How are e-money holders protected on insolvency? Court of Appeal hands down decision on ipagoo

Our latest payments podcast looks at the Court of Appeal’s decision on ipagoo and the implications for the payments industry.

The Payment Services Regulations 2017 and Electronic Money Regulations 2011 require payment institutions and e-money institutions to protect their customers’ money. The FCA has argued that these safeguarding requirements impose a trust over the relevant funds.

Several cases have now considered this question. Some have agreed with the FCA (Supercapital, Allied Wallet) but last year the High Court in ipagoo disagreed. Notwithstanding features which are consistent with a statutory trust, the decision concluded that there is no basis for implying a trust into the regulations. Now the Court of Appeal has upheld that decision.

As Harry Eddis and Frances Hodgkins explain in the podcast episode, the outcome is not necessarily bad news for customers of e-money and payments firms. This is because the Court also considered that funds which were not properly safeguarded could form part of the pool of assets to be distributed to e-money holders. This should increase the chance of customers getting money back on the insolvency of the firm.

Listen to our podcast for more.