How are funds protected?
Funds held in Coconut current accounts are protected through safeguarding rules under the Electronic Money Regulations 2011. All funds are held in a segregated account with Barclays bank, protected under these rules, which mean that money cannot be lent out or used for any other purpose, ensuring it is always readily accessible by account holders.
What about FSCS?
Coconut isn't a bank, and so doesn't take risks with deposits like traditional banks. Banks use customer deposits in order to provide credit to other customers - this is heavily regulated, but runs the risk that overextend and be in a position to not be able to cover its deposits if loans default.
The Financial Services Compensation Scheme (FSCS) provides compensation of up to £85,000 in the event a bank can't provide access to your funds. In the event your bank fails, your access to funds will be frozen. This scheme will then aim to provide compensation within 7 days (but can take up to a few weeks).
How does Safeguarding work?
Because we come under the FCA's e-money rules, your deposits with Coconut aren't lent out or put at risk. They are held in a safeguarded Barclays account ensuring your funds remain accessible at all times.
What if Coconut or PPS go out of business?
In the unlikely event that Coconut or our e-money provider (PPS) were to cease trading, you would still have access to your funds because they are not put at risk, and cannot be used to cover liabilities of either company.
The FCA may decide to put a temporary freeze on funds while they investigate, which could last a few days or weeks depending on the circumstances - if this happens they you may not receive the benefit of immediate access that safeguarding provides over FSCS, as there would be a similar delay in regaining access to funds.
In other cases, there may be no delay in gaining access to funds (unlike with claiming through FSCS).
FSCS vs Safeguarding, what's the difference?
Here is a bit more information on the difference between FSCS and safeguarding:
If you have any questions about this, feel free to get in touch with our support team and they'll be happy to help.