Banking
Safeguarded funds
Also known as safeguarding
Safeguarded funds are customer balances held by an e-money or payment institution which, under its licence, must be segregated in an account at a credit institution or covered by insurance rather than lent out. They are protected by segregation, not by a deposit guarantee scheme.
In plain terms: Your money at a fintech is ring-fenced rather than insured.
Why it matters
Segregation is a genuine protection and better than nothing. But on the provider's insolvency the pool is distributed through an administration, after the administrator's costs, which historically takes months rather than the days a deposit guarantee scheme takes.
Common misunderstanding
Keeping an entire operating balance with one such provider. The concentration risk is not the provider's solvency so much as the loss of access — a compliance review or a de-risking decision can freeze the balance with no insolvency involved.
Read the full guideDeposit protection and bail-in