The Financial Conduct Authority (FCA) has launched a consultation on additional guidance for payments firms to strengthen the way in which they look after customers’ money.
The payments sector is a priority area for the FCA and the consultation follows ongoing work to ensure payments firms are adequately protecting customer funds.
The guidance is part of a broader programme of work the FCA was planning to consult on later in the year, to set out its expectations for the payments sector. This has now been brought forward due to pressures the coronavirus pandemic is placing on firms’ finances.
Payments firms bring financial parties together to deliver a simple payment experience for business and their customers by processing payments quickly and efficiently, and offer services including money remittance.
The sector is developing rapidly and an increasing number of firms are entering the market. However, some payments firms are unprofitable in the early stages while they seek to grow market share and many also rely on investor funds to remain solvent in the short-term. Firms may also be facing decreased revenues because of coronavirus and it could be impacting their ability to operate as well as their growth plans.
The guidance will provide additional direction for firms to meet their safeguarding requirements and it outlines the FCA’s expectation of firms to put in place more robust plans for winding down, so that customer funds are returned in a timely manner.
The FCA will continue to proactively supervise firms in this sector and will act swiftly where firms fail to meet safeguarding and other regulatory requirements. It carried out an assessment on firms’ safeguarding practices last year and also sought an urgent update from firms about their financial arrangements in relation to the pandemic.
The consultation, which will apply to all payments firms, will last for two weeks and closes on 5th June 2020. If confirmed, the final guidance will be published at the end of June.