Is a fintech app a bank?

#What makes a company a bank in the eyes of the law?

A bank, in legal terms, is a firm licensed to take deposits from the public. That licence is hard to get. In the UK, the Prudential Regulation Authority decides whether to authorise a new bank, and only with the Financial Conduct Authority's consent⁠^[1]. In the euro area, the European Central Bank makes the final decision to grant or withdraw a banking licence⁠^[2] and holds fintech applicants to the same capital, governance and fit-and-proper standards as any other bank⁠^[3].

Because the licence comes with supervision, banks' deposits are covered by deposit insurance up to a limit: £120,000 per person per authorised firm in the UK from 1 December 2025⁠^[4] and $250,000 per depositor, per insured bank, per ownership category in the US⁠^[5]. A firm without a banking licence cannot offer you that protection directly.

#If an app is not a bank, what is it?

Most non-bank money apps fall into one of three groups. The table shows how each one holds your money and what protects it.

#What is e-money, and why can't it earn interest?

UK law defines electronic money as electronically stored monetary value, represented by a claim on the issuer, that is issued when you hand over funds to make payments and is accepted by someone other than the issuer⁠^[8]. Two rules shape it. The issuer must redeem your e-money at any time and at par value, meaning £1 of e-money is always worth £1⁠^[9]. And the issuer must not pay interest or any other benefit linked to how long you hold the money⁠^[10]. If an app that holds e-money also advertises interest, ask which separate product, and which firm, is paying it. Our e-money glossary entry has a short definition.

#What happens to your money if a non-bank app fails?

The FCA is blunt: if your non-bank payment provider goes out of business, your money won't be protected by the Financial Services Compensation Scheme. E-money and authorised payment institutions must put customer money in a separate safeguarding account at a bank, or protect it with an insurance policy or similar guarantee. You should get most of it back, but it may take time and may not be the full amount, because some costs could be taken by the administrator or liquidator⁠^[6].

Past failures show why this matters. The FCA says payment firms that became insolvent between Q1 2018 and Q2 2023 had average shortfalls of 65% of their customers' funds⁠^[11]. New UK safeguarding rules, including daily checks that the right amount is protected, came into effect on 7 May 2026⁠^[11]. In the US, regulators warn that end users may not realise their access to funds can depend on the app company, and that deposit insurance does not protect against losses from that company's failure⁠^[7].

#How can you check what an app really is?

1. Scroll to the bottom of the app's website or open its terms. Look for the legal entity name and a reference number.
2. Search that name on the regulator's register. In the UK, the FCA says you can use its Financial Services Register to check that a provider is authorised and has permission for the service it offers⁠^[6].
3. Read the permission type: deposit-taker (bank), e-money institution, or payment institution.
4. If the app says accounts are provided by a bank, note that bank's name and check it too.
5. Work out what protects your balance: deposit insurance, safeguarding, or, for a small payment institution, possibly neither.

#Does it matter if the app works perfectly well?

For small everyday amounts, many people are comfortable using non-bank apps for spending and transfers. The difference matters most for large balances, savings you cannot afford to have frozen and money you need on a deadline, such as rent. In the US, pass-through deposit insurance only works if the bank's records disclose the custodial relationship and each owner's interest can be identified⁠^[13]. When records fail, as in the 2024 problems described in banking as a service explained, customers can lose access even though no bank failed.