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

Ch1ll1Phlakes

masonic said:

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.

Ok fair enough not something that I imagine many people are familiar with (hence this thread) but even the FCA Checker doesn't make it clear as TPPs and intermediaries like Modulr are described as e-money on the checker. But thanks for the clarification.

Also managed to find this on the Modulr website which backs up everything you have said so far. Open Banking: What Is It? | Glossary Modulr. As you've stated Modulr clearly uses e-money accounts.