Safeguarding Accounts

Introduction

Electronic Money Institutions (EMIs) and Payment Institutions (PIs) collect and hold customer funds in exchange for providing payment services and for the issuance of e-money to their customers. The funds collected should always be protected in the event of insolvency or operational failure of those institutions.

To comply with regulatory requirements, EMIs and PIs are legally required to have safeguarding accounts to keep customers’ funds separate from their own operational funds.

What is a safeguarding account?

A safeguarding account is an account managed and controlled by the EMI or PI for the purpose of segregating and safeguarding the funds they collect from their customers from their own operational funds. The primary purpose of this account is to protect customer funds in the event of insolvency or operational failure of the institution. This segregation ensures that even if the EMI or PSP were to go bankrupt, customers' money would be safeguarded and would not become part of the institution's assets that creditors can claim.

It is considered a safety net in case of disaster, but it also gives confidence to your customers that their money cannot be lost or taken by a third party.

Who needs a safeguarding account?

If you're an EMI or PI, you're required to have a safeguarding account to keep your clients' funds received for the provision of a payment service or the issuance of e-money safe and segregated from your own funds.

For example, EMIs and credit unions must safeguard funds that have been received in exchange for e-money that has been issued, i.e., for every e-money issued, its equivalent of fiat money must be safeguarded.

Product overview

Solaris Safeguarding Accounts allow you to comply with regulatory requirements with a simple onboarding process and a few endpoints that help you keep your customers' funds segregated and secure.

Key features

As the EMI or the PI, you'll open the safeguarding account with Solaris and will be the owner of the account (i.e., the account holder). Solaris will have no direct contact with your end customers nor can you send and/or receive money from the accounts of your end customers to the safeguarding account.
As the account holder, the EMI or PI will be the contractual party and must successfully go through the business onboarding process.
After successful onboarding, the EMI or PI will have control over the safeguarding account and will be responsible for the daily reconciliation of funds from their operational accounts to the safeguarding account.
The safeguarding account will be tied to one other external reference account (which should be another safeguarding account with another bank) owned by the EMI or the PI.
Pay-ins and pay-outs will be restricted to this reference account.
A safeguarding account is a non-bearing interest account.

Prerequisites

To open a safeguarding account, you need the following prerequisites:

Your business must successfully go through the business onboarding process. The business' legal entity as well as the natural persons associated with the business (such as legal representatives and beneficial owners) must be identified. For more information, please see the BKYC guide.
You must have one other external safeguarding account, which will be added as the reference account for your safeguarding account with Solaris.
Integrate the relevant endpoints and webhook events to manage your safeguarding account and execute transfers to and from your reference account.

Money flow

EMIs or PIs must reconcile funds on a daily basis from their end customers accounts. For example, by the end of no later than one business day after the initial transfer of the funds, the money available on customer balances must be transferred to a safeguarding account. The collective balance of customer accounts and the balance in the safeguarding account must always match.

Solaris Safeguarding Accounts - Money flow

The following diagrams give an overview of how the money flow works with a Solaris Safeguarding account:

Incoming funds - Money flow

Diagram: Incoming funds money flow

Outgoing funds - Money flow

Diagram: Outgoing funds money flow

Relevant APIs

After the EMI or PI successfully passes the business onboarding flow, the safeguarding account will be opened in its name and shared with the partner.

As the partner, the EMI or PI will have to integrate the following APIs to be able to manage the account and execute pay-ins and pay-outs to and from the reference account: