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How Airwallex Business Accounts work in the UK and Europe, and why your funds are always safe

March 22, 2023

This article originated from the Xero blog. The XU Hub is an independent news and media platform - for Xero users, by Xero users. Any content, imagery and associated links below are directly from Xero and not produced by the XU Hub.
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In the wake of the collapse of Silicon Valley Bank (SVB) in the US and Signature Bank, we’d like to take a moment to clarify how our customers’ funds are kept safe in the UK and Europe.

Airwallex is not a bank, we are licensed as an Electronic Money Institution (EMI) by the Financial Conduct Authority (FCA) in the United Kingdom and the Dutch National Bank in the Netherlands. We partner with banks worldwide to offer multi-currency accounts, money transfers, foreign exchange, payment acceptance and more to global businesses. While we share many features with banks, there is a key difference in how we store our customers’ money.

How deposits work at Airwallex

When you deposit funds into an Airwallex business account, those funds are held in a separate safeguarded account on your behalf. The money in this safeguarded account is not available to Airwallex’s creditors, our banks or third parties. It cannot be lent or used for other purposes, such as to fulfil operational needs or to invest in assets. That means that whenever you wish to withdraw money or make a payout from your Airwallex account, that money will be available to you. Our operations team rebalances our safeguarded funds daily to ensure all our clients’ wallets are safeguarded in line with regulations.

In the unlikely event of Airwallex ceasing business operations or going into insolvency, liquidation or bankruptcy, your funds will be safely set aside in the safeguarding account, and you will receive them back in priority to all our creditors.

Unlike Airwallex, banks invest a proportion of their customers’ deposits in loans, bonds and other assets. If a bank experiences a ‘run’, where a large number of customers withdraw their deposits at the same time out of fear that the bank will fail, the bank may suffer a liquidity crisis, particularly if it has made a loss on its investments. This, in turn, increases the likelihood that the bank will fail.  

Why you should diversify

When you deposit money in a bank in the UK, the Financial Services Compensation Scheme (FSCS) insures your deposit up to £85,000. This means customers that hold deposits above £85,000 with a single bank are left exposed if the bank fails. Whilst it is rare for a bank to fail, recent events are a stark reminder of the importance of managing risk exposure. Any individual or business that has more than £85,000 in a single bank account should consider spreading their cash reserves across more than one financial institution to ensure their funds are protected. There is equivalent protection in the Netherlands under the Dutch Deposit Guarantee (DDG) for deposits up to €100,000, and the same advice applies.

Safeguarding is different to the protection afforded under the FSCS or DDG. The key difference between the FSCS / DDG and safeguarding is that FSCS / DDG protection is provided by an independent statutory organisation (rather than the bank itself) and in the event of the bank’s insolvency the organisation pays customers up to the maximum compensation amount. Whereas when you deposit money in an Airwallex business account, you can rest assured that all your funds are safeguarded (less certain administrative charges), with no upward limit on the amount. If you’re looking to reduce your risk exposure, an Airwallex business account can offer you the ability to secure funds in excess of FSCS regulation. It’s one of many reasons thousands of businesses choose to hold money with us.

Why leave it there?

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