Segregated bank accounts are helpful for all manner of businesses, but particularly those bound by strict regulations, such as investment funds, insurance companies, brokers and payment service providers – in other words, modern FinTech players. A payment institution cannot secure a financial service provider’s license without maintaining segregated accounts.
Imagine a triangular arrangement of three parties – a FinTech company, its customer, and a bank. In this triangle, the bank operates as the mediator, providing the business with segregated accounts to hold customers’ funds. This solution is often delivered as part of modern banks’ Banking-as-a-Service (BaaS) product.
“An essential service with BaaS is segregated accounts. Regulators in multiple countries require customer accounts to be recorded separately from a company’s current assets, and a payment institution will be unable to receive a payment services license without having segregated accounts in place,”
comments Staņislavs Siņakovičs, Head of the Business Development Department at LPB Bank.
Segregated bank accounts allow FinTech companies to hold their customers’ funds separately from their circulating assets. A fintech business that opens a segregated account with a bank guarantees that no funds belonging to the bank or the fintech company will be held on that account. Having this type of account means that the FinTech company will never combine its customers’ assets with those of its own or use customer funds to fulfill any of its financial obligations. If the relationship between a customer and its FinTech vendor sours and the customer decides to withdraw its deposits, they can always do this thanks to a segregated account. In this case, all applicable banking fees will be debited from the company’s account.
Another consideration related to segregated accounts is addressable BIC in SEPA. With this service, a payment institution becomes visible to international payment systems and can execute payments on behalf of its customers using a unique BIC. It also enables the assignment of unique IBANs to different customers.
You can learn more about segregated accounts and the Banking-as-a-Service platform for FinTech on LPB Bank website. LPB Bank provides everything a payment system (PI, EMI, PSP) might need to enter a new market and start servicing customers as soon as possible.
Head of marketing and communication at LPB Bank
T. +371 26471277