In the recent Supercapital decision, the High Court found that the Payment Services Regulations 2017 (PSRs) created a trust over customer assets. This trust relationship addresses certain gaps in the safeguarding rules under the PSRs, but raises additional questions and will have unintended consequences — not least of which, it now appears that funds held by a non-bank payment institution with a credit institution may be subject to Financial Services Compensation Scheme (FSCS) protection in the event of insolvency of the credit institution.

In our article, first published in the December 2020 edition of Butterworths Journal of International Banking and Financial Law, our payments regulation experts Mark Simpson, Julian Hui and Connie Faith highlight some of the additional questions and unintended consequences raised by Supercapital and argue that legislative intervention is required to update the PSRs safeguarding regime.

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