E-money / Modulr Information
Goji Financial Services Limited (Firm Reference Number: 902759) is a registered EMD agent of Modulr FS Limited, a company registered in England and Wales with company number 09897919, which is authorised and regulated by the Financial Conduct Authority as an Electronic Money Institution (Firm Reference Number: 900573) for the issuance of electronic money and payment services.
Your e-money account and related payment services are provided by Modulr FS Limited. Whilst Electronic Money products are not covered by the Financial Services Compensation Scheme (FSCS) your funds will be held in one or more segregated accounts and safeguarded in line with the Electronic Money Regulations 2011 – for more information please see the UK Safeguarding Explanation below.
Further information on the European safeguards in place is provided further down this page.
A message from Modulr: How we keep customer funds safe
At Modulr, we work hard to ensure that all our customer communications are clear and we’re committed to playing our part in increasing standards across the industry. So, we welcome the chance to offer further clarity around the differences in protections between our services and traditional banking, and answer some frequently asked questions.
Who is Modulr?
Modulr is the embedded payments platform for digital businesses that need a faster, easier and more reliable way to move money. We provide the digital infrastructure that enables our customers and partners to embed payment and account functionality directly into their platforms, workflows and customer experiences.
Is Modulr a bank?
Modulr is not a bank, we’re an E-money Institution (“EMI”).
An EMI is an organisation that has been authorised by the regulator to issue e-money accounts and provide related payment services. In the UK, we're authorised and regulated by the Financial Conduct Authority (FCA) and in the EU we're regulated by De Nederlandsche Bank. Our payment accounts come with sort codes or Euro IBANs, access to payment schemes and everything you would expect, but all in a faster, easier and more reliable way.
How is Modulr different from a bank?
One of the main differences between Modulr, an EMI, and a bank is that banks lend money, whereas EMIs are prohibited from lending money. Specifically, banks receive deposits from customers that they use to lend money out and make a profit on the difference . By contrast, an EMI such as Modulr holds 100% of client funds at all times, does not lend any customer funds or offer interest on balances.
Our payment services however are regulated by the same payments regulations that apply to banks.
How does Modulr protect customer funds?
Modulr is required by law to use a process called Safeguarding to protect customer money. This means we ensure that 100% of the funds we receive in exchange for e-money are safeguarded on receipt, meaning that these are segregated from all other funds that we hold and they cannot be used for any other purposes. This is completely separate from the additional funds that Modulr holds to meet its corporate obligations and run its business. 100% of the funds we safeguard must be held in specially designated client accounts at credit institutions (banks) or the Bank of England (see ‘Where is my money safeguarded?’ below).
Furthermore, as an EMI, we must also hold an additional 2% of the total value of safeguarded client funds in our own funds, which are held separately to those client funds. The purpose of the additional 2% funds is to ensure that, in the case of any problems with our business, there are enough funds to support an orderly business wind-down and the process of returning of client funds . Combining this ‘2%’ requirement with the safeguarding means that customer funds are 100% available to a customer, and there is a protection mechanism to help ensure an orderly wind down if ever required.
So, while the Financial Services Compensation Scheme (“FSCS”) is not applicable to e-money, the regulatory requirements outlined above can be relied upon instead and protects the balance of customer funds, as opposed to only compensating up to a limit as is the case with the FSCS
What is the FSCS and is it applicable to Modulr?
The FSCS offers consumers protection of their bank deposits up to £85,000 maximum, or £170,000 for a joint account, in the event of a bank failure. The FSCS scheme only applies to banks, and therefore is not relevant to an EMI such as Modulr. However, as mentioned, Safeguarding means that 100% of customer money at Modulr, regardless of the amount, is segregated from all other funds that we hold and cannot be used for any other purpose.
What would happen in the unlikely event of Modulr’s insolvency?
In addition to the safeguarding and further ‘2%’ requirements we’re also required to prepare orderly wind down planning. These plans include the early identification of a potential insolvency event and the return of your funds before an insolvency process if possible. We have to provide these plans to the FCA and they are subject to external audit review. This further reduces the unlikely event of your funds having to be returned during our insolvency. In the unlikely event that Modulr becomes insolvent, your funds are separate from the funds of Modulr and therefore the creditors of Modulr (other third parties that are owed money from Modulr) are not able to make a claim or have effect on your funds.
