FCA Regulated Banking for UK Businesses: EMI vs Bank Accounts Guide 2026

1 Fully Authorised Bank (PRA + FCA Dual-Regulated)

A fully licensed bank holds a deposit-taking licence issued by the PRA and is simultaneously regulated by the FCA for conduct. These firms can accept deposits, offer overdrafts, extend credit, and operate current accounts. Client funds are deposits in the legal sense, and eligible deposits are protected by the Financial Services Compensation Scheme up to £85,000 per eligible depositor per institution.

Examples of account types: Standard business current accounts, savings accounts, overdraft facilities.

2 Authorised Payment Institution (API)

An Authorised Payment Institution is licensed under the Payment Services Regulations 2017 to provide payment services. These include executing credit transfers, direct debits, card payments, and money remittance. APIs cannot accept deposits in the banking sense — they hold funds on behalf of clients temporarily during payment execution. Funds must be safeguarded.

What they can do: Send and receive payments, hold payment accounts, issue payment instruments, provide currency exchange. Cannot offer overdrafts or interest-bearing deposits.

3 Small Payment Institution (SPI)

A Small Payment Institution operates under a lighter-touch regulatory regime, subject to a monthly transaction threshold. SPIs are registered rather than authorised, which means they do not face the same capital requirements or regulatory obligations as an Authorised Payment Institution. For significant business volumes, an SPI may present greater risk than a full API.

Key distinction: Registered, not fully authorised. Lower regulatory threshold. Check whether your provider holds full authorisation or merely registration.

4 Authorised Electronic Money Institution (EMI)

An Authorised EMI is licensed under the Electronic Money Regulations 2011. EMIs issue electronic money — a digital representation of stored value — in exchange for funds received. The practical experience for business customers is very similar to a bank account: the EMI provides an IBAN, a balance, payment rails, and a debit card. However, the funds are not deposits. They are e-money, and the EMI must safeguard 100% of the corresponding funds at all times.

What they can do: Issue e-money, hold balances, execute payments, provide IBANs, issue cards. Cannot accept deposits, offer overdrafts, or pay interest on balances.

5 Small EMI

Like the Small Payment Institution, a Small EMI operates under a registration (not full authorisation) with the FCA, subject to an average outstanding e-money threshold. They are subject to lighter capital requirements and have more limited regulatory obligations than a fully authorised EMI.

Key distinction: Registered, not fully authorised. Suitable for lower-volume use cases only.

6 Registered Account Information Service Provider (RAISP)

A RAISP is authorised solely to access and aggregate account information from different financial institutions, with the explicit consent of the account holder. They do not hold funds, issue accounts, or execute payments. You are unlikely to encounter a standalone RAISP as a primary banking provider — they are most commonly part of open banking and accounting integrations.

FSCS Protection (Banks)

The Financial Services Compensation Scheme (FSCS) is a statutory compensation scheme that pays out to eligible depositors if a PRA-authorised bank fails. For business accounts, FSCS protection applies up to £85,000 per eligible depositor per authorised institution.

FSCS protection is not a safeguarding mechanism — it is a compensation mechanism that activates after a bank fails. If your bank becomes insolvent, the FSCS aims to pay eligible claims within seven working days.

Important: Not all business accounts are eligible for FSCS. Many SMEs qualify, but large corporates and certain other entities may be excluded. Always verify your eligibility with the institution directly.

Safeguarding (EMIs and APIs)

Safeguarding is a regulatory obligation placed on EMIs and authorised payment institutions by the FCA under the Electronic Money Regulations 2011 and Payment Services Regulations 2017. An EMI or API must, at all times, hold funds equivalent to its outstanding e-money or payment obligations in a ring-fenced safeguarding account or covered by an insurance policy or guarantee.

Safeguarding protects your funds by keeping them separate from the firm's own operating capital. If the EMI or API becomes insolvent, safeguarded funds are outside the insolvent estate and are returned to customers.

Key difference from FSCS: Safeguarding is not a compensation scheme — it is a structural protection. There is no £85,000 cap on safeguarded funds. However, there is no guaranteed speed of return or independent body like the FSCS administering it.

Method 1: Segregated Safeguarding Account

The EMI or API holds client funds in a dedicated, segregated account at a credit institution (typically a bank). This account is ring-fenced and cannot be used by the EMI for its own operations. The funds are labelled as client funds in trust. In insolvency, these funds sit outside the firm's estate and are returned to clients ahead of general creditors.

Method 2: Insurance or Guarantee

Alternatively, the EMI or API can cover relevant funds using an insurance policy or comparable guarantee from an authorised insurance or credit institution. This covers the equivalent value of outstanding client funds so that, if the EMI fails, clients' positions can be made whole from the insurance pay-out.

What Safeguarding Protects Against

• Insolvency of the EMI or payment institution — your funds are outside the insolvent estate
• Misappropriation of client funds to pay firm operating costs — ring-fencing prevents this structurally
• Unlimited balance exposure — unlike FSCS, safeguarding covers 100% of funds with no cap

What Safeguarding Does Not Protect Against

• Failure of the bank where safeguarded funds are held — though that bank may itself be FSCS-covered
• Administrative delays in returning funds during insolvency proceedings — there is no guaranteed seven-day window as with FSCS
• Fraud or unauthorised transactions — these are governed by separate payment dispute rules

1. Confirm FCA Authorisation Status

Verify the FCA reference number on register.fca.org.uk. Confirm the status is "Authorised" for the relevant activities. Check whether the firm is an authorised EMI, authorised payment institution, or a licensed bank — and understand the implications of each for your use case.

