PIF is the not-for-profit industry body that represents providers of regulated prepaid accounts. Here we answer some frequently asked questions account holders have about the safety and security of prepaid accounts.
My prepaid account is not covered by the Financial Services Compensation Scheme. What happens to my money if the company providing my account goes bust?
You don’t need to worry because your money is safe.
Prepaid accounts that are used in much the same way as a traditional bank account are highly regulated by the Financial Conduct Authority (FCA). Examples include travel money cards, digital and card-based prepaid accounts that can be used to manage personal and business finances and multi-store gift cards that can be used in multiple retail outlets.
Providers of these types of accounts must be regulated by the FCA as an authorised ‘E-Money’ institution before they can offer you prepaid accounts and services. They are required by law to ‘safeguard’ the funds they receive from their customers in ring-fenced accounts. This means that your money is protected and can be paid back to you in full if the provider goes into administration.
Before you apply for a prepaid account, be sure that the company issuing the card or account is authorised by the FCA. This information should appear on the account providers’ website, usually towards the end of the page and in the account Terms & Conditions.
With all the new technology, I’m worried about fraudsters hacking my account. What is being done to keep my money safe from criminals?
In an increasingly digital and interconnected world, criminals are becoming more sophisticated. Staying one step ahead of fraudsters is a challenge for every provider of financial services whether it’s a high street bank or an alternative to a bank.
The good news is that prepaid account providers are rapidly expanding the range of technologies they use to detect and prevent fraud. In fact, companies in the prepaid industry have long used technologies that high street banks are only now starting to use.
Prepaid account providers are required by law to have systems and processes in place to reduce the risks and prevent fraud. They will all have significant controls in place to protect your money if the worst happens.
For example, latest technologies allow account providers to monitor your purchases in ‘real-time’ which means they can keep a close eye on any purchases that fit a known pattern of fraud. Many account providers use ‘device reputation’ to track whether the computer or smartphone the transaction is made from is linked to known fraudulent transactions. This also helps your account provider to spot any new types of fraud and improve detection.
Your account provider will always help you if your card or account has been fraudulently used to debit money from your account. If you or your account provider spots something suspicious on your account, they will block your card and account and contact you immediately to let you know what’s happened and what they will do next. In many cases, they will attempt to contact merchants to cancel fraudulent purchases to help make refunds easier. Your account provider may also make a claim under the Mastercard or Visa chargeback schemes on your behalf.
As with every type of account, it’s very important for you to be vigilant as well. Many prepaid account providers have features that will allow you to block or freeze your card or account yourself if you are worried about a transaction or if your card is lost or stolen.
If you have any questions or concerns about your prepaid account, you should contact your account provider.
Notes to editors:
For further information about the safeguarding requirements, visit: https://www.fca.org.uk/firms/emi-payment-institutions-safeguarding-requirements
For further information about the prepaid sector, please contact firstname.lastname@example.org