An independent insolvency professional (referred to as an ‘insolvency practitioner’) will be appointed to return your funds to you. However, where an insolvency practitioner is unable to take their costs of sending the funds to you from elsewhere (for example, the general pot of Modulr funds remaining or from the additional 2% own funds described above) they are entitled to take their costs from your funds. In this unlikely circumstance, while you’ll likely receive most of your funds you may not receive the total value if costs are deducted. The process of returning your funds by an insolvency practitioner is likely to take longer than if you were making a claim in the FSCS.
Where is money safeguarded?
Modulr must deposit 100% of the value if all the e-money it has issued to customers at a credit institution (banks) or the Bank of England. Modulr uses a range of clearing banks for different services but, with our direct access to Faster Payments and Bacs, Modulr is one of a few non-bank Payment Service Providers to hold funds associated with GBP domestic flows directly at the Bank of England. Our safeguarding processes are subject to independent yearly external audit, providing further confidence that we adhere to the regulations required for safeguarding.
Who regulates Modulr in the UK?
Modulr FS Ltd (FRN: 900573) is licensed as an authorised E-Money Institution (“EMI”) and regulated by the Financial Conduct Authority (“FCA”). This enables Modulr to issue e-money to its customers, hold customer funds in safeguarded accounts and provide related payment services to customers. Modulr Finance Limited (FRN: 900699) is registered with the Financial Conduct Authority as an EMD Agent of Modulr FS Limited.
Payment services in the UK are subject to the Payment Services Regulations (“PSRs”). The PSRs apply to all payment services, meaning in relation to payment services, there is no difference in how Modulr and other payment service providers and banks are regulated.
Who regulates Modulr in the EU?
Modulr Finance B.V. is licensed and regulated by De Nederlandsche Bank (Relatienummer R182870) as an Electronic Money Institution.
How we keep your money safe
We think it’s important that you understand how we protect your money when you send it to Modulr Finance B.V. (“Modulr”) and we work closely with industry partners and our regulators to make sure this message is communicated clearly.
Our Dutch regulator, De Nederlandsche Bank (“DNB”), also shares our view that the safeguarding of customer funds is a key priority. While we set this out in our terms and conditions with you, this note provides more detail on how we achieve that protection.
Modulr is an Electronic Money Institution (“EMI”) and is licensed and regulated by De Nederlandsche Bank (“DNB”). This means Modulr is allowed to do certain things which include issuing electronic money (e-money) to clients, holding client funds and providing payment services to clients.
Like all EMIs registered in the Netherlands, Modulr falls under the supervision of the De Nederlandsche Bank (“DNB”) and the Dutch Authority for the Financial Markets (“De Autoriteit Financiële Markten” - “AFM”). DNB is responsible for issuing authorisations and exercising prudential supervision of EMIs. The AFM is responsible for supervision of market conduct. Combined they regulate the supervision of the Financial Supervision Act (“Wet op het financieel toezicht” - “Wft”). It is worth noting that all payment services within the Netherlands are subject to Wft. This means there are great similarities in how payment services are regulated at Modulr and banks. As an EMI, Modulr protects your money through “safeguarding” and this is different to how your money is protected by Credit Institutions (banks). We believe it is important for customers to understand this difference, so we will explain safeguarding below.
How Modulr protects your money
We hold 100% of your funds separately from Modulr’s own funds and in an account at a bank. The account is clearly identifiable as being for our clients. This means that any money you send to your Modulr account is held separately from Modulr’s money and we must put it into an account held with a bank where it is labelled as being specifically for our clients. These bank accounts are held by a separate legal entity, a ‘stichting’ which is similar to a foundation, that has the sole purpose of holding the funds in accordance with the Segregation Structure prescribed by DNB and referred to as stichting derdengelden (named “Stichting Custodian Modulr Finance” ). The Modulr Stichting is an independent custodian that holds the bank accounts according to Dutch law. The rules concerning how we protect your money in this way are referred to as ‘safeguarding’. We safeguard your money through the use of one A rated bank, with both of these being authorised and regulated in their own right. In the unlikely event that Modulr ceases trading, the safeguarding account is protected from other creditors making a claim against Modulr. In this scenario, you would get the majority of your money back, except for costs deducted by an insolvency professional (see below) for distributing the money to you, which will only be deducted from the safeguarded balances if there are no funds available from Modulr itself.
