E-money accounts do not afford the same protection to customers as bank accounts. The Financial Conduct Authority is concerned that e-money firms do not make adequate disclosures concerning the protection available to their customers. The FCA has sent a Dear CEO Letter to e-money firms asking them to write to their customers by 29 June 2021 to make it clear how their money is protected. The FCA considers that this is a matter of Board-level importance for e-money firms.
Customers must be reminded that their money is protected through safeguarding arrangements, and that Financial Services Compensation Scheme (FSCS) protection does not apply. E-money firms are also required to review their financial promotions against relevant regulatory requirements to check that they are accurate, do not emphasise any potential benefits without also giving a fair and prominent indication of any risks, and provide sufficient information. If any promotion names the FCA as regulator but refers to matters that are not FCA-regulated, the promotion must make it clear that those matters are not FCA-regulated.
The FCA previously wrote to e-money firms (and payment services firms) in July 2020 concerning related matters: see Portfolio strategy letter; and Finalised Guidance regarding safeguarding. The FCA will check implementation of the latest requirements across a sample of firms.
We are concerned that many e-money firms compare their services to traditional bank accounts or hold themselves out as an alternative in their financial promotions, but do not adequately disclose the differences in protections between e-money accounts and bank accounts.