Hodge Bank and/or Modulr Finance Ltd 04-29-05

southwest_lass

MSE currently mentions Hodge Bank as a good home for Easy Access savings. But when opening an account the sort code specified is 04-29-05 Modulr Fs Ltd, which seems to be some e-Money outfit I've never heard of. Furthermore Modulr is NOT covered by the FS compensation scheme. Hodge is covered by FSCS, but exactly with whom am I placing my money? A sort code checker shows that sort code to be "Bank: Modulr Fs Limited Branch: Hodge Bank". I'm uneasy about this.

Ch1ll1Phlakes

See Hodge Bank's T&Cs
and their glossary


Modulr is just a payments provider, i.e. they facilitate the transfer of funds from your current account to Hodge Bank. The funds will be held by Hodge Bank but they use Modulr to get them

masonic

Modulr FS is an emoney provider that processes payments into and out of several "aggregator" services (that offer a savings marketplace but are not themselves a savings provider). I guess this service is cheaper or easier for Hodge to use instead of piggybacking off of a clearing bank's systems like other providers do.

Your money will not be FSCS protected while held by Modulr, but as soon as it reaches Hodge it will be. If it makes you feel more comfortable, you could break up your transactions into smaller parts to limit your risk, as only money in transit is affected.

southwest_lass

masonic said:

Modulr FS is an emoney provider that processes payments into and out of several "aggregator" services (that offer a savings marketplace but are not themselves a savings provider). I guess this service is cheaper or easier for Hodge to use instead of piggybacking off of a clearing bank's systems like other providers do.

Your money will not be FSCS protected while held by Modulr, but as soon as it reaches Hodge it will be. If it makes you feel more comfortable, you could break up your transactions into smaller parts to limit your risk, as only money in transit is affected.

Thanks. Splitting payments is an interesting suggestion. Whole thing seems completely pointless to me. Nobody else of the several banks/building societies with whom I have accounts bothers with such a roundabout system. I'm still not convinced, so I may not continue with this account.

WOTSWOT

Having recently opened a Hodge Easy Access Account I can confirm that deposits are truly at lightning speed.
When I press the confirmation send button from HSBC I get a funds received email from Hodge just seconds later. Even Marcus cannot match that. Nevertheless I have contacted Hodge on their freephone number to make them aware of this post, as it may detract from their product as seen here. As a consequence they thanked me for bringing this to their attention and may make a post here or update their product information to further clarify any potential risks in deposit transactions.
Modulr FS is regulated as an electronic money institution (EMI) in the UK by the Financial Conduct Authority (FCA) and in Europe by De Nederlandsche Bank (DNB) according to their website and having visited that my confidence in their role with Hodge is very high.

LHW99

It isn't that unusual for a third party payment processor - some accounts I've had use Barclays, I forget the others but there have been some, and banks / building socs generally tell you as you open the account, as Ch1ll1Phlakes says here.

southwest_lass

LHW99 said:

It isn't that unusual for a third party payment processor - some accounts I've had use Barclays, I forget the others but there have been some, and banks / building socs generally tell you as you open the account, as Ch1ll1Phlakes says here.

Yes, that's quite right. But this is the first time I have come across an intermediary that isn't itself a major bank covered by the FSCS.

Ch1ll1Phlakes

Just thought I'd give an example from another Company. This is from the Chip Financial help page regarding their payments providers. Similarly to Hodge Bank, they don't use a Major Bank.



Have a look at the TrueLayer website. They are used by Trading212, OakNorth, Nutmeg etc. for payments.
Tink is similar and while Chip have only started using them, their clients include JPMorganChase, PayPal (and Adyen), BNP Paribas etc.

This is just an illustration that companies do not always use major banks and note, these companies are Third-Party Providers and do not hold your funds. See the following comment by @masonic for an explanation of the difference between this and Modulr.

masonic

There seems to be some conflation here between Open Banking Third Party Providers (TPP) and intermediaries like Modulr FS.

