The Electronic Money Regulations 2011 define e-money as electronically stored value, issued when money is paid in, used to make payments and accepted by people other than the issuer. The FCA says e-money is usually held in an online account or wallet. It can also sit on a prepaid card. Some payment and business account providers are EMIs rather than banks. The FCA’s Financial Services Register shows which.

How it differs from a bank

• Money held with an EMI is not protected by the Financial Services Compensation Scheme. Bank deposits are, up to £120,000 per eligible person per authorised firm since 1 December 2025.

• Instead, the EMI must safeguard customers’ funds. It either covers them with insurance or a guarantee, or keeps them separate from its own money and, if it still holds them at the end of the next business day, puts them in a separate account at a bank or the Bank of England or invests them in secure low-risk assets.

• It cannot pay interest on e-money and must give the money back at face value whenever the customer asks.

• If it fails, customers are paid from the safeguarded funds ahead of other creditors, but the FCA warns this can take time and that the administrator’s costs may reduce what comes back.

Changes in 2026

Since 7 May 2026, FCA rules have required payment and e-money firms to check daily that the right amount is safeguarded, report monthly and, if they safeguard more than £100,000 of customer funds, have an annual audit. The FCA said payment firms that failed between early 2018 and mid-2023 had an average shortfall of 65% of customer funds.

Worth knowing

Safeguarding protects money if the EMI fails. It is different from the protection a package organiser must give its own customers against the organiser’s insolvency, such as ATOL, a bond or a trust account.