How is EMI different from a traditional bank?
EMI is a financial entity managing electronic money like digital currencies and e-wallets. Unlike banks, EMIs do not use customer funds for investments or lending. Instead, they separate the customer’s money from their operational funds to ensure it is available for withdrawal whenever necessary.
What is the FCA?
The FCA is a UK regulatory body overseeing around 50,000 financial services firms, including PayDo. Their mission is to protect consumers, maintain the integrity of financial markets, and foster competition. They ensure that financial entities operate transparently and ethically.
What does safeguarding mean?
Safeguarding means your funds are kept in segregated correspondent bank accounts entirely separate from EMI’s funds, by The Electronic Money Regulations 2011 (EMR 2011) and The Payment Services Regulations 2017 (PSR 2017). This helps ensure that relevant customer funds can be handled appropriately if an EMI becomes insolvent or enters administration.
How does safeguarding work at PayDo?
PayDo bears a legal responsibility to ensure the safety of your money. Unlike traditional financial safeguards relying on The Financial Services Compensation Scheme (FSCS), PayDo employs specialised safeguarding techniques:
- We keep all the necessary funds safeguarded in accounts at UK, EEA and Swiss credit institutions.
- We make sure they’re monitored throughout the day and reconciled at least daily.
We calculate payments and fees from the previous day, along with all types of transactions, both inside and outside our system. Our finance team watches the movement of money throughout the day. They then double-check everything to ensure the safeguarding accounts’ amounts match precisely what we’re holding for our customers. This ensures that everything is in order and your money is secure.
Where are your funds stored?
PayDo places your funds in a segregated account, a safeguarding history. These accounts are named so they will not hold only your protected funds. Then, our system deposits the relevant funds in a designated separate account held with our chosen authorised credit institution.
PayDo exercises due skill, care, and diligence in handling financial matters. A periodic review of the chosen authorised credit institution is conducted at least once a year. Additional reviews are carried out if anything affecting the appointment decision has materially changed. This approach ensures that funds are managed with precision and attention to detail.
Safeguarding and FSCS
At PayDo, one of the key missions is for our clients to understand the nature and extent of the financial security we offer. You might be familiar with the Financial Services Compensation Scheme (FSCS), a UK-based insurance for bank deposits. However, it’s crucial to note that FSCS protection does not apply to funds held by EMIs like PayDo.
Why no FSCS protection?
Banks have the liberty to invest or lend the funds deposited by their clients. In the unfortunate event of a bank failure, there might not be enough money to pay back the clients, which is where FSCS steps in. The scheme compensates up to £85,000 per individual in such cases.
How is PayDo different?
Unlike banks, EMIs are not allowed to lend client funds. Therefore, we are not required to participate in the FSCS. Instead, PayDo adheres to stringent safeguarding requirements laid down by regulatory authorities. Your funds are separated from PayDo’s operational money and are stored in a safeguarding account with an authorized bank.
What does this mean for you?
The funds PayDo is required to safeguard are identified and reconciled on a daily basis and kept separate from PayDo’s own operational funds. Safeguarding is designed to help protect relevant customer funds if an EMI fails, although it is different from FSCS deposit protection and the return of funds may be subject to the applicable insolvency and safeguarding process. This means your funds are handled in line with applicable safeguarding requirements and with appropriate care and due diligence.
What if PayDo becomes insolvent?
In the unlikely event that PayDo becomes insolvent or enters administration, a special insolvency process may apply.
PayDo would activate its customer communication process to keep clients informed of relevant insolvency-related updates and any steps they may need to take.
Because safeguarded customer funds are kept separate from PayDo’s own funds, they should not form part of PayDo’s general assets available to ordinary creditors. Any return of safeguarded funds would be handled through the applicable legal and insolvency process, with the aim of returning funds to customers as soon as reasonably practicable.
For further clarification, please contact us at support@paydo.com.