Banking Tools to Implement Safeguarding Customers’ Funds

Once a business understands why it’s so important to safeguard customer funds, and the key considerations they need to take, the next step is to review the tools they use to both create and execute these processes. Given that time and money are often barriers to progress when it comes to safeguarding customers’ funds, finding the right solution, or partner, is vital.

Direct integration to the bank

In order to get the most accurate real-time data on customer funds and transaction flows, a business will need to directly integrate with their bank (or banks). This can be difficult as banks often use different reporting systems that require the manual transfer of information such as statements. By working with a partner such as Integrated Finance, businesses are able to directly integrate with supported banks through a single platform, using software that enables fees to be moved across accounts in real-time, as well as identifying which accounts contain company funds and customer funds.

Automate funds movement

If a business utilises a large number of accounts, there is always risk of commingling funds. This risk substantially increases if these funds are manually moved; potential human error and funds not leaving accounts and time lags are just two factors to consider. Automating the movement of funds ensures that funds move from accounts at the right time and end up in the right place.

Real-time reporting

Through direct integration to multiple banking partners, a partner such as Integrated Finance offers real-time reporting tools that allow a business to have an overview of the aggregate balance across all safeguarding accounts. Highlighting any shortfalls or overfunding that needs to be addressed gives a business the opportunity to reallocate funds as needed to remain compliant.

Account structure tools

Partnering with a platform such as Integrated Finance can also help a business to deploy pre-configured accounts that are structured to remain compliant with safeguarding at all times. One common structure is for a business to have a “house account” for operational funds; this strictly will not contain any customer funds. Then there is a “fee account” which allows customer fees to be debited in real-time and swept into this account. Finally, businesses can have “user accounts” which are the designated safeguarding accounts which contain customer funds. Only fees are to be deducted from these accounts. This is just one example of compliant account structure, but it is easy to implement with a single API platform such as Integrated Finance.

For many fintech’s safeguarding customer funds is an afterthought, especially as most efforts are put towards the survival and growth of a company. However, it is incredibly important that any company processing or holding funds on behalf of third parties is able to effectively identify funds and provide high-quality information when needed at all times. Any failure to supply this information or, more seriously, have the money available to reimburse customers, can result in hefty fines from the FCA and possibly legal action. It is therefore imperative to understand why you need to safeguard funds, how you do it and how to optimise managing the process.