E-money and prepaid accounts – why doesn’t FSCS protect my money?
E-money (electronic money) isn’t something FSCS protects – read on to find out why and how to check your money is safe.
On 26 June 2020, the Financial Conduct Authority (FCA) suspended e-money provider Wirecard from operating after problems were reported with its German parent company, Wirecard AG. The FCA has now lifted its suspension and Wirecard can issue e-money and provide payment services again.
What is e-money?
E-money (including prepaid cards and accounts) is money that's stored in electronic form which can be used to make payments - a well-known example is PayPal.
Companies that offer e-money, including some who used Wirecard's services, can offer many of the same features as a traditional high-street bank or building society, or one of the newer app-based banks. You might get a card from them to make payments or set up direct debits to pay bills with an account number and sort code.
Some people choose to use a prepaid account or card to help them budget, or because they haven't been able to get an account with a bank, building society or credit union.
There is protection in place for e-money, including rules on how customers’ money should be protected. These requirements are known as ‘safeguarding’. E-money firms must be regulated by the FCA, whose Wirecard article gives more details.
Why doesn’t FSCS protect e-money?
FSCS protects deposits you pay into a bank, building society or credit union. A deposit is classed as money that’s placed in a bank, building society or credit union in current and savings and accounts, cash mini ISAs and some types of saving bonds.
E-money is considered a method of payment, like cash or currency, and not a deposit that a bank, building society or credit union holds. This means it falls outside our remit and we can’t protect it.
If your bank, building society or credit union fails, we will return your money up to our £85,000 per person compensation limit, usually within seven days.
How can I check if my money is safe?
Our protection checker tool will tell you if we can protect your deposits. Simply enter the name of the bank, building society or credit union where your money is held and how much money is in your account. We’ll then tell you if we can protect your money and, if so, how much.
Something else to look out for is a statement on a company's website or in its paperwork that says something like: "This is a prepaid account, not a bank. Prepaid accounts are not covered by the Financial Services Compensation Scheme."
As well as deposits, FSCS protects many other financial products, including insurance policies, pensions, mortgages and investments. See what else we protect.