Notice – No.43 – Management of Merchant Collection Funds by Settlement Banks and Payment Service Providers

The notice reinforces a strict safeguarding model: merchant money must sit in designated settlement accounts at approved settlement banks, separate from the PSP’s own operating accounts, and remain merchant property until settlement. For compliance teams, the key issue is legal and operational control: PSPs cannot use, pledge, encumber or treat those balances as their own. Firms should verify that account structures, contracts, treasury processes and reconciliations reflect that separation, and that settlement banks have clear visibility of designated accounts.

The notice raises expectations for governance, record-keeping and monitoring rather than introducing a new deadline. Higher-risk areas include commingling, liquidity or credit exposure to PSP failures, and weak oversight of settlement arrangements. PSPs should review merchant terms, safeguarding policies, bank mandates, signatory controls, reconciliation frequency and exception escalation; settlement banks should confirm onboarding and ongoing monitoring of designated accounts.

Small PSPs may need targeted remediation, while larger groups should assess group-wide consistency. RegCanary expects supervisory attention to merchant fund safeguarding and potential enforcement where commingling or ownership claims persist. Actionable next steps: map all merchant balances, confirm approved settlement bank arrangements, separate operational accounts, document ownership, test reconciliation and report gaps to boards.