Top Savings Accounts recommendations - Chip Financial not as it seems

Expotter

Reported in today's Telegraph

Crackdown on payment firms to avoid fresh crisis

City regulator threatens to close so-called shadow banks unless they ‘ensure customer money is safe’

• The Daily Telegraph
• 17 Mar 2023
• By Simon Foy

PAYMENTS providers have been ordered by the City watchdog to strengthen their controls as fears of another financial crisis continue to haunt markets.

The Financial Conduct Authority (FCA) threatened to shut down so called shadow banks – which offer deposit and transfer services without a banking licence – unless they “ensure your customers’ money is safe”.

In a letter to nearly 300 chief executives, the regulator instructed businesses to build up their financial reserves, eliminate potential money laundering and ensure they are managed appropriately given their size and complexity.

While a source close to the FCA said the warning reflected its “long-time priorities”, the unusual intervention comes as regulators scramble to avert a global banking crisis.

Matthew Long, director of payments and digital assets at the FCA, said the watchdog “remained concerned that many payments firms do not have sufficiently robust controls and that, as a result, some firms present an unacceptable risk of harm to their customers and to financial system integrity”.

Mr Long criticised payment companies in the UK for having “significant issues with governance, oversight and leadership”.

He said this included “a lack of appropriately knowledgeable and experienced personnel to provide payments services and issue e-money, including among key functions such as money laundering risk office and other compliance staff ”.

Mr Long said the watchdog welcomed the competition and innovation in payments after new firms were encouraged to open.

However, he said: “Our work with firms over the past two years has identified material issues with financial crime systems and controls.”

The watchdog said it was concerned that some companies were not doing enough to manage their liquidity risk – the danger of being overwhelmed by a large number of withdrawals in a short space of time – and were failing to stress test their finances against a downturn.

It added: “Macroeconomic conditions remain challenging and many firms are unprofitable and reliant on external funding for survival. Our work has identified need for improvement in firms’ prudential risk management.”

The FCA said that payments companies were a “target for bad actors” because of their “ability to provide bank-like services, willingness to service high-risk customers and weaknesses in some firms’ systems and controls”.

Mr Long added that the regulator would take “swift and assertive action to protect customers and ensure market integrity” if companies failed to comply.

VXman

soulsaver said:

Just posted this comment in the EA discussion thread:
Chip:


So if your savings (upto £85k) are protected 100% of the time, why doesn't Chip just clearly state that?

I read it as it does...

nottsphil

I read it as it does too, but then I read "subject to the scheme's conditions".
That leaves an awful lot of wriggle room, doesn't it?
Why don't those of us with money in Chip ask Clearbank how much we hold with them? If they don't know, and I suspect they don't, how would they know how much to claim from the FSCS?

tednol

soulsaver said:

Just posted this comment in the EA discussion thread:
Chip:

Chip say money held in Clearbank is FSCS protected; but you pay money to Chip which is then ported to Clearbank.

Not true. When I pay into Chip savings through the Chip app, the payment goes to an account in my name with sort code 040625. 

This is a Clearbank Ltd sort code, with Chip Financial Ltd as the ‘branch’. 

I think you are flagging a non-existent issue. 

brokengrumpy

I've been reading this thread with interest as my mum told me about chip today, so I thought I'd do some research before moving my savings. At the end of the page shared earlier in the thread where it looks as though the savings would be covered by fscs, it then looks as though they aren't... I'm now thoroughly confused, but think I'll be looking elsewhere to save my hard earned pennies.

grumbler

brokengrumpy said:

I've been reading this thread with interest as my mum told me about chip today, so I thought I'd do some research before moving my savings. At the end of the page shared earlier in the thread where it looks as though the savings would be covered by fscs, it then looks as though they aren't... I'm now thoroughly confused, but think I'll be looking elsewhere to save my hard earned pennies.

What you see at the end of the page refers to the "money ...held in a ‘segregated client trust account’ ", i.e. "all savings accounts other than the Chip Prize Savings Account and Chip Instant Access Account".

That said, like I said earlier in this thread, IMO "their is no full clarity with this".

Band7

It is fully clear that cleared funds in the Instant Access Saver and in the Prize Saver are covered by FSCS because such funds are held in Clearbank. Deposits made by bank transfer clear immediately. Deposits made by card take 3 days to clear, don't earn interest and are not FSCS covered whilst uncleared.

It is also fully clear that CHIP have other accounts which are not FSCS covered.

grumbler

Band7 said:

It is fully clear that cleared funds in the Instant Access Saver and in the Prize Saver are covered by FSCS because such funds are held in Clearbank.

This, on its own, doesn't mean anything.  All companies hold clients' money in banks, not in safes, but not all such funds are protected.

ETA: The very same webpage says that the money held in some other "safeguarding account" in the same ClearBank isn't "FSCS eligible"

Band7

grumbler said:

Band7 said:

It is fully clear that cleared funds in the Instant Access Saver and in the Prize Saver are covered by FSCS because such funds are held in Clearbank.

This, on its own, doesn't mean anything.  All companies hold clients' money in banks, not in safes, but not all such funds are protected.

ETA: The very same webpage says that the money held in some other "safeguarding account" in the same ClearBank isn't "FSCS eligible"

I despair.

MikeJXE

Band7 said:

grumbler said:

Band7 said:

It is fully clear that cleared funds in the Instant Access Saver and in the Prize Saver are covered by FSCS because such funds are held in Clearbank.

This, on its own, doesn't mean anything.  All companies hold clients' money in banks, not in safes, but not all such funds are protected.

ETA: The very same webpage says that the money held in some other "safeguarding account" in the same ClearBank isn't "FSCS eligible"

I despair.

So do I and thats why I keep my money where I know 100% its safe