FCA tightens rules for payment firms

The Financial Conduct Authority (FCA) has announced that stricter regulations for electronic payment firms will come into force in May 2026.

The new rules say companies must separate customer funds from their own, ensuring refunds in case of firm failures. The City watchdog says firms will face annual audits by qualified auditors, monthly reporting, and daily checks on safeguarded funds. The rules will apply to payment institutions, e-money institutions and credit unions that issue e-money.

These rules will address issues the regulator has found in previous failures of payment firms. Payment firms that became insolvent between Q1 2018 and Q2 2023 had average shortfalls of 65% of their customers’ funds.

Matthew Long, Director of Payments and Digital Assets at the FCA, said “People rely on payment firms to help manage their financial lives. But too often, when those firms fail, their customers are left out of pocket.

“Most of those who responded to our consultation agreed we need to raise standards to protect people’s money and build trust, but any changes needed to be proportionate, especially for smaller firms.

“We’ll be watching closely to see if firms seize the opportunity and make effective improvements that their customers rightly deserve – this will help us to determine whether any further tightening of rules is necessary.”