What is safeguarding? How customer money is protected in money apps
By SendPay Business · · 2 min read
Safeguarding is the rule that e-money and payment firms must keep their customers' money separate from their own. In the UK, it's how money in most money apps is protected, rather than through the deposit protection scheme that covers banks.
How it works
- The firm puts customers' money in a separate safeguarding account at a bank, or invests it in approved safe assets.
- Or it takes out insurance or a guarantee that covers the same amount.
- It checks every day that what it holds matches what it owes customers.
What happens if a firm fails
Because safeguarded money isn't the firm's own, it shouldn't be used to pay the firm's other debts. An administrator returns it to customers, though the costs of doing so can be taken first and it can take time.
Safeguarding vs deposit protection
Money in a UK bank is covered by the Financial Services Compensation Scheme up to its limit, which pays out if the bank fails. Money in an e-money account is safeguarded instead. Both protect customers, in different ways, and every money app should say which applies.
What it means if you launch a money app
If your app holds customer money, it has to be safeguarded, either by your own licensed firm or by a licensed partner. SendPay platforms are powered by licensed partners, and SendPay tells you in writing which licences apply to your platform before you pay.
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Build my platform →Questions people ask
What's the difference between an e-money firm and a bank?
The guide explains licences, protection and what each can do.
E-money institution vs bank →Which licences might I need?
The registration guide covers the main UK routes.
FCA and HMRC registration guide →Read next
This guide is general information, not legal or financial advice. SendPay Business is a technology company, not a bank, and does not take deposits; regulated services on the platforms are provided by licensed partners. PayPal, Patreon and Substack are named as reference points only and are not affiliated with SendPay Business.