Electronic money institutions - current trends, regulatory issues and future prospects

Adopted in response to the emergence of new prepaid electronic payment instruments and aspiring to establish a clear legal framework for the strengthening of the Single Market in payment services and the promotion of competition between issuing institutions, the E-money Directives have yet to achieve their objectives. Several years after the legislation's entry into force, relatively few licences have been issued, while the size of the e-money market continues to remain modest. What is more, the likelihood of an immediate increase in the volume of e-money issuance appears small, not only because of the still limited consumer interest in e-payment instruments but, also, on account of the perceived failings of the current regulatory regime. The purpose of this paper is to examine critically the state of play in this segment of the financial services industry and to inquire how the E-money Directives might be amended to bring about enhanced legal and operational certainty, facilitate the delivery of the potential benefits of e-money and contribute to the development of e-commerce within the EU. Our discussion of the regulatory concerns raised by the E-money Directives and our inquiry into the most appropriate means of resolving these will be preceded by an examination of the e-money market's expansion hitherto and its future growth prospects within the EU. JEL Classification: K