For most EMIs, safeguarding has always been a core operational requirement. But under the updated FCA expectations around diversification, it is no longer enough to rely on a single safeguarding partner, which comes with issues such as: 

• Over-reliance on a single safeguarding provider introduces operational risk 
• Infrastructure limitations slow down product development and scaling 
• Restrictions from banking partners can block specific payment flows or customer segments 

As a result, diversification is becoming a necessity. Safeguarding partners for EMIs that need diversification include providers such as ClearBank, LHV, and large traditional banks like Barclays – each offering different capabilities, trade-offs, and services.

The FCA’s updated expectations around safeguarding place greater emphasis on how EMIs manage concentration risk. 

In practice, this means EMIs must think beyond simply holding safeguarded funds in a compliant account. They now need to demonstrate that their safeguarding arrangements are resilient and not overly dependent on any single institution. 

This introduces several practical requirements: 

• Avoiding concentration risk: EMIs should not rely solely on a single safeguarding bank to hold client funds. A failure or withdrawal of that partner could disrupt operations. 
• Maintaining operational continuity: Payment flows, collections, and payouts should remain functional even if one partner becomes unavailable. 
• Structuring safeguarding accounts appropriately: This includes segregated accounts, client money accounts, and multi-currency setups that align with regulatory expectations. 
• Ensuring scalability and flexibility: As volumes grow or use cases evolve, the safeguarding structure should not become a bottleneck

ClearBank is a UK-based clearing bank, operating in the UK and EU, built specifically to support financial institutions, including EMIs. It provides safeguarding, payment clearing, and account infrastructure through a cloud-based API. 

Here’s how ClearBank can help EMIs that need diversification under the new FCA rules:

ClearBank is designed to support EMIs and other regulated financial institutions: 

• Supports safeguarding, segregated, and client money account structures 
• Familiar with EMI payment flows and regulatory obligations 
• Enables more complex models, including PSPs serving other PSPs 
• Provides dedicated relationship management and specialist support 

This reduces the friction often seen with traditional banks, where EMIs need to explain their business model or justify specific use cases.

ClearBank is frequently used alongside other banking partners rather than as a full replacement. This supports diversification in line with FCA expectations: 

• Reduces reliance on a single safeguarding provider 
• Adds redundancy for critical payment flows 
• Allows EMIs to split responsibilities across providers (e.g., safeguarding vs FX vs credit) 

In fact, many EMIs operate with at least two banking partners. This structure helps maintain continuity if one provider changes its risk appetite or withdraws services.

A key capability is the ability to create virtual accounts (vIBANs) via API. 

These accounts: 

• Can be generated in real time for each end-customer under the EMI’s own sort code 
• Behave like full current accounts from the end-user perspective 
• Enable clean, automated reconciliation without relying on reference matching 

This is especially important for high-volume platforms. Instead of routing all funds into a single pooled account, EMIs can assign unique account details to each customer. As volumes grow, this reduces operational overhead and improves auditability.

ClearBank’s cloud-native API enables: 

• Near real-time payment processing 
• Automated payment initiation and account management 
• Event-driven updates (e.g., webhooks for transaction status) 
• Full API coverage across accounts, payments, and reporting 

This replaces manual processes such as CSV uploads, portal-based approvals, and delayed reporting. 

ClearBank also enables access to payment schemes such as Faster Payments, Bacs, CHAPS, SEPA Credit Transfer, and SEPA Instant.

LHV provides banking infrastructure to over 200 regulated financial institutions across the UK and Europe, with a focus on cloud-native technology and access to payment schemes. 

Its offering includes: 

• Safeguarding and operational accounts: Multi-currency accounts designed to meet regulatory requirements and hold client funds. 
• Virtual accounts: Unlimited virtual IBANs linked to a master account, supporting reconciliation and transparency. 
• API-driven infrastructure: Real-time account information, payment execution, and reporting through its Connect API. 
• Payment scheme access: Faster Payments, Bacs, SEPA Instant, SEPA Credit Transfer, and international payments. 
• Indirect scheme access model: Payment access delivered via a white-labelled setup. 

LHV combines fintech-oriented infrastructure with broader banking capabilities, while also operating a retail banking proposition alongside its financial institutions offering.

Large global banks such as Barclays, NatWest, and J.P. Morgan are still widely used by EMIs, particularly for broader financial services. 

They typically offer: 

• Credit facilities and lending 
• Foreign exchange and treasury services 
• Advisory and global banking support 
• Established regulatory frameworks 

However, they come with trade-offs when used as a primary EMI bank account or safeguarding partner: 

Strengths: 

• Strong balance sheets and global reach 
• Access to a wide range of financial products 
• Established reputation and stability 

Limitations: 

• Slow and uncertain onboarding processes 
• Legacy infrastructure that is harder to integrate with 
• Limited support for virtual accounts at scale 
• Less flexibility for newer payment models or customer segments 
• A conservative risk appetite that can restrict growth 

As a result, many EMIs retain traditional banks for specific services while introducing additional partners for payments, safeguarding, and account infrastructure.

1. Separate responsibilities across providers. For example, one provider for safeguarding and clearing, another for FX or credit. 
2. Ensure overlapping capabilities. At least two partners should support critical payment flows to avoid single points of failure. 
3. Prioritise API compatibility. Integration across multiple providers should not create operational bottlenecks. 
4. Use virtual accounts to support efficient reconciliation. This reduces complexity when managing multiple end client accounts. 
5. Assess risk appetite alignment. Choose partners that can support your customer segments and use cases as you scale. 
6. Plan for growth. Your setup should accommodate higher volumes, new markets, and more complex flows as you scale.

The FCA’s updated expectations on safeguarding diversification require EMIs to reduce reliance on a single provider and build more resilient operational structures. 

In practice, this means working with multiple banking partners and clearly defining how responsibilities are split across safeguarding, payments, and other services. 

Providers such as ClearBank, LHV, and traditional banks each offer different capabilities. Rather than choosing one, EMIs typically combine them to meet regulatory requirements and support growth.

Sources:

https://www.lhv.com/about 

https://www.lhv.com/financialinstitutions  

https://www.lhv.com/financialinstitutions/payments 

https://www.lhv.com/financialinstitutions/accounts 

https://www.lhv.com/financialinstitutions/api 

https://www.lhv.com/financialinstitutions/fx 

*Disclaimer: All information relating to third-party products and companies featured in this article has been sourced solely from their respective public websites and official publications at the time of writing. ClearBank makes no representations as to the accuracy, completeness, or currency of this information. Product features, positioning, and company details may have changed since publication. Readers should refer to each provider's official website for the most up-to-date information before making any purchasing decisions.