1. Overview
Q1. What is safeguarding?
Safeguarding is a means protecting customer and merchant funds that we hold in connection with our electronic money and payment services. These funds must be kept separate from Paynetics' own money and held in specially designated safeguarded accounts.
Q2. Why do we safeguard funds?
Safeguarding ensures that if we were ever to stop trading or become insolvent, customers and merchants would have their safeguarded funds returned to them. It’s a legal requirement under the Electronic Money Regulations 2011 (EMRs) and the Payment Services Regulations 2017 (PSRs).
Q3. Whose money is safeguarded?
We safeguard:
Issuing activity: funds received from customers who load or hold e-money (e.g. cards or digital accounts).
Acquiring activity: funds received from card transactions before they are settled to merchants.
2. How Safeguarding Works
Q4. How is safeguarding applied for issuing?
When customers load funds or hold an e-money balance, those funds are placed into dedicated safeguarded accounts at a designated account with a regulated bank. These accounts are separate from Paynetics’ accounts used for operational purposes.
Q5. How is safeguarding applied for acquiring?
When merchants receive payments via card transactions, those funds are safeguarded from the time we receive them until they are paid out to the merchant’s designated account.
Q6. Are issuing and acquiring funds safeguarded together?
No. Separate safeguarding arrangements are maintained for issuing and acquiring activities to ensure accuracy and compliance with regulatory requirements.
Q7. When must safeguarding occur?
All relevant funds must be safeguarded by the end of the business day following the day of receipt (D+1).
3. What Customers and Merchants Should Know
Q8. How can we explain safeguarding to customers or merchants?
You can say:
“Your money is protected through a process called safeguarding. This means your funds are kept separate from Paynetics’ own money in special accounts held with reputable financial institutions. If Paynetics were ever to stop trading, these funds would be returned to you, less any permitted costs of the insolvency process.”
Q9. Are safeguarded funds covered by the Financial Services Compensation Scheme (FSCS)?
No. Safeguarding is a separate form of protection. Funds are kept ring-fenced but are not covered by the FSCS or any government compensation scheme.
Q10. Where are safeguarded funds kept?
Safeguarded funds are held with a regulated bank within the UK, selected by Paynetics. We do not publicly disclose account details for security reasons..
Q11. What happens to funds if Paynetics goes into administration?
An independent insolvency practitioner would identify and return safeguarded funds to customers and merchants, after deducting any permitted insolvency-related costs.
4. Roles and Responsibilities
Q12. Who is responsible for safeguarding?
Paynetics is ultimately responsible for safeguarding. Partners and distributors must follow the agreed operational procedures to ensure all customer or merchant funds reach safeguarded accounts in the required timeframe.
Q13. What are partners expected to do?
Partners must:
Follow agreed settlement and fund flow processes.
Ensure customer/merchant communications are accurate and consistent.
Escalate any safeguarding-related queries or complaints to Paynetics promptly.
Q14. What are partners not allowed to do?
Partners must not:
Open or operate safeguarding accounts.
Change settlement instructions or timelines outside of agreed processes.
Provide detailed information about safeguarding banks or processes without Paynetics’ approval.
5. Common Misunderstandings
Q15. Does safeguarding guarantee that all funds will be recovered?
Safeguarding provides strong protection but not a full guarantee. In the unlikely event of insolvency, there may be permitted deductions (e.g. insolvency costs) before funds are returned.
Q16. Do customers earn interest on safeguarded funds?
No. Safeguarded funds are held solely for protection purposes, not for generating interest or investment income.
Q17. Can safeguarded funds ever be used for business operations or lending?
No. These funds are completely ring-fenced and cannot be accessed or used by Paynetics.
6. Staff and Partner Conduct
Q18. What should I do if a customer or merchant asks a safeguarding question I’m unsure about?
Do not guess. Politely explain that you’ll refer the question to the compliance or finance team for an accurate response.
Q19. What should I do if I suspect safeguarding procedures have not been followed correctly?
Immediately escalate this to the Head of Finance. Partners should report issues to their account managet.
7. Approved Staff/Partner Script (Optional Use)
For quick customer or merchant queries, you may use the following approved wording:
“Paynetics is an electronic money institution, required by law to safeguard customer and merchant funds. This means your money is kept separate from their own funds in in dedicated safeguarding accounts with a reputable bank. These funds are not covered by the Financial Services Compensation Scheme, but they are protected through safeguarding in line with FCA regulation.