Is it safe to keep money in my Wedo account?
Wedo isn’t a bank. We’re an e-money institution.
We’re required to keep your money safe and protected, and we do this differently to conventional banks. Unlike banks, we do not lend out customer money. Instead of protecting your money in a financial protection scheme (like FSCS), we safeguard your money.
What’s a financial protection scheme?
Financial protection schemes, like the Financial Services Compensation Scheme (FSCS), are only available to:
- UK-authorised banks
- Building societies
- Credit unions
These types of institutions are required to participate in a financial protection scheme.
Unlike Wedo, banks lend out the money deposited by their customers. If a large number of borrowers are unable to repay their loans, then a bank may become insolvent and be unable to return customer funds. This is why the government makes them insure their deposits via FSCS — in case something goes wrong. The FSCS is legally obliged to pay back customer funds to eligible customers up to the maximum compensation to the value of up to 85,000 GBP, or 170,000 GBP for joint accounts.
Because we’re different from the institutions listed above, we safeguard your money instead.
What is safeguarding?
Safeguarding means that, by law, we have to keep all of your money in accounts that are completely separate from the ones we use to run our business. So your money is backed by assets that we hold in separate accounts. These funds are called ‘safeguarded funds’.
Where is my money held?
In keeping with FCA regulations, Wedo uses two approaches to safeguard your funds. We deposit your funds at banking institutions and invest them in government backed liquid assets, primarily government bonds.
We have a dedicated team that makes sure we’re safeguarding the correct amount for each customer. Our safeguarding processes and controls are regularly reviewed to ensure we are adhering to best practice.
Why do you safeguard at different financial institutions?
We safeguard your funds at different financial institutions and in both the UK and Europe in order to reduce concentration risk. We assess the credit worthiness of all our safeguarding partners and ensure that no single partner safeguards all our customer funds.
If the banks where we safeguard your money were to become insolvent, then we wouldn’t be able to guarantee the return of all of your money. However, we carry out regular reviews of these banks to ensure that they remain low risk. We would change banks if we saw any issues.
Why do you invest safeguarded funds?
The amount we decide to invest is driven by cost and risk, and can go up or down over time. Regardless of the method used to safeguard your money, Wedo will always be able to return all your funds upon request — unless we were to become insolvent.
- Cost: Currently interest rates are very low and even negative in some countries. This means that there is a cost associated with holding your money in a bank account. At Wedo we want to keep our costs low so we can pass on any savings to you.
- Risk: Holding money with banks carries risk. In order to diversify our risks we invest your money, as well as hold it at banks. Investing your money also generates risk, even if we’re investing in low-risk assets like bonds. That’s why Wedo holds additional money, known as Available Liquid Resources (basically extra cash), to protect against any adverse market movements.
We only invest in high quality liquid assets. These are investments that are classified by our regulators as low risk and highly liquid. Primarily, this means that we invest your money in government bonds, such as UK Government Gilts and US Government T-Bills.
What would happen if Wedo became insolvent?
Safeguarded funds are inaccessible to our creditors, our banks or any other third parties. So your money will always be available to you in the normal course of our business.
The protections afforded by safeguarding stay in place even in the unlikely event that Wedo were to become insolvent. However, if this happens, some of this money might be used by an insolvency administrator to pay for their own costs. This means the money returned to you could be lower than the total amount you had in your account. It might also take some time for that insolvency administrator to return the rest of your money back to you.
We don’t want to go out of business, and certainly not in an insolvent way. We are required to hold regulatory capital as part of our FCA licence. This capital is designed to protect Wedo, and your money, against any unexpected market events.
We also carry out regular stress testing of our business and how we operate. We’ll think of the worse case scenario, then work backwards to make sure that we’re covered if that scenario happens. We regularly test and monitor the amount of capital we hold, to make sure it’s enough to cover any risks our business might face.
Who regulates Wedo?
We follow a strict set of rules set by our regulatory agencies in every country we operate in, like the FCA in the UK.. These agencies protect you, and protect the market we operate in.
We always act fairly and honestly, in the best interests of our customers. Our regulators monitor us to make sure what we say and do is in line with their regulatory standards, so that we operate in accordance with our licences.