The choice affects compliance, operational risk, audit complexity, and ultimately the platform's relationship with regulators. This is not a feature comparison. It is an architecture decision that shapes everything from day-to-day reconciliation to insolvency outcomes.
How pooled accounts work
In a pooled account structure, also called an omnibus or For Benefit Of (FBO) account, a single bank account holds funds belonging to multiple end customers. The bank maintains one account with one aggregate balance. The platform maintains a separate internal ledger tracking which portion belongs to which customer. The operational advantage is efficiency: opening one bank account is faster and cheaper than opening thousands, and fund movements within the pool do not require bank processing.
The structural risk is the gap between the bank's view and the customer's expectation. The bank sees one account. The customer assumes they have an individual account. If the platform's internal ledger drifts from the bank's records, or if the platform becomes insolvent, there is no structural mechanism to identify which funds belong to which customer. Recovery depends on the quality of internal recordkeeping, which is exactly the component most likely to fail under stress.
The FDIC's proposed rulemaking on custodial accounts, issued in response to the Synapse bankruptcy, targets precisely this vulnerability. The proposed rule would require banks holding FBO accounts to maintain beneficial ownership records in a standardised format, conduct reconciliation at least daily, and ensure direct, continuous access to records even if a third-party intermediary fails. The rulemaking exists because pooled account structures failed at scale, and the FDIC concluded that the existing regime could not guarantee prompt deposit insurance determinations when ledger-based records broke down.
How named accounts work
In a named account structure, each client receives a distinct account held in their name at the custodial institution. The bank sees individual accounts with individual balances. Ownership is determined by the account structure itself, not by an intermediary's ledger. When a regulator or insolvency practitioner needs to identify who owns which funds, the answer is visible in the account records. There is no dependency on a third-party reconciliation process. The custody architecture is self-documenting.
The operational trade-off, historically, has been speed and cost. Opening individual bank accounts for thousands of customers was slow and expensive. This is changing. API-based account provisioning now allows platforms to open named custody accounts programmatically, maintaining the onboarding speed of a pooled model while providing the structural protection of segregated custody. The speed objection that historically favoured pooled structures no longer holds.
Named accounts also simplify compliance with safeguarding requirements. Under the FCA's Supplementary Regime, effective May 2026, payment firms must perform daily reconciliation and maintain resolution packs. With named accounts, reconciliation is a verification that each account holds the correct balance. With pooled accounts, reconciliation requires matching thousands of ledger entries against a single aggregate bank balance, a process that scales poorly and fails under stress. The audit burden is fundamentally different.
The regulatory direction is clear
Regulators in every major jurisdiction are moving toward prescriptive requirements for client fund segregation. As Goodwin's analysis of the FCA's safeguarding reforms notes, the new regime introduces CASS-like measures to increase protection for customer funds when firms become insolvent: mandatory daily reconciliation, resolution packs for insolvency practitioners, annual safeguarding audits, and monthly regulatory returns. The FCA found that payment firms entering insolvency between 2018 and 2023 had an average shortfall of 65% in funds owed to clients. While PS25/12 does not explicitly prohibit pooled accounts, the compliance burden it imposes on pooled structures creates a strong practical incentive toward segregated custody.
PSD3, which reached provisional political agreement in November 2025, requires funds to go directly into safeguarding accounts at receipt with no commingling. The European Commission's legislative package establishes segregation at receipt as a baseline requirement, not a best practice. The GENIUS Act in the US requires stablecoin issuers to segregate reserve assets and prohibits commingling, with Latham & Watkins noting that custodial services may only be performed by entities under federal or state banking supervision.
The MAS in Singapore and the DFSA in Dubai have both tightened custody requirements for licensed institutions, with emphasis on structural segregation of client assets. Platforms operating on pooled-only architectures face a closing compliance window across all of these jurisdictions simultaneously.
Making the comparison
Pooled accounts are characterised by:
- Lower upfront cost and faster initial deployment.
- Operational simplicity for internal fund movements within the pool.
- Higher regulatory risk as safeguarding requirements tighten across jurisdictions.
- Higher reconciliation cost at scale, with complexity growing as the client base expands.
- Structural vulnerability in insolvency: recovery depends on ledger accuracy under stress.
Named accounts are characterised by:
- Structural compliance with current and anticipated safeguarding requirements by design.
- Simpler reconciliation: verification of individual balances rather than ledger matching against aggregates.
- Clearer audit trails and resilience in insolvency scenarios.
- Requirement for API-based provisioning infrastructure and per-account custodian costs.
- Satisfaction of converging UK, EU, and US regulatory expectations from a single architecture.
For platforms at early stage with limited regulatory exposure, pooled accounts may be a pragmatic starting point. For platforms at scale, operating across regulated jurisdictions and holding significant client fund balances, named accounts are increasingly not optional. The compliance cost of maintaining pooled structures with daily reconciliation, annual audits, resolution packs, and monthly returns will exceed the infrastructure cost of named accounts for most platforms within the first year.
The infrastructure choice
The custody architecture a platform chooses today determines its regulatory posture, operational resilience, and audit complexity for years to come. Migrating from pooled to named accounts mid-growth is expensive and operationally disruptive. Building on named accounts from the outset, or transitioning proactively before regulatory deadlines arrive, avoids that disruption and positions the platform for compliance across jurisdictions from day one.
Lorum provides named custody accounts across 30+ markets, provisioned via API, with structural segregation by design. For fintech and PSP platforms, payroll and EOR platforms, and marketplace operators, the named account model provides cash management infrastructure that satisfies current requirements and anticipated regulatory expectations across the UK, EU, and US simultaneously.
