Safeguarding
Safeguarding is the regulatory obligation on EMIs and payment institutions to protect customer funds by holding them separately from the firm’s own money, typically in a segregated account at a credit institution or covered by an insurance arrangement, so customers are repaid if the firm fails.
Safeguarding failures are among the most common reasons a regulator restricts or withdraws a payments licence, and a safeguarding account is itself a banking relationship that has to be placed and kept. A payments firm that loses its safeguarding bank can be forced to stop taking customer funds within days.
A segregated account holds client funds separately from a firm’s own operating capital, so client money is never at risk if the firm becomes insolvent.
An Electronic Money Institution is a regulated entity, licensed separately from a bank, authorized to issue e-money and provide payment accounts and services.
An EMI licence is the authorisation a regulator grants a firm to operate as an Electronic Money Institution: issuing e-money and providing payment accounts and services.
A Payment Institution is a firm licensed to provide payment services, such as executing transfers, acquiring transactions, or issuing payment instruments, without issuing e-money.