How safeguarding works
EU law gives an institution two methods (PSD2, Article 10). They apply to funds received from customers, or through another provider, for payment transactions, and to funds received in exchange for e-money.
- Segregation: customer funds are never mixed with anyone else's money, the institution's included.
- Funds still held at the end of the business day after receipt go into a separate account at a credit institution or central bank, or into secure, liquid, low-risk assets.
- Segregated funds are insulated from the institution's other creditors, in particular in an insolvency.
- Insurance or guarantee: cover for the same amount from an insurer or credit institution outside the institution's group.
When funds must be safeguarded
The ban on mixing funds applies at all times, and the separate account from the end of the next business day. E-money bought with a card or another payment instrument is safeguarded once the funds reach the institution, and no later than five business days after the e-money is issued (E-Money Directive, Article 7).
The duty belongs to the institution that holds the licence. For a company with its own licence, safeguarding shapes three things early: a bank willing to hold the accounts, a ledger that shows what each customer is owed, and reconciliation of that ledger against the bank's statements.
Safeguarding in the UK since 7 May 2026
The UK's Payment Services Regulations 2017 and Electronic Money Regulations 2011 require safeguarding by the same two methods, which the FCA calls the segregation method and the insurance or guarantee method. Since 7 May 2026 the FCA's rules in CASS 15, made in policy statement PS25/12, supplement them.
- An internal safeguarding reconciliation at least once each reconciliation day (CASS 15.8.19R).
- Due diligence on the banks and other third parties that hold the funds.
- Conditions an insurance policy or guarantee has to meet.
- A yearly safeguarding audit and a monthly safeguarding return to the FCA.
What is changing
In the UK the FCA consulted on a further stage that would hold the funds on a statutory trust. PS25/12 says that stage will not be implemented without further consideration and consultation, so only CASS 15 is in force.
In the EU a third Payment Services Directive (PSD3) is agreed but not adopted. The agreed text keeps both methods, would have funds received for e-money safeguarded by the end of the next business day, and asks institutions to avoid keeping all customer funds at one credit institution.
Safeguarding or deposit protection?
- Deposit protection
- A guarantee scheme repays a failed bank's depositors up to a fixed limit. E-money is not a deposit (E-Money Directive, Article 6), and the FCA states that the FSCS does not cover cases where the payments firm itself fails.
- Capital
- The institution's own money, held as a buffer. Safeguarded funds are the customers' money, kept apart from it.
- Safeguarding account
- One tool of the segregation method, not the whole duty. Records, reconciliations and due diligence on the bank are part of it too.
Where safeguarding shows up in a platform
Modules that do the work
- LedgerThe double-entry book of record behind every balance, fee and transfer.
- Accounts & IBANsCustomer accounts with their own IBANs, on the partner bank and the rails you choose.
- Compliance reportingTransaction monitoring, the Travel Rule and regulatory reports, ready for your regulator.
Platforms that need it
Guides that go deeper
- How to launch a neobank without a banking licenceYour own e-money licence, an EMI's agent, a partner bank or a bank licence: how each route works, who holds the money, and what safeguarding and deposit protection cover.
- EMI or payment institution licence in the UK, or launch under a partnerE-money or payments, authorised or small: what the FCA asks for in capital, safeguarding and people, how long it takes, and when an agent or banking partner is the faster route.
- EMI or payment institution licence in the EU, and the agent routeWhat an e-money institution and a payment institution may do in the EU, the capital each needs, safeguarding, passporting, and launching as an agent first.
Where it is written
The laws and standards this page's facts come from.
- Directive (EU) 2015/2366, PSD2, consolidated: Article 10 (EUR-Lex)
- Directive 2009/110/EC, the E-Money Directive, consolidated: Article 7 (EUR-Lex)
- FCA Handbook, CASS 15: payment services and electronic money, relevant funds
- FCA, PS25/12: changes to the safeguarding regime for payments and e-money firms
- PSD3, text agreed in negotiations, 5 May 2026 (European Parliament)
General information, not legal advice: what applies to you depends on your services and your market.