2. Understand the Fund Protection Mechanism

Ask the provider directly: is this account covered by FSCS or by safeguarding? Where are safeguarded funds held? Are they in a segregated account or covered by insurance? This is material information that providers should disclose.

3. Match Authorisation to Your Needs

If you require overdraft facilities or business loans, you need a licensed bank. If you need multi-currency accounts, fast international payments, and API access, an authorised EMI or payment institution will typically serve you better. Do not use a provider whose authorisation does not cover the services you require.

4. Review Payment Rails Supported

Confirm which payment schemes the provider is connected to: Faster Payments, CHAPS, BACS, SEPA Credit Transfer, SEPA Instant, SWIFT. Access to the relevant rails for your transaction types is a practical operational requirement, not a secondary concern.

5. Assess Currency Capabilities

If your business transacts in multiple currencies, understand whether the provider offers named multi-currency accounts with dedicated IBANs per currency, or merely currency conversion on a single account. These are materially different propositions. See our Multi-Currency Accounts page for further detail.

6. Evaluate Onboarding and KYC Requirements

All FCA regulated providers must conduct Know Your Customer (KYC) and Anti-Money Laundering (AML) checks. The depth and speed of this process varies significantly. Understand what documentation will be required, how long approval typically takes, and what support is available if queries arise during the process.

7. Clarify the Total Cost of Operation

Assess monthly account fees, per-transaction charges, FX conversion costs, and fees for specific payment types (e.g., CHAPS, SWIFT). The headline monthly fee is rarely the most significant cost element for businesses with meaningful transaction volumes.

8. Understand the Complaints Process

All FCA authorised firms must have a complaints procedure. For payment disputes, you can escalate to the Financial Ombudsman Service (FOS) if the firm's internal process does not resolve your complaint. Confirm this route is available to business customers under the firm's terms.

9. Consider the Provider's Track Record

Review the firm's Companies House record, check for any FCA enforcement notices against the firm, and assess how long they have been operating under their current authorisation. A recently authorised firm is not inherently less trustworthy, but a longer operating history provides more evidence of stable compliance.

Is an EMI account as safe as a bank account?

Both are FCA regulated, but they protect funds differently. A bank account at a PRA-licensed institution is covered by the FSCS up to £85,000 per eligible depositor. An EMI account is protected by safeguarding — the EMI must hold 100% of relevant funds in a ring-fenced account or under insurance cover. For balances above £85,000, a safeguarded EMI account may in practice protect more of your funds, since there is no compensation cap. However, the speed and certainty of recovery in an insolvency scenario is more prescribed under FSCS than under the safeguarding regime.

What is an FCA registered vs FCA authorised firm?

FCA registration and FCA authorisation are meaningfully different. Authorisation is the full approval for regulated activity, requiring the firm to meet capital adequacy, governance, and ongoing supervisory obligations. Registration is a lighter-touch regime available to smaller firms (Small Payment Institutions and Small EMIs) that fall below certain thresholds. Registered firms have fewer regulatory obligations than authorised firms. For significant business funds or high-volume transactions, an authorised firm provides a more robust regulatory framework.

Does FSCS protection apply to business bank accounts?

FSCS protection for business deposits applies to most small businesses, sole traders, and partnerships. However, certain large companies and financial institutions are excluded. The eligibility criteria can be complex and change periodically. If FSCS eligibility is material to your decision, you should confirm your business's eligibility directly with the institution and review current FSCS rules at fscs.org.uk.

Can an EMI or payment institution offer interest on business balances?

No. Under the Electronic Money Regulations 2011, EMIs are prohibited from paying interest on e-money balances. This is a fundamental legal distinction between e-money accounts and bank deposits. Authorised payment institutions are similarly restricted from offering balance interest. If you require interest on held funds, a licensed bank deposit account is the appropriate product.

How do I find a firm's FCA reference number?

Any FCA authorised or registered firm is required to display its FCA reference number on its website, typically in the footer or on a regulatory disclosures page. You can then verify this number independently on the FCA Register at register.fca.org.uk. If a firm claims to be FCA regulated but cannot provide a verifiable reference number, treat this as a significant warning sign.

What regulatory protections do payroll bureaus and accounting firms need to consider?

Payroll bureaus and accounting firms often hold or move client funds as part of their service delivery. If your firm collects or disburses funds on behalf of clients, you may have specific obligations under your own professional regulator (e.g., ICAEW, ACCA, CIPP) regarding which types of accounts you may use for client money. In addition to verifying FCA regulation of your banking provider, ensure the account structure is compatible with your client money obligations. Contact us to discuss how our infrastructure supports compliant client fund management.

Is financeb2b.co.uk itself FCA regulated?

financeb2b.co.uk operates as a privileged intermediary partner of Gemba and is not itself an FCA authorised or registered firm. The banking and payment services made available through financeb2b are provided by Gemba (FCA Authorised Payment Institution, FRN: 804853). This structure is transparent and clearly disclosed. You can verify Gemba's regulatory status on the FCA Register. For questions about this structure, see our Compliance page.