TPP access your current account in order to send a payment to a receiving bank account on your behalf. The money doesn't pass through them, they just set up a payment like you would do in your app or online banking. If the receiving bank account is owned by a firm with a banking licence (such as Clearbank in the case of Chip) or FCA client money permission (like Tembo Savings Limited), then your money is FSCS protected end to end.

E-money providers offer a different service whereby they receive the money into their own account and then send it on to the recipient. The bank account details you use to send the money may not be those of a firm authorised to accept deposits or hold client money. There is no FSCS protection in this instance until the money is received by a firm with one of those authorisations. The money is subject to "safeguarding", but unlike deposits and Client Money with FSCS protection, there is no compensation if it turns out the money wasn't safeguarded.

If the process of moving the money is completed quickly then the risk of the shutters crashing down at that point are really very low, but it would be wrong to say this is equivalent to an Open Banking transfer to a bank.

Ch1ll1Phlakes

masonic said:

There seems to be some conflation here between Open Banking Third Party Providers (TPP) and intermediaries like Modulr FS.

TPP access your current account in order to send a payment to a receiving bank account on your behalf. The money doesn't pass through them, they just set up a payment like you would do in your app or online banking. If the receiving bank account is owned by a firm with a banking licence (such as Clearbank in the case of Chip) or FCA client money permission (like Tembo Savings Limited), then your money is FSCS protected end to end.

E-money providers offer a different service whereby they receive the money into their own account and then send it on to the recipient. The bank account details you use to send the money may not be those of a firm authorised to accept deposits or hold client money. There is no FSCS protection in this instance until the money is received by a firm with one of those authorisations. The money is subject to "safeguarding", but unlike deposits and Client Money with FSCS protection, there is no compensation if it turns out the money wasn't safeguarded.

If the process of moving the money is completed quickly then the risk of the shutters crashing down at that point are really very low, but it would be wrong to say this is equivalent to an Open Banking transfer to a bank.

Using the FCA Firm Checker, I don't know if Modulr actually ever is authorised to hold funds in their own account. Maybe you can check Search | FCA. I've removed my other post to reduce any confusion for now.

masonic

Ch1ll1Phlakes said:

masonic said:

There seems to be some conflation here between Open Banking Third Party Providers (TPP) and intermediaries like Modulr FS.

TPP access your current account in order to send a payment to a receiving bank account on your behalf. The money doesn't pass through them, they just set up a payment like you would do in your app or online banking. If the receiving bank account is owned by a firm with a banking licence (such as Clearbank in the case of Chip) or FCA client money permission (like Tembo Savings Limited), then your money is FSCS protected end to end.

E-money providers offer a different service whereby they receive the money into their own account and then send it on to the recipient. The bank account details you use to send the money may not be those of a firm authorised to accept deposits or hold client money. There is no FSCS protection in this instance until the money is received by a firm with one of those authorisations. The money is subject to "safeguarding", but unlike deposits and Client Money with FSCS protection, there is no compensation if it turns out the money wasn't safeguarded.

If the process of moving the money is completed quickly then the risk of the shutters crashing down at that point are really very low, but it would be wrong to say this is equivalent to an Open Banking transfer to a bank.

Using the FCA Firm Checker, I don't know if Modulr actually ever is authorised to hold funds in their own account. Maybe you can check Search | FCA. I've removed my other post to reduce any confusion for now.

Yes, it's permitted providing it falls under their authorised payment services. They cannot relay money without first receiving it into one of their accounts. They have a responsibility to safeguard it while holding it. Generally they have automated systems to move the funds onward or bounce them back when unrecognised. So when all is well they wouldn't hold money for any significant amount of time.

They also have responsibilities under AML regulations, so can place a hold on funds in some circumstances. There was a thread a while back from someone complaining that they couldn't get money out of a crypto exchange because the intermediate e-money firm required information about source of funds before they'd release the payment. Though I doubt that would be relevant where their customer is a regulated bank and did their own KYC checks.