The regulator has withdrawn your EMI's licence, the portal is frozen, and the account manager has stopped replying. The money is not gone. What happens next follows a procedure — and your position in that procedure is decided, more than anything else, by the state of your documentary record.
What safeguarding requires of an EMI
Electronic money institutions do not hold your funds the way a bank holds a deposit. Under the EU framework — the Electronic Money Directive, with the safeguarding rules applied through PSD2's regime for payment institutions — an EMI must safeguard funds it has received from or for its customers.
In practice, safeguarding takes one of two forms:
- Segregation. Customer funds are held separately from the institution's own money, in a designated safeguarding account with a credit institution, or invested in secure, liquid, low-risk assets.
- Insurance or guarantee. Less common: the funds are covered by an insurance policy or comparable guarantee from a third party.
The purpose is single-minded: if the institution fails, the safeguarded pool exists for the people whose money it is — not for the institution's general creditors.
That is the design. Whether a given EMI actually safeguarded everything it should have, in the amounts it should have, is one of the central questions in any wind-down. Shortfalls in the safeguarded pool are common enough that supervisors in several jurisdictions have repeatedly warned institutions about safeguarding practices.
Two different things: safeguarded funds and claims against the institution
When a merchant says "the EMI owes me money", that sentence usually covers two legally distinct positions. Separating them is the single most useful thing you can do early.
Funds that should sit in the safeguarded pool. Your settlement balance — money received for you that the institution had not yet paid out. If safeguarding worked as designed, these funds are ring-fenced and are distributed to customers in priority, ahead of ordinary creditors. Your task is to evidence exactly what the institution held for you, and when.
Claims against the institution itself. Everything else: a reserve the institution retained beyond its contractual release date, deductions you never agreed to, fees applied at offboarding, damages flowing from the way the relationship was ended. These are claims against the institution's own estate. They rank with the other unsecured creditors unless something elevates them.
The two positions run on different tracks, are proved with different documents, and tend to pay out differently. The safeguarded entitlement is proved with the institution's own settlement records and your reconciliation of them; the claim against the estate is proved with the contract and the correspondence around the disputed deductions or the unreleased reserve. A merchant who lumps them together in one angry email to the administrator weakens both.
There is a third position worth naming, because it is the one most often missed: amounts that never reached your account at all. Scheme recoveries credited to the institution for your transactions but not passed through, or chargeback debits that do not reconcile against scheme data, do not appear on any statement you hold — they appear as an absence. Quantifying that absence is financial-controller work, and it is regularly the difference between the quantum you can prove and the quantum you merely suspect.
What happens, chronologically
The sequence varies by jurisdiction, but the shape is consistent.
1. Supervisory action. The regulator withdraws or restricts the licence, or the institution surrenders it under pressure. Often there are restrictions first — a freeze on onboarding, a requirement to hold funds — and the withdrawal is the final step, not the first. From this point the institution usually cannot carry on regulated business, and payouts stop.
2. Wind-down or administration. Either the institution winds down solvently under the supervisor's eye, or an insolvency practitioner — an administrator, liquidator or equivalent — is appointed. In the UK, payment and electronic money institutions can be placed in a special administration regime designed for exactly this situation, with the return of customer funds as an explicit objective.
3. Reconciliation. The administrator reconstructs who is owed what: the safeguarded pool on one side, the customer entitlements on the other. This takes longer than anyone wants — months, frequently — because the institution's records are rarely in the condition its marketing implied.
4. Claims and distribution. Customers are invited to submit claims. The safeguarded pool is distributed to those with safeguarding entitlements, usually after the costs of the distribution itself are deducted from it — a point that surprises merchants, and a reason early, clean claims tend to fare better than late, contested ones. Claims against the estate are dealt with separately, under ordinary insolvency ranking.
At every stage there are deadlines, forms and evidentiary thresholds. None of them are designed around a merchant's convenience.
A note on what to expect from the administrator's side. The administrator owes duties to the process, not to you. They will communicate through portals and standard-form letters, on their timetable. They will ask for documents in a specific shape — claim forms, supporting schedules, proof of identity and authority — and a submission that does not match the shape goes to the bottom of the pile, however meritorious. They may make interim distributions, and they may revise their view of the safeguarded pool as reconciliation progresses, which means the percentage you are quoted early is not a promise. Treat every interaction as part of the record: written, dated, complete.
Why your claim survives — and what decides the outcome
The point that surprises merchants most: the institution's collapse does not extinguish the claim. The claim survives the licence withdrawal, survives the administration, and survives the brand disappearing from the internet. What changes is who you are dealing with and what they will accept as proof.
An administrator does not take your word for a balance. The distribution you receive is decided by what you can evidence:
- The contract. The services agreement, the schedules, the fee annexes, any side letters. This is what defines what the institution was holding for you and on what terms.
- The statements. Settlement files, transaction exports, account statements — the institution's own contemporaneous records of your balance.
- The correspondence. Written acknowledgements of the balance, written explanations for withheld amounts, written notice of termination. What was said on the phone is, for these purposes, close to worthless.
Two merchants with identical economic positions can receive very different outcomes for no reason other than the condition of their files. The well-documented file gets reconciled and admitted; the thin one gets queried, discounted or rejected. In a shortfall scenario — where the safeguarded pool does not cover all entitlements — the quality of the documentary record matters even more, because the merchants who prove their numbers first and cleanly define the baseline everyone else is reconciled against.
This is also where assignment earns its place. A specialised Assignee running a portfolio of claims against the same estate deals with the administrator as a repeat, professional counterparty — with the reconciliation work already done to the standard the process demands.
The three mistakes merchants make in the first month
We see the same three errors in nearly every file that arrives late.
1. Waiting. "The administrator will sort it out" is a costly assumption. Waiting means missed claim deadlines, lost portal access, and a seat at the back of the reconciliation queue. Time limits apply and vary by jurisdiction; assess early.
2. Keeping it verbal. Calls to the support line, reassurances from the account manager, a promise that "the release is being processed" — none of it exists unless it is in writing. Every material communication should be sent or confirmed by email, from day one.
3. Discarding the paper. Merchants terminate the relationship in frustration and lose access to the very records that prove their claim: the signed agreement, the fee schedules, the settlement exports sitting behind a login that is about to be switched off. Export everything, immediately, while you still can. The patterns that produce these claims in the first place — withheld settlements, unreleased reserves, unexplained deductions — are the same ones we describe in our scenarios, and they all turn on the same records.
If this is your situation
A licence withdrawal starts a clock, and the early weeks decide more than the later months. If an EMI holding your funds has lost its licence or stopped paying out, submit a fit check — five minutes, eight fields, no upfront cost. We respond with an initial view within five business days.
This article is for information purposes only and does not constitute legal advice.