financial statements

These documents must be submitted within 15 days of their official approval by the EMI or its parent company.

If, during the audit process, the audit firm identifies any issue that could result in a qualified or adverse opinion—or even a refusal to issue an opinion—it must immediately notify the KNF. This includes findings that suggest regulatory breaches or potential risks to the EMI’s financial stability or ongoing operations.

In addition to the annual reports, EMIs are obligated to submit quarterly and supplementary annual reports that include:

• The value of funds held
• Information on credit extended under Article 74(3), including number, value, and duration of loans
• Data on executed payment transactions: volume, value, and currency details
• A breakdown of own funds and their individual components
• A summary of any non-core activities conducted under Article 132j(1), such as:
  • Currency exchange
  • Safe custody of payment funds
  • Data storage and processing
  • Operation of payment systems
  • Other permitted economic activities

The KNF may, upon request and with justification, waive or reduce the scope of these reporting duties for specific institutions.

6.2. Quarterly Reporting to the National Bank of Poland (NBP)

In line with Article 14c(1) of the UUP, all EMIs must report quarterly to the National Bank of Poland (NBP) on the value of outstanding electronic money issued.

If the institution also issues payment instruments that store this electronic money, the report must include:

• The types and number of payment instruments issued
• The number of acceptance devices and devices enabling top-ups
• The volume and value of:
  • Transactions made using the instruments
  • Top-up transactions
  • Transactions in breach of the law or fair trading rules, including losses incurred

Additionally, if the EMI acts as a settlement agent (acquirer) under Article 14a of the UUP, it must report:

• The number of merchants served
• Devices used by those merchants to accept payments
• The value and number of processed transactions
• Any unlawful or fraudulent transactions and resulting financial damage

If the EMI also issues payment instruments unrelated to stored e-money, a separate report under Article 14b(1) must be submitted, detailing:

• Type and quantity of instruments issued
• Volume and value of executed transactions
• Number of ATMs provided and their usage metrics
• Incidents involving violations of legal or ethical standards and the financial impact thereof

All these reports must be submitted electronically, using certificates issued by the NBP or other authorized methods, in accordance with Article 14ca of the UUP. Practical submission instructions are available on the official NBP website.

7. Internal Governance and Policy Framework for EMIs

An Electronic Money Institution (EMI) must implement and regularly update a comprehensive set of internal policies, systems, and procedures to ensure compliant, secure, and effective operations. Below is an outline of the required components:

7.1 Strategic Activity and Financial Planning

EMIs are required to prepare a three-year operational strategy, which must include:

• Business Objectives:
  • Marketing and operational plans
  • Timeline of strategic milestones
  • Employment policy and workforce plans
• Organizational Structure:
  • Full organisational chart
  • Responsibilities of internal units and key roles (including management board, supervisory bodies, and internal audit)
  • Defined governance and decision-making processes
  • Relationship with parent companies and group entities, if applicable
• Outsourcing and Agent Management:
  • Outsourcing policy detailing tasks delegated and responsible internal staff
  • Identification of outsourced partners and agents (with legal identifiers)
  • Compliance and monitoring systems, including planned audits and training procedures for agents
• Payment Systems and Technical Infrastructure:
  • Description of information systems, internal communication, and operational tools
  • Business continuity and disaster recovery planning, including Recovery Time and Recovery Point Objectives

7.2 Risk Management and Internal Controls

EMIs must put in place robust internal control systems that include:

• Risk Identification and Mitigation:
  • Assessment of operational, compliance, and security risks
  • Procedures for monitoring, measuring, and managing risks
• Compliance Monitoring:
  • Systems for ensuring adherence to laws, regulations, and internal policies
  • Regular audits and internal reviews
• Sensitive Data Protection:
  • Clear data classification and access protocols
  • Tools and procedures for tracking, storing, and safeguarding payment data
  • Rules for managing system access and breach responses

7.3 Regulatory and Financial Compliance

Key policies must also address:

• Handling of Client Funds:
  • Safeguarding mechanisms in line with Article 132n UUP
  • Procedures for tracking and reconciling funds related to payment transactions
• Financial Reporting and Accounting:
  • Standardised accounting procedures
  • Rules for collecting and analysing business and transaction data, including fraud statistics
• IT Security Policy:
  • Evaluation of risks associated with payment services
  • Physical and logical security measures
  • Secure customer authentication and transaction integrity mechanisms

7.4 Anti-Money Laundering and Counter-Terrorist Financing (AML/CFT)

EMIs are obligated to adopt and enforce a complete AML/CFT framework that includes:

• Risk Assessment:
  • Analysis of exposure based on client type, services, channels, and geography
• Mitigation Measures:
  • Procedures for Know Your Customer (KYC), transaction monitoring, and suspicious activity reporting
  • Controls to ensure branch and agent compliance (including those operating abroad)
• Training and Designation:
  • Staff education programmes on AML/CFT
  • Appointment of a responsible AML officer with proven competence
• Monitoring and Reporting:
  • Mechanisms to ensure timely, consistent, and effective AML procedures
  • Internal handbook detailing AML/CFT duties for all staff

This structured framework ensures that EMIs operate with transparency, integrity, and in compliance with legal obligations.

8. Mergers and Acquisitions Involving EMIs

8.1 Notification Requirement to the KNF

In accordance with Article 132c of the Payment Services Act (UUP), any entity intending to directly or indirectly acquire shares in a Polish Electronic Money Institution (EMI) that would result in reaching or surpassing thresholds of 10%, 20%, 30%, or 50% of voting rights or share capital, or that would result in the EMI becoming a subsidiary or co-controlled entity, must formally notify the Polish Financial Supervision Authority (KNF).

This procedure follows similar rules to those under the Banking Law, specifically Articles 25 and 25a–25g, which apply correspondingly.

If the acquiring entity is:

• An EMI, payment institution, credit institution, investment firm, insurer, reinsurer, or management company licensed in another EU member state, or
• A parent company or controlling entity of any of the above,

then the notification must clearly indicate the name and registered office of each related entity.

The notification must be accompanied by detailed information, including but not limited to:

• Identification of the acquirer and its management team
• Identification of the EMI in question
• Information on the acquirer’s business activities, including scope, location, history, and education/professional background (for individuals)
• Group structure and affiliations, including financial and personal links
• Financial standing of the acquirer
• Intended shareholding structure and financing methods
• Strategic plans post-acquisition (e.g., governance, operations, marketing)
• Commitments to ensuring the EMI’s continued prudent and stable management

If the acquirer is a regulated institution in Poland or the EU (e.g., bank, insurer, payment institution), certain disclosures (e.g., on qualifications) may be waived if sufficiently substantiated.

Supporting documentation is outlined in the Regulation of the Minister of Finance dated 6 March 2014 (Journal of Laws 2014, item 386).

8.2 KNF’s Right to Object

As per Article 132e of the UUP, the KNF may object to the acquisition if:

• The acquirer fails to address deficiencies or submit required documents
• Requested supplemental information is not provided on time
• The acquisition raises concerns about the stability or prudent management of the EMI

In making this assessment, the KNF also considers any commitments made by the acquirer regarding the EMI’s future governance and stability.

If shares are acquired:

• Without notifying the KNF
• Despite an objection by the KNF
• Before the KNF’s decision window expires
• After missing a KNF-imposed deadline

then voting rights attached to those shares are suspended. The KNF may also challenge the validity of shareholder resolutions and order divestment of such shares within a specified timeframe.

Where a parent-subsidiary relationship is created through such acquisition, managers affiliated with the parent company are restricted from representing the EMI. If the affiliation is unclear, appointments of directors may be deemed invalid.

Failure to divest shares within the KNF’s deadline may result in:

• Fines of up to PLN 1,000,000
• Revocation of the EMI’s license

Resolutions passed in breach of these provisions are considered invalid unless the necessary quorum and voting majority exist without counting the invalid votes.

In exceptional circumstances, the KNF may waive restrictions on voting or representation—if the acquirer proves that their involvement poses no risk to the EMI and that such waiver serves the interests of electronic money users.