You’ve built the product. You’ve raised the round. Your FCA application is drafted. Then a single missing piece stops everything: no bank will give you a safeguarding account.
It’s one of the most common reasons promising e-money institutions stall before they launch. Safeguarding isn’t optional, and you can’t self-serve it. You need a third-party bank to say yes, and a lot of them say no.
This post explains what an EMI safeguarding account is, what the FCA requires now the rules changed in May 2026, why banks are so reluctant to provide them, and your options if you’re struggling to find one.
What Is an EMI Safeguarding Account?
An EMI safeguarding account is a separate, designated bank account where an e-money institution ring-fences customer funds, kept apart from its own operating money so that customers are protected if the firm fails.
Under the Electronic Money Regulations 2011 (EMRs) and the Payment Services Regulations 2017, firms must protect customer money in the event of insolvency. The FCA calls this “safeguarding”, and for authorised e-money institutions, authorised payment institutions and small e-money institutions it is mandatory and a condition of authorisation.
There are two permitted methods, and you pick one:
- Segregation. Keep relevant funds separate and, by the end of the business day after you receive them, place them in a separate account with an authorised credit institution (a bank) or the Bank of England, or invest them in secure, liquid, low-risk assets held with an authorised custodian.
- Insurance or guarantee. Cover the funds with an insurance policy or comparable guarantee from an authorised insurer or credit institution, with proceeds paid into a separate designated account if you become insolvent.
In practice, the vast majority of firms use the segregation method, and the FCA expects segregation in almost all cases. So “safeguarding account” and “segregation” usually mean the same thing.
However, the bank holding your safeguarding account cannot be in the same group as your EMI. You cannot hold your own safeguarded funds. You depend on an outside e-money institution safeguarding bank being willing to take you on — which is exactly where the difficulty begins.
And be clear what safeguarding is not: e-money isn’t covered by the Financial Services Compensation Scheme the way a bank deposit is. Safeguarding is the protection mechanism, which is why the FCA takes it so seriously.
What Does the FCA Require From a Safeguarding Account?
Since 7 May 2026, EMIs must meet a strengthened set of safeguarding rules — daily reconciliations, monthly regulatory returns, annual independent audits and maintained resolution packs — on top of holding the account itself.
The FCA’s new Supplementary Regime came into force on 7 May 2026, following consultation CP24/20 and policy statement PS25/12. If you’re reading older guidance, check the date — the bar is now higher.
The core obligations for authorised EMIs today, set out on the FCA’s safeguarding page, include:
- Daily reconciliations — internal and external safeguarding reconciliations at least once each reconciliation day.
- Monthly reporting — a safeguarding return (form REP027) submitted via My FCA within 15 business days of each month-end.
- Annual safeguarding audits by a qualified auditor, with defined submission deadlines.
- Resolution packs kept up to date so customer funds can be returned quickly if the firm fails.
- Enhanced due diligence on any third party that holds or manages relevant funds.
The reform follows HM Treasury’s 2023 Payment Services Regulations Review and the FCA’s finding of weaknesses in firms’ safeguarding practices. And it isn’t finished: a later “Post-Repeal Regime” will eventually replace the current rules with a full CASS-style statutory trust. That’s pending legislation, but it’s the direction of travel.
Why Are Banks Reluctant to Provide EMI Safeguarding Accounts?
Providing a safeguarding account means taking on heavy anti-money-laundering oversight and reputational exposure for relatively thin margin — so many banks have simply exited the market.
It surprises first-time founders. You’d expect a regulated, ring-fenced account to be easy to open. The opposite is true.
The economics mirror the wider de-risking trend we write about across high-risk banking.
A safeguarding relationship loads the host bank with monitoring and compliance obligations while the revenue rarely justifies the effort, so many banks decline EMIs as a category. Industry practitioners report that UK banks have pulled back so far that a large share of UK EMIs end up holding safeguarding accounts in other European jurisdictions.
For a founder, that means real friction. Onboarding can run to six months or more, banks may charge non-refundable due-diligence fees with no guarantee of approval, and a bank can decline or later exit with little explanation.
The strengthened regime, however, has an emphasis on diversification and third-party due diligence pushes firms toward maintaining more than one provider — which means sourcing more than one reluctant bank.
