Safeguarding has become one of the defining components of modern fintech infrastructure, long before any company reaches the point of being licensed or even formally supervised. In today’s regulatory climate, safeguarding is not something a fintech can “add later” or consider once revenues grow. Instead, banking partners, BIN sponsors, EMIs, payment networks, regulators, investors, and institutional counterparties now expect a robust safeguarding strategy in place at the earliest stage — well before a company applies for an EMI license or begins handling customer funds in any capacity. The entire ecosystem has shifted from product-first to compliance-first, meaning that the firms with the strongest safeguarding architecture will be the ones that secure bank accounts, settlement rails, card issuance partners, and institutional support, while those without it struggle to onboard, fail licensing expectations, or collapse at the first sign of scrutiny.
At its core, safeguarding refers to the mandatory segregation of customer funds from the company’s own operational balance sheet, ensuring that if a fintech becomes insolvent, client money remains protected and recoverable. While this appears straightforward, it is far more complex in practice. Safeguarding today requires not only a dedicated regulated account with a bank or EMI, but also a comprehensive operational structure surrounding that account — including reconciliation controls, oversight frameworks, transaction monitoring, internal policies, business continuity plans, and verification mechanisms. The regulatory expectation is that a fintech, even pre-license, can demonstrate exactly where client funds will sit, how they will be protected, who will oversee them, how reconciliation will occur, and how the company will respond to a failure of its safeguarding partner. This depth of detail is now non-negotiable for any company looking to operate within the payments ecosystem.
The requirement to build a safeguarding strategy early is particularly critical for fintechs seeking EMI licensing, BIN sponsorship, or settlement accounts. BIN sponsors (Visa/Mastercard issuing partners) demand evidence of safeguarding processes during due diligence, often before commercial contracts are even discussed. They must be confident that a fintech partner will not expose them to regulatory, financial, or reputational risk through mishandling of client funds. Similarly, EMIs that provide settlement or operational accounts require detailed safeguarding documentation even for companies that are not yet licensed; this is because regulators place increasing responsibility on EMIs to evaluate the safeguarding and fund flow governance of their partners. A fintech that cannot produce fund flow diagrams, oversight methodology, reconciliation cycles, governance documents, and compliance policies is immediately disqualified from onboarding — regardless of its business model or revenue potential.
Even regulators expect safeguarding clarity long before an application is submitted. During pre-application consultations, supervisory authorities will ask: Where will you safeguard funds? How will you segregate them? What is the reconciliation schedule? Who is the safeguarding officer? What policies govern auditing, failures, outages, or insolvency scenarios? If a fintech cannot answer these with maturity, their application loses credibility instantly. The same applies to investors. Serious institutional investors no longer provide capital to fintechs that lack compliance fundamentals; they want proof of safeguarding capabilities, internal governance, and a clear operational relationship with regulatory-grade financial institutions. Investors increasingly treat safeguarding readiness as a proxy for management competence and long-term viability.
A fully-formed safeguarding strategy consists of three interlocking pillars. First, the fintech must secure or demonstrate access to safeguarding accounts through a regulated institution such as an EMI, specialist bank, or authorised safeguarding provider. These accounts must support segregated client balances, reconciliation reporting, and regulatory oversight. Second, the fintech must build a complete compliance and governance framework including internal safeguarding policies, operational manuals, reconciliation procedures (daily or intraday depending on jurisdiction), incident reporting protocols, outsourcing policies, defined oversight responsibilities, and a designated safeguarding officer. The documentation must be sufficiently detailed and aligned with FCA, EU, and other regulatory standards — even if the fintech has not yet applied for a license. Third, the safeguarding architecture must align perfectly with external partners such as BIN sponsors, settlement EMIs, correspondent banks, or card program issuers. Fund flows must match institutional expectations; misalignment between the fintech’s proposed structure and a partner’s safeguarding model is a common reason why onboarding fails.
Many fintechs today fail not because of their products, customers, or market strategy, but because they cannot articulate a safeguarding model that regulators or banking partners trust. The industry has moved into a period of heightened scrutiny, driven by de-risking, compliance failures, insolvencies, and wider systemic risk concerns. Banks and EMIs are no longer willing to take chances on companies without a safeguarding blueprint. This means the fintechs that survive and scale will be those that invest in safeguarding early, adopt proper governance before revenue begins, and present a clear, coherent, regulator-aligned safeguarding design to all institutional partners. Those who treat safeguarding as an afterthought simply will not be able to operate.
At Sodalite Capital, we help fintechs build bankable safeguarding frameworks from the ground up. We structure safeguarding accounts across the UK, EU, Switzerland, and offshore jurisdictions; map and stabilise fund flows for regulators and banking partners; design safeguarding policies and reconciliation methodologies for future EMI applications; and align fintechs with BIN sponsors, settlement EMIs, and card issuers whose infrastructures match their operational model. The companies that work with us secure faster onboarding, stronger institutional relationships, and a compliance foundation that allows them to scale internationally without interruption.
In a market where compliance is the new currency, safeguarding is the first prerequisite for legitimacy. The fintechs that prioritise safeguarding at the earliest stage will outperform their competitors, attract better partners, gain investor confidence, and survive regulatory pressure. Safeguarding has moved from an internal policy to the foundation upon which modern financial technology companies are built.
📩 For safeguarding and payments infrastructure advisory: contact@sodalitecapital.com
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