ClearBank Report Reveals European EMI Market Holds €35 Billion in Deposits, Despite Challenges

ClearBank, a leading provider for real-time clearing and embedded banking, has released a report detailing the state of the Electronic Money Institution (EMI) market in the UK and Europe. The report, conducted by analyst firm Celent, reveals that EMIs across Europe now hold a staggering €35 billion in deposits, marking an 84% increase from 2019.

The Role of EMIs in the Fintech Ecosystem

The report, titled “UK and European banks and EMIs: friends or foes?”, is based on interviews with over a dozen industry players including banks, EMIs, and fintechs who are clients of EMIs. It outlines the significant role EMIs play in the financial ecosystem. Despite not requiring the same high capital reserves as a banking license, e-money licenses give firms the ability to offer limited payment and financial services.

The report underscores the complexity of the fintech ecosystem, highlighting that banks, EMIs and other fintechs often function as both competitors and collaborators. In many cases, EMIs rely on banking partners to offer their services. These banks provide crucial safeguarding services, credit and banking services, and act as sponsors for account-to-account payment systems.

The Challenges and Opportunities for EMIs and Banks

Despite the significant value held by EMIs, the report indicates that they often struggle to find banking partners that meet their needs. Yet, it suggests that there is an opportunity for partner banks to capture a greater share of the €35 billion in deposits across the UK and EU by considering EMIs as key clients and partners in offering embedded finance.

The report also explores the impact of the fintech downturn and increased regulatory pressure on EMIs and their relationships with banks. It found that safeguarding of customer funds, as required by Electronic Money Regulations, is facing increased scrutiny from both customers and EMI partners.

EMI’s Response to Regulatory Pressures

Many EMIs are now seeking additional banking partners to provide extra risk mitigation and resilience. When selecting a banking partner, EMIs value the ease of integration and risk appetite alignment over the price. Despite expectations of tighter regulation due to market failures, EMIs welcome this as an opportunity to enhance their reputation through adherence to higher compliance standards.

The report concludes that cooperation and collaboration between EMIs and banks are vital for improved services for consumers and businesses. It suggests that EMIs, despite the challenges, are increasingly important in the financial services landscape, filling gaps left by traditional banks unable or unwilling to support the fintech sector.