What Happens If You Can't Find a Safeguarding Provider?
Without a safeguarding arrangement you cannot complete FCA authorisation, and an authorised firm that loses its only safeguarding account cannot lawfully hold customer funds. In plain terms: no safeguarding account, no business.
Because safeguarding is a condition of authorisation, the FCA needs to see a workable arrangement before it will authorise you. A firm that can’t evidence one doesn’t get over the line. And a live EMI whose bank exits, leaving it without cover, can’t keep taking customer money until it has a replacement in place.
This is the bottleneck. It traps otherwise viable EMIs at the authorisation stage and puts operating firms at the mercy of a single banking relationship.
How to Secure an EMI Safeguarding Account Provider in the UK
Decide your method early, prepare for the scrutiny a bank will apply, and don’t rely on a single relationship — approach the search the way the banks will assess you.
A few practical moves help. Decide between segregation and insurance before you apply, since that shapes who you approach. Build a safeguarding and reconciliation process that already meets the post-2026 standard, because banks now expect to see it. P
repare the documentation any underwriter would want: clean compliance policies, clear fund flows, credible governance. And plan for diversification from day one rather than scrambling for a second provider after the first one wobbles.
The hardest part is simply finding an e-money institution safeguarding bank willing to onboard you, and knowing which providers genuinely serve EMIs in your risk profile rather than wasting months on those that never will.
Get this right early and safeguarding becomes manageable instead of the thing that sinks your application.
The Bottom Line
A safeguarding account isn’t a box-ticking detail. It’s the structural dependency that decides whether your EMI launches at all. The rules got tougher in May 2026, and willing providers remain in short supply. The firms that succeed treat safeguarding as a first-order problem and line up providers before they need them.
This is exactly what we help payment and e-money firms with at Capitalixe. Through our network of over 100 banks, EMIs and financial institutions worldwide, we connect founders with safeguarding providers that will actually take them on — and we do it on a complimentary basis.
If you’re preparing for FCA authorisation or your current arrangement is at risk, get in touch to talk through your options. You can also read more about how we support fintech and EMI clients.
FAQs
What is an EMI safeguarding account?
It’s a separate, designated bank account where an e-money institution ring-fences customer funds away from its own money, so customers are protected if the firm becomes insolvent. It’s required under the Electronic Money Regulations 2011.
Is a safeguarding account a legal requirement for an EMI?
Yes. For authorised e-money institutions it is mandatory and a condition of FCA authorisation. You cannot operate as an authorised EMI without a compliant safeguarding arrangement.
What are the two safeguarding methods?
Segregation (holding funds in a separate account with an authorised credit institution or investing them in secure, low-risk assets) and insurance or guarantee (covering funds with a policy or guarantee that pays out on insolvency). Most firms use segregation.
What changed for safeguarding in May 2026?
The FCA’s Supplementary Regime came into force on 7 May 2026, adding daily reconciliations, a monthly safeguarding return, annual independent audits, and stronger record-keeping and resolution requirements.
Why is it so hard to open an EMI safeguarding account?
Safeguarding accounts carry heavy compliance and oversight obligations for the host bank for relatively little margin, so many banks have stopped offering them to EMIs. Onboarding can take months and approval isn’t guaranteed.
Can an EMI hold its own safeguarded funds?
No. The bank providing the account cannot be in the same group as the EMI, so firms must rely on a genuinely third-party provider.
Are EMI customer funds protected by the FSCS?
Generally no. E-money is not covered by the Financial Services Compensation Scheme in the way bank deposits are. Safeguarding is the mechanism that protects customer funds instead.
What happens if my EMI loses its safeguarding account?
You cannot lawfully continue holding customer funds without a compliant arrangement, so you’d need a replacement urgently. This is why maintaining more than one provider is increasingly important.
How long does it take to get a safeguarding account?
It varies, but founders frequently report processes running six months or longer, sometimes with non-refundable fees, which is why it’s wise to start early.
How can Capitalixe help me find a safeguarding provider?
We use our network of 100+ banks and financial institutions to match EMIs with safeguarding providers suited to their risk profile, saving you the time and uncertainty of approaching unwilling banks one by one.
