How customer funds are protected (UK)
How does it work?
When you load funds into your Nium Account, these funds go directly into a Nium owned client funds account, and Nium issues the equivalent value of electronic money (also known as e-money) to their Nium Account. E-money is electronically stored monetary value (cash). Nium protects your money through safeguarding, meaning when Nium receives your money, it will place it in a safeguarding account with a bank and it will stay in that account until you spend or withdraw it.
How is Nium different from a bank when it comes to protecting your money?
In terms of protection, a customer’s deposits with a bank, building society or credit union (“financial services firm”) are protected under the Financial Services Compensation Scheme (FSCS). The FSCS is an independent fund that exists to protect eligible customers of financial service firm that have failed up to a certain limit (usually £85,000 for eligible customers or up to £170,000 for joint accounts).
Whereas, money held in with Nium in an e-money account is not protected under the FSCS. Instead, e-money institutions (like Nium) are required to ‘safeguard’ relevant funds using one of the methods allowed by the law – segregation (also called safeguarding) or under an insurance policy/guarantee, and there is no limit on the funds that will be protected. As described above, Nium has chosen to safeguard your money.
What happens to your money if Nium go out of business?
In the unlikely event that Nium goes out of business whilst it is in possession of your money, an insolvency practitioner (or someone similar) would be appointed to return your funds to you from the safeguarding account. This means you would get your money back, although some costs may be deducted by the insolvency practitioner (or someone similar) for distributing the money back to you.
Please also note that due to e-money institution insolvency (or similar) procedures, it may take longer (as compared to an FSCS claim) for your money to be returned to you.
For more information about using a non-bank payment service provider, you can visit the FCA website.
If you have any questions, please reach out to us at [email protected].