Safeguarding (payment and e-money firms)
Safeguarding, for payment and e-money firms, means protecting customer funds so they can be returned if the firm fails. Firms either segregate the funds from their own money or cover them with insurance or a guarantee.
This page explains the rules in general terms and is not legal or regulatory advice. Check the primary source and take advice on how the rules apply to your firm.
UK: Payment Services Regulations 2017 (regulation 23), Electronic Money Regulations 2011 and FCA CASS 15, in force from 7 May 2026. Canada: Retail Payment Activities Act safeguarding duties apply from 8 September 2025.
How it works
In the UK, the Payment Services Regulations 2017 and Electronic Money Regulations 2011 set the duty. Funds still held at the end of the business day after receipt must go into a separate account. That account must sit with an authorised credit institution or the Bank of England. Alternatively, the funds can be invested in approved secure, liquid assets.
Firms can instead cover relevant funds with an insurance policy or comparable guarantee. The FCA's CASS 15 rules added daily reconciliations, monthly reporting and annual audits from 7 May 2026. The FCA cited an average 65% shortfall in client funds at payment firms that failed between 2018 and 2023.
Canada now imposes a similar duty under the Retail Payment Activities Act. Providers holding end-user funds must use a trust account, a prescribed arrangement, or a dedicated account with insurance or a guarantee. Common pitfalls include commingling, late segregation and treating safeguarded money as working capital.
Example
Illustrative example: A UK payment institution receives £5,000,000 from customers on Monday. By close of business on Tuesday, £3,000,000 has been paid out. The remaining £2,000,000 must by then sit in a designated safeguarding account or approved assets. The firm's safeguarding requirement for that point is £2,000,000.
Frequently asked questions
Which safeguarding method should we choose?
Most firms segregate, using designated accounts and approved secure, liquid assets. Insurance or a guarantee avoids moving funds, but under CASS 15 payout cannot depend on anything beyond certification of insolvency. Firms must also decide on renewal at least three months before expiry.
Does CASS 15 cover every payment we process?
No. It covers payment services and e-money within the UK regulations' scope. Out-of-scope funds need not be safeguarded but must be kept apart from relevant funds. Services provided to both payer and payee from outside the UK are excluded.
Related terms
Sources
- The Payment Services Regulations 2017, regulation 23 (Safeguarding requirements) · legislation.gov.uk (The National Archives)
- CASS 15.1 Purpose and application · FCA Handbook
- PS25/12: Changes to the safeguarding regime for payments and e-money firms · Financial Conduct Authority
- Retail Payment Activities Act, sections 17 to 29 · Justice Laws Website, Government of Canada
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