What is a client money account (CMA)?

Client Money accounts, or CMAs, are accounts that payment service provers use to store their customers’ funds, whether company or individual. These accounts can also be referred to as e-money accounts.

Essentially, CMAs separate and protect clients’ funds from the associated PSP. This means that if the boat a PSP is on sinks, the customer knows their funds can still stay afloat.

Use cases

The two primary uses of CMAs are global workforce payments and online payments.

Online payments

When someone makes an online purchase, the money can sometimes be kept in a CMA until it’s transferred to the seller’s account. This keeps the money safe in case the seller goes out of business. Doing this can also help prevent fraud: keeping the money in a CMA lets the seller know that the payment is legitimate before the transfer is made.

Global workforce payments

With all the different currencies, tax laws, and payment regulations involved, global payroll tend to be complex.

CMAs simplify the process. Companies can use CMAs to hold the funds in the employee’s local currency until it’s time to make the payment. This is one way to make sure global payments are made in accordance with the local regulations.

Using a CMA can help reduce delays and risks of errors, as well as secure funds from a variety of financial problems PSPs could face.

Can only regulated financial institutions offer CMAs?

The answer is no, not necessarily.

Some countries require regulated FIs to protect their client funds using CMAs. Meanwhile, other businesses could offer CMAs as a way to showcase their reliability.

Best practices and regulations may vary depending on the country. This means that non-regulated FIs could face extra challenges in offering CMAs, making them more susceptible to fees and breaches.

Because of this, a lot of companies see established conventional banks as the best option for CMAs, since they evoke the most trust and security in the minds of customers.

Nonetheless, certain regulated fintech competitors could outperform banks in this respect, offering CMAs that are just as safe and secure, while adding efficiency and automation to the package.