Safeguarding requirements for authorised payment institutions and electronic money institutions

Authorised payment institutions (PIs) and electronic money institutions (EMIs) must comply with certain safeguarding requirements. Find out more about what funds this applies to.

The Payment Services Regulations 2017 (PSRs) and Electronic Money Regulations 2011 (EMRs) impose safeguarding requirements to protect customer funds received for the provision of a payment service or e-money.

All authorised PIs must comply with the safeguarding requirements in regulation 23.

Regulation 20 requires all EMIs to safeguard funds received in exchange for e-money that has been issued.

Read about the safeguarding requirements in Chapter 10 of Payment Services and Electronic Money – Our Approach. This includes:

  • how funds must be safeguarded, including the segregation and insurance methods
  • protection from the claims of other creditors
  • relevant systems and controls
  • effect of an insolvency event

Safeguarding requirements for small PIs

If you’re a small PI, you can choose to comply with safeguarding requirements.

If you do choose to safeguard, you will need to apply the same level of protections that are expected of an authorised PI. You will also need to tell us:

  • when you apply for registration, and
  • in your annual reporting returns

If you decide to begin safeguarding funds after you have been registered, or if you decide to stop safeguarding, let us know by calling 0300 500 0597.

Funds that need to be safeguarded for PIs

The requirement to safeguard applies to ‘relevant funds’. These are sums received:

  • from, or for the benefit of, a payment service user for the execution of a payment transaction, and
  • from a payment service provider for the execution of a payment transaction on behalf of a payment service user

Credit unions and safeguarding requirements

If you’re a credit union that issues e-money, you will have a Part 4A permission under the Financial Services and Markets Act 2000 (FSMA) to issue e-money. 

Under the EMRs, you must safeguard funds received in exchange for e-money as if you were an EMI (see regulation 20(5)).

Safeguarding funds from unrelated payment services 

EMIs and credit unions are entitled to provide payment services that are unrelated to the issuance of e-money.

Authorised EMIs that provide unrelated payment services are subject to the safeguarding provisions of the PSRs (regulation 19 of the PSRs) as if they were authorised payment institutions.

Small EMIs that provide unrelated payment services are in the same position as small payment services providers.

Small EMIs and credit unions may choose to safeguard funds received in exchange for unrelated payment services.

Funds that need to be safeguarded for EMIs and credit unions

EMIs and credit unions must safeguard funds that have been received in exchange for e-money that has been issued (referred to as 'relevant funds').

Authorised EMIs must also separately safeguard funds received in exchange for unrelated payment services.

FCA explains: Safeguarding for payment firms

Payment firms must have plans in place to protect customer funds if the firm becomes insolvent