• Over 250 electronic money institutions (EMIs), and almost 1,000 payment institutions (PIs), are now licensed by the Financial Conduct Authority (FCA) in the UK

• The number of e-money accounts alone now stands at 76 million at the end of 2022, up 108% in two years, outnumbering UK current account estimates

• £16.3 billion was held in e-money accounts at year end, up 191% in two years - equates to 7% of all non-interest bearing bank deposits in the UK

• 2.7 billion e-money transactions conducted during 2022 calendar year, worth over £630 billion (up 169% in two years) - equivalent to approximately 70% of the volume, and 20% of the value, of FasterPayments transactions

Despite a number of popular non-banks providing bank-like services, consumers using EMIs and PIs are not protected by the Financial Services Compensation Scheme (FSCS). Instead firms are expected to perform “safeguarding” of customer funds, hold adequate investments or insurance to protect customers should these businesses fail. However, recent insolvencies have shown that such measures are deficient: customers can face significant delays and may not get back all their funds once wind-up costs are taken into account.

With an industry that is lightly regulated and growing in size and significance, and an increase in business failures anticipated due to deteriorating economic conditions, action is needed. This report calls on EMIs, PIs and the FCA as their regulator to do more to educate and protect consumers, and maintain trust in a sector that has been an important source of innovation and competition - with a specific focus on three areas: greater sector transparency, enhanced regulatory focus and improved consumer protection.

James Sherwin-Smith, Managing Director, Dsruptiv commented:

“The UK has led the world in its use of e-money and payments to drive innovation and competition. As alternative providers continue to blur the line by offering bank-like services without being banks, consumers are perhaps unknowingly bearing the risk of firms benefiting from a light touch regulatory regime. Given the explosive growth of the sector, this report calls on stakeholders to do more to maintain trust in this increasingly significant part of the UK financial services landscape.”