Revolut, as an e-money institution (EMI), protects your money through “safeguarding”, which differs from how your money is protected by banks in the UK through the Financial Services Compensation Scheme (FSCS). It is important to know this difference and we have put together this blog on how your money is protected with Revolut through “safeguarding”, and not through FSCS.
In the UK, Revolut is not a bank but an e-money institution, authorised under the UK Electronic Money Regulations. This means, in particular, that FSCS protection does not apply to the e-money or payment services we provide.
So, how is your e-money protected at Revolut?
“Safeguarding” is a set of laws that defines how an e-money institution must protect your money. These rules are designed to ensure that if the e-money institution fails, your money will have been kept in a safe place and be paid back to you. For safeguarding to protect you, the e-money institution must follow these rules. That’s why you should only use an e-money institution that you trust.
To explain in more detail: once an e-money institution receives your money, it must either place it in a dedicated "safeguarding account" with a bank, or invest it in low risk assets that have been approved by the regulator as an alternative to cash. Sometimes, less commonly, it may protect the money with an insurance policy instead. Your money must stay in these accounts or investments until you spend it.
The protection this provides means that if an e-money institution fails, there should be a pot of money (the safeguarding account) sufficient to pay all customers the money they are owed. These safeguarding accounts are protected by law from other creditors of a failed e-money institution making a claim against them. The only thing that can be paid from these safeguarding accounts, before the customers are paid back their e-money, is the cost of the receiver (the person who’s appointed to manage the closure of a failed company).
Why is safeguarding different from the FSCS protection given by banks?
When you keep money with an e-money institution, it's safeguarded instead of having FSCS protection (sometimes called “deposit insurance”).
The main difference between FSCS protection and safeguarding is that FSCS protection is covered by an independent statutory organisation, while safeguarding protection is provided by the e-money institution itself. If a FSCS protected firm were to fail, this independent organisation is legally obliged to pay back their funds to eligible customers up to the maximum compensation amount (normally £85,000 for consumers). This will happen whether or not the FSCS protected firm actually has that money itself. This payout will normally happen within seven days.
If an e-money institution (like Revolut) fails, the customers’ claims will be paid from the safeguarding account. This is because the e-money institution cannot lend the money it has received from one person to another, so it should have enough money in its safeguarding accounts to cover its debts to its customers. Only if the institution has breached its obligations, might there not be enough money in these accounts for customers to be repaid their funds.
So, provided that it is compliant with the safeguarding laws, if an e-money institution goes out of business, customers should get most, if not all, of their money back. (Although, as explained, in some instances certain costs may be taken by the receiver of the firm.) The payout could also take longer than it would with a bank.
To be clear, the safeguarding rules only apply to your e-money. They do not apply to money you put in your Revolut Savings Vault - that money is deposited with a third party bank which holds it on your behalf and is FSCS protected. The safeguarding rules also don't apply to cryptocurrency or commodities you purchase through the Revolut app or to any stocks you buy through our app.
How can you learn more about safeguarding?
If you want to learn more about safeguarding, you should! It’s important to know how your money is protected.
Here are some resources you might find useful:
- We give a bit more detail about how we safeguard in our terms and conditions (section 8 for Retail and section 11 for Business)
- The FCA’s letter to e-money institutions is here. They’ve also included a page on their website providing a bit more information for customers
- If you're unsure of how your money with a particular company is protected, check out the FCA's “Financial Services Register”. This is a list of the companies that the FCA regulates. It tells you what type of licence each company has and how the company protects your funds.
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