In what way is safeguarding different from the protection given by Credit Institutions (or banks)?
Credit Institutions (banks) protect your money through the Deposit Guarantee Scheme (“DGS”) (“depositogarantiestelsel”, “DGS”) in The Netherlands, which protects customer money up to a limited amount. This scheme is administered by DNB and if a DGS-protected firm ceases trading, the DGS will pay back eligible customers up to a maximum compensation amount. This happens regardless of whether the DGS-protected firm actually has that money. If Modulr ceases trading, our customers’ claims will be paid from the safeguarding account. As Modulr cannot use this protected money, there will be enough in the safeguarding account at all times to cover all customer balances, subject to insolvency practitioner costs. As an EMI, we’re not allowed to lend your money or make any investments with it. The pay-out may take longer than it would with the DGS.
Further funds an EMI must hold
To reduce risk further, an EMI is also required to hold additional ‘own funds’ to the value of 2% of all client money that it holds and has a responsibility to notify the DNB if funds fall below this level. This money is held separately, over and above your money that we hold. The primary purpose of these additional 2% own funds is to ensure that, in the case of any financial issue with an EMI, there’s enough money to support an orderly business winddown and the return of funds to clients. The DNB can also intervene in the running of an EMI, if it has concerns around their financial stability, in order to ensure your money is protected. This can include requiring the EMI to hold more additional ‘own funds’ Insolvency In addition to the safeguarding and further ‘capital’ requirements we’re also required to prepare orderly wind down planning. These plans include the early identification of a potential insolvency event and the return of your funds before an insolvency process. We must provide these plans to DNB, and they are subject to external audit review. This further reduces the unlikely event of your funds having to be returned during our insolvency.
In the unlikely event that Modulr becomes insolvent, your funds are separate from the funds of Modulr and therefore the creditors of Modulr (other third parties that are owed money from Modulr) are not able to make a claim or have any effect on your funds.
An independent insolvency professional (referred to as a ‘guardian) will be appointed to return your funds to you. However, where a guardian is unable to take their costs of sending the funds to you from elsewhere (for example, the general pot of Modulr funds remaining or from the additional 2% own funds described above) they are entitled to take their costs from your funds. In this circumstance, while you’ll likely receive most of your funds you may not receive the total value if costs are deducted.
In the unlikely event that either of these banks were to become insolvent / bankrupt, what protection is offered against the safeguarded funds that they hold for Modulr?
For the purposes of safeguarding in the EU, Modulr use JP Morgan (“JPM”) only. The safeguarding accounts we hold with JPM are designated specifically as “client accounts” which means funds held therein would not form part of the estate of JPM in the unlikely event of their insolvency. Additionally, special insolvency regimes are in place (with local differences) to assist with the efficient return of assets to customers in these circumstances.
We hope this note was useful and helps you understand how your money is protected. Please do not hesitate to contact your customer success representative if you have any additional questions on the ways in which Modulr protects client funds.
Modulr Finance Limited is a company registered in England with company number 09897957 and ICO registration: ZA183068, registered with the Financial Conduct Authority (Firm Reference Number: 900699) as an EMD Agent of Modulr FS Limited. Modulr FS Limited is a company registered in England with company number 09897919 and ICO registration: ZA183098, authorised and regulated by the Financial Conduct Authority as an Electronic Money Institution (Firm Reference Number: 900573). You can check the Financial Services Register here. Modulr Finance B.V. is licensed and regulated by De Nederlandsche Bank (Relatienummer R182870) as an Electronic Money Institution. © 2021 Modulr Finance Limited. All rights reserved.