The Hidden Line Between Payment Accounts and E-Money

Alejandro Martínez · 2026-10-26

Ever wondered where your money actually sits when you use a payment app? You're not alone. The difference between a payment account and e-money might sound like legal nitpicking, but it shapes everything from how long your funds are protected to whether you earn interest. Let's break it down in plain English. ### Payment Accounts: The Short-Term Parking Spot A payment account offered by a Payment Institution (PI) is like a short-term parking spot for your money. Under Article 4(12) of the Second Payment Services Directive (PSD2), it's designed for executing payment transactions—nothing more. Funds received by a PI don't count as deposits, other repayable funds, or electronic money. Think of it as a transit zone: your money comes in, gets processed, and moves on. Typical examples? An acquirer's settlement balance owed to a merchant, or remittance funds held between receipt from the payer and delivery to the payee. In both cases, the PI is just a conduit. It doesn't offer a place to store money long-term. But here's where it gets interesting. Case law has widened the scope a bit. In Case C-661/22, ABC Projektai v Lietuvos bankas, the Court of Justice of the European Union (CJEU) ruled that a PI can receive funds not immediately accompanied by a payment order and leave them available on a payment account—as a payment service, not e-money issuance. The European Banking Authority (EBA) agreed in Q&A 2018_4221, provided safeguarding under Article 10 PSD2. The key condition? An intention to use the funds for future payments. So the account remains one of transit, not storage. ### E-Money: The Long-Term Wallet By contrast, e-money is "electronically stored monetary value" under the Second Electronic Money Directive (EMD2). It can be held indefinitely—think of wallets like Wise or PayPal. An Electronic Money Institution (EMI) must safeguard the funds it receives (Article 7) and must issue and redeem e-money at par (Article 11). It may not pay interest or any other time-based benefit (Article 12). So if you're holding a balance in an e-wallet for months, that's e-money. If you're just passing funds through for a specific payment, that's a payment account. ### Three Questions to Tell Them Apart In practice, the distinction boils down to three questions: - **Is there an intention to use the funds for a specific or identifiable future payment?** If yes, a payment account is the more suitable characterization. - **Does the user hold a claim on the issuer that is redeemable at par and may be spent with third parties?** If yes, the balance is e-money. - **What is the intended timeframe?** A short period pending a payment order points to a payment account, whereas an indefinite period points to e-money. > "The boundary can still be difficult to draw in practice, but these questions provide a useful framework." ### The Bottom Line The CJEU and the EBA permit a PI to hold funds pending future payment orders, but this doesn't allow it to offer long-term storage of value. That remains the territory of EMIs and credit institutions. So next time you see a balance sitting in an app, ask yourself: is it in transit or is it stored? The answer might surprise you.