Wise, like other online foreign exchange businesses, have become more popular for online banking over recent years, and are no longer used solely for transferring funds from one country to another. But what protection levels are in place for individuals should Wise go bust?
Wise is not a bank
This is an important difference … Wise is a payment institution, not a bank, and your Wise Account is not a bank account either, even if you have a debit card with it. The funds held with Wise, including balances in your Wise Account, are not insured by any deposit protection scheme, including the Financial Services Compensation Scheme (FSCS). Instead, Wise holds your funds in permissible investments in accordance with applicable laws. Unlike banks, Wise don't lend customers money to people or businesses.
Because they’re not lending your money, they handle it differently, they call this ‘safeguarding’ it. Depending on where your account is held, you will have an agreement in place with Wise in respect of the safeguarding of your money. If you move abroad/change location, your Wise Service provider might change as well and, as a consequence, you will be subject to the Agreements with the respective other Wise entity. Wise debit card transactions are not protected by the Financial Services Compensation Scheme (FSCS). Your Wise account is an electronic money account, not a bank account.
When you live in the UK, your agreement will be with Wise Payments Ltd and governed by English law. So when you send, hold, spend, or receive money with Wise, the following banks are where Wise predominantly safeguard your money:
Type Institution
Cash deposit BARCLAYS BANK PLC
Cash deposit CITIBANK N.A.
Cash deposit JPMORGAN CHASE BANK, N.A
Cash deposit DEUTSCHE BANK AG, LONDON
Secure liquid assets EU, US and UK Government bonds
However, when paying for a Money Transfer in a currency other than British pounds (GBP), you may be doing business with a different Wise entity, in which case their other agreement and safeguarding institutions would be used.
When you live in the EU, your agreement will be with Wise Europe SA and governed by Belgian law. So when you send, hold, spend, or receive money with Wise, the following banks are where Wise predominantly safeguard your money:
Type Institution
Cash Deposit JPMORGAN CHASE BANK, N.A
Low Risk Liquid Assets (Money Market Funds) BLACKROCK & STATE STREET
Your money is held in cash in segregated accounts with these banks, as secure liquid assets like EU, UK and US Government bonds or backed by a comparable guarantee given by authorised insurers. Wise use a combination of these methods to protect customers in the event Wise becomes insolvent to diversify risk and maximise liquidity.
Holding money in government assets is generally considered less risky than holding your money in a bank account, because banks can become insolvent but stable governments rarely do. For a government bond to fail, the government which issued the bond would need to default on their loan payments, which almost never happens with large stable governments.
No Warranty Regarding Goods or Services
Wise is not responsible for the quality, safety, legality, or any other aspect of any goods or services you purchase with your Card. Any disputes or issues with any goods or services you purchase with your Card should be addressed to the merchants or individuals from whom the goods and services were purchased, not Wise.
Wise Assets
If you’re in the UK and hold savings with Wise Assets UK Ltd (an investment subsidiary of Wise) if Wise or Wise Assets becomes insolvent, your assets are held separately from Wise’s other corporate assets. This means that your investment should be returned to you in the event of Wise Assets going bankrupt. In addition, the Financial Services Compensation Scheme (“FSCS”) protects each customer, but only for up to £85,000 GBP.
IMPORTANT INFORMATION IF YOU LIVE IN THE EUROPEAN ECONOMIC AREA (EEA)
If you’re in the EEA and hold savings with Wise Assets Europe AS (an investment subsidiary of Wise) if Wise or Wise Assets becomes insolvent, your assets are held separately from Wise’s other corporate assets. This means that your investment should be returned to you in the event of Wise Assets going bankrupt. In addition, the Estonian Investor Protection Sectoral Fund will cover your assets, but only for up to €20,000 EUR.
Summary
Our aim is to ensure that you are able to enjoy life while we take care of your finances, ensuring you’re set up in the most tax efficient way for your particular circumstances. If you are considering how best to set up your finances as a resident of Spain please contact us.
Speed Financial Solutions are a highly qualified and regulated financial services provider looking after clients throughout Spain and the UK. Established in 2010, we provide a discreet and comprehensive service to individuals, and our service is tailored to suit your needs taking advantage of tactical opportunities as they arise in respect of your financial planning.
Our Principal, Andrea Speed, is a qualified Discretionary Investment Manager specialising in Investment and Risk, Taxation and Trusts, and a qualified Pension Specialist. Andrea is also a Fellow of the Chartered Insurance Institute (CII), which is the world’s largest professional body for insurance and financial services in the world.
Fellowship is the highest qualification awarded by the CII (Level 7) and is universally regarded as the premier qualification. It is a major achievement in the financial industry and demonstrates the acquisition of skills and knowledge at the highest of levels. Along with a Fellowship, Andrea is a CII Chartered Financial Planner.
Please take a look at our website – www.speedfinancialsolutions.com
For further information contact us on Tel 951 315 271 or 951 318 529
We are happy to discuss your own situation in more detail. One of our advisers would be pleased to spend some time with you either in your home or at our office to review your current savings, investments and pensions, so do call to make an appointment. Our Financial Review is completely free of charge and without obligation. Follow us on Facebook for regular updates.
This communication is for information purposes only based on our understanding of current legislation and practices which is subject to change and is not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice form a professional adviser before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, we are not responsible for any errors or omissions.
Andrea J Speed FPFS (DM), M.A.
Principal, Fellow and Chartered Financial Planner
Speed Financial Solutions
19 December 2024