Safeguarding Requirements

for UK Payment & E-Money Institutions

Authorised Institutions

Authorised Payment Institutions (APIs) and Electronic Money Institutions (EMIs) in the UK have a mandatory obligation to safeguard customer funds to ensure they are protected in case of firm insolvency.

Authorised Payment Institutions (APIs)

• Legal Basis: Payment Services Regulations 2017 (PSRs), regulation 23.
• Key Practices: Segregation of relevant funds, protection from other creditors’ claims, appropriate systems and controls, and ensuring funds are available to customers upon insolvency.

Electronic Money Institutions (EMIs)

• Legal Basis: Electronic Money Regulations 2011 (EMRs), regulation 20.
• Key Practices: Must keep safeguarded funds separate from their own, either through segregation or insurance/guarantees. Similar controls and reporting as APIs.

Small Institutions

Safeguarding is voluntary for Small Payment Institutions (SPIs) and Small EMIs. They can choose to “opt-in” to the requirements.

• Opt-in Process: Must declare their intention to safeguard during registration and in annual returns.
• Opted-in Status: If a small institution opts in, it is subject to the same safeguarding standards as its authorised counterparts.
• Non-Opting: If a small institution does not opt-in, it has no formal safeguarding obligations unless it issues e-money or offers unrelated payment services.

Recent Regulatory Developments

The Financial Conduct Authority (FCA) is implementing new rules to strengthen the safeguarding regime.

FCA Interim Rules (effective May 2026)

• Daily Reconciliations: Firms must perform daily checks on all relevant funds.
• Resolution Pack: A “resolution pack” with key records is now mandated to ensure a quick return of funds during insolvency.
• Enhanced Due Diligence: Stricter checks are required for third parties involved in safeguarding.
• Monthly Returns & Audits: New monthly reporting and annual safeguarding audits by a qualified auditor.

End-State Rules

The FCA plans to eventually move to a statutory trust structure for safeguarded funds, providing even greater protection for consumers.

Key Takeaways

• Purpose: Safeguarding is designed to protect customer funds and ensure their rapid return if a firm fails.
• Scope: It is mandatory for authorised institutions but optional for small institutions.
• Recent Changes: The new FCA rules focus on enhanced reporting, monitoring, and a future move towards a statutory trust structure.