What FCA Regulation Actually Means

The Financial Conduct Authority is the UK's financial services regulator. Its mandate covers conduct, consumer protection, and market integrity across a wide range of financial services — from retail banks to payment institutions to investment firms.

For business banking, the relevant authorisation is as a Payment Institution under the Payment Services Regulations 2017 (PSR 2017), which implemented the EU's PSD2 directive into UK law.

Payment Institution vs. Bank: The Key Difference

A payment institution is not a bank. This distinction matters for one specific reason: deposit protection.

Funds held with a UK-authorised bank are protected up to £85,000 per depositor by the Financial Services Compensation Scheme (FSCS). Funds held with a payment institution are not covered by the FSCS.

This is not a loophole — it is a deliberate regulatory distinction, and it is disclosed clearly by every regulated payment institution.

Safeguarding: What Replaces FSCS Protection

Instead of FSCS coverage, payment institutions are required by the FCA to safeguard client funds under PSR 2017 Regulation 23. This means:

  • •Segregation: Your funds must be held in accounts entirely separate from the payment institution's own operational funds
  • •Ring-fencing: Safeguarded funds cannot be used by the institution for its own purposes
  • •Insolvency protection: In the event of the payment institution's insolvency, safeguarded funds are ring-fenced from creditors and returned to clients

Safeguarding is not equivalent to FSCS protection — but for business accounts holding operational funds rather than long-term deposits, it provides meaningful protection against institutional failure.

What the FCA Authorisation Actually Covers

For a payment institution like Gemba Finance Ltd (which provides the payment infrastructure behind EXFI accounts), FCA authorisation means:

  • •Conduct oversight: The FCA monitors how the institution treats its customers, including fee disclosure, complaints handling, and fair treatment obligations
  • •Operational standards: Capital adequacy requirements, business continuity obligations, and cybersecurity standards
  • •Payment execution: Rules on execution timeframes, value dating, and error resolution
  • •Anti-money laundering: Mandatory KYC/AML procedures and suspicious activity reporting obligations

What It Means in Practice

For businesses choosing a payment institution for their international banking needs, the practical implications are:

  1. •Your funds are protected from institutional failure through mandatory safeguarding — not through FSCS
  2. •Your transactions are governed by the Payment Services Regulations — giving you rights on execution times, unauthorised payment claims, and fee transparency
  3. •The institution is supervised by the FCA — with ongoing conduct and capital requirements
  4. •You have regulatory recourse — through the FCA and, for retail customers, the Financial Ombudsman Service

For most business treasury functions, the safeguarding model is appropriate. Businesses holding significant long-term cash reserves should consider whether a combination of payment accounts and FSCS-protected savings products is the right structure.

EXFI accounts are provided through Gemba Finance Ltd, authorised and regulated by the Financial Conduct Authority (FRN: 804853). Your funds are safeguarded under PSR 2017 Regulation 23. They are not covered by the FSCS.