The Financial Conduct Authority (FCA) has outlined three critical priorities for payment firms to achieve in line with the National Payments Vision, emphasising trust, innovation, and security in the UK’s payments ecosystem. These priorities affect Payment Institutions (PIs), Electronic Money Institutions (EMIs), and Registered Account Information Service Providers (RAISPs).

 

Three Essential Outcomes for Payment Firms

1. Effective Competition and Innovation

The FCA has observed positive developments in Open Banking and Consumer Duty implementation, yet concerns remain about consistent delivery of good customer outcomes. Key focus areas include:

  • Enhanced Innovation Hub support services with 50% more dedicated supervisors for early and high growth firms
  • Comprehensive implementation of Consumer Duty requirements
  • Scrutiny of foreign exchange pricing transparency in payment services

2. Financial System Integrity

Two critical aspects demand attention:

Financial Crime Prevention

  • Strengthened governance arrangements and control systems
  • Implementation of APP fraud reimbursement requirements
  • Adherence to payment delays legislation whilst minimising impact on legitimate transactions

 

Operational Resilience

  • Enhanced technological resilience measures
  • Implementation of new operational resilience requirements by 31 March 2025
  • Identification of important business services and establishment of impact tolerances

3. Customer Money Safety

The FCA emphasises three crucial areas:

Safeguarding Requirements

  • Proper identification and protection of relevant funds
  • Daily reconciliation of books and records
  • Appropriate use and monitoring of safeguarding insurance

 

Prudential Risk Management

  • Maintenance of regulatory capital requirements
  • Effective financial risk management
  • Adequate ongoing financial resources

 

Wind-down Planning

  • Development of actionable wind-down plans
  • Clear triggers for orderly business wind-down
  • Consideration of customer money return processes

 

Governance and Oversight Requirements

Firms must implement:

  • Proportionate governance arrangements and control systems
  • Robust agent and distributor oversight
  • Effective management of outsourced functions
  • UK-based head office with appropriate senior management presence

 

Future Regulatory Developments

Key upcoming changes include:

  • Enhanced Open Banking regulations and development of the Future Entity
  • Revision of Strong Customer Authentication requirements
  • Implementation of new safeguarding rules in mid-2025

 

Need Support with Regulatory Compliance?

Ensuring compliance with these regulatory requirements can be complex. For expert guidance on implementing these changes and maintaining regulatory compliance, contact our regulatory specialists who can provide tailored support for your organisation.

 

References

Portfolio letter: FCA priorities for payments portfolio firms
[pdf]