PSD Bond
PSD Bond is the first and currently only insurance contract to meet the safeguarding requirements of the revised Payment Services Directive (PSD2) and second Electronic Money Directive (EMD). It was launched mid-2019 in the United Kingdom and has since been accepted for use in Lithuania and Ireland.
Pioneered and offered exclusively by Protean Risk, PSD Bond is underwritten by major insurers, including Lloyd's of London, and all providing Standard & Poor’s or equivalent ‘A’ rated financial security.
It is being used by an increasing number of APIs and EMIs, including some of the world's largest and well-known brands. With a credible and acceptable insurance option on the table, payment service providers are well advised to re-examine their safeguarding alternatives.
Key contacts
We are members of the Emerging Payment Association and the Association of Foreign Exchange and Payment Companies:
Overcoming key challenges
Double safeguarding
Segregation is difficult to do properly and efficiently where there is uncertainty or complexity associated with the payment flow e.g. involving banks, agents or distributors. In some cases firms are having to tie up even more cash than they need to – maybe twice what they need to.
Commingling
As the payments and E-money universe becomes more complex, it is becoming harder to know which funds to segregate and for how long – with 100% confidence. Examples can be found in areas such as foreign exchange and involving non EEA balances.
"Firms need to consider safeguarding as one of their key controls and make sure they are doing it correctly, so that consumers are protected. Using insurance can help them get it right in some of the more difficult areas and allow them to improve capital efficiency especially when used to complement segregation."
John Burns
Technical Director, Payment Services
Compliancy Services Ltd
Benefits of PSD Bond
- Reduces operational costs
- Improves capital efficiency
- Alleviates regulatory risk – smooths over some of the more challenging aspects of segregation.
- Simplifies compliance – solves some of the grey areas
- Retains flexibility – can move to other options in future
- Strengthens consumer protection – transferring risk to insurance underwriters
- Enhances regulatory compliance – the underwriting due diligence process
Our guide uses real life case studies to give insight into where and how PSD Bond can make a difference.
Latest thinking
PSD Bond accepted for use in Ireland
Protean Risk's PSD Bond accepted in Ireland for use as a method of safeguarding of clients' funds using Insurance Read more...
Safeguarding insurance - FCA guidance
The FCA recently issued a guidance note to firms using or considering using insurance as a safeguarding method. Read more...