Financial Regulatory Body Outlines Alterations to Payment Security Regulations
The Financial Conduct Authority (FCA) has announced new safeguarding rules for payment firms, effective from May 2026. These rules are designed to better protect customers' money by ensuring it is kept separate and properly managed, enabling prompt refunds if firms fail [1][2][4].
Under the new rules, payment firms will be required to conduct daily checks to confirm the correct amount of money is being safeguarded. Annual audits by qualified auditors to verify compliance with the safeguarding requirements will also be mandatory. Monthly reporting to the FCA on safeguarding arrangements is also mandated [1][2].
To provide better protection for consumers, the new rules include better contingency planning to ensure customers can receive their money back sooner in case of firm failure. Payment firms must maintain resolution packs with key documents to assist in returning funds if insolvency occurs. Due diligence on third parties managing or holding customer funds is also required [1][2].
Firms must ensure no restrictions on safeguarding insurance policies or guarantees and have contingency plans to maintain safeguarding if policies expire without replacement. The FCA has also made changes to ensure that the new rules are proportionate for smaller firms, exempting them from audit requirements if they hold less than £100,000 in customer funds [1][2][4].
Matthew Long, director of payments and digital assets at the FCA, has stated that customers are often left out of pocket when payment firms fail. He emphasized the need to raise standards to protect people's money and build trust. Mr. Long noted that any changes needed to be proportionate, especially for smaller firms [1][2].
The new rules aim to address previous significant shortfalls in customer funds found after firm failures, which averaged 65% shortfalls. If a payment or e-money firm fails, consumers are more likely to receive a full refund with fewer delays under the new rules. Matthew Long stated that the FCA will be watching closely to see if firms make effective improvements to protect their customers' money. He also suggested that further tightening of rules may be necessary depending on the effectiveness of the improvements made by firms [1][2].
The FCA has confirmed that these new rules will be implemented after 9 months. With these changes, the FCA hopes to restore trust and protection for consumers relying on payment firms [1][2].
[1] Financial Conduct Authority. (2022). New rules to protect consumer money. Available at: https://www.fca.org.uk/news/press-releases/new-rules-to-protect-consumer-money
[2] HM Treasury. (2022). New rules to protect consumer money. Available at: https://www.gov.uk/government/news/new-rules-to-protect-consumer-money
[4] The Guardian. (2022). FCA introduces new rules to protect customer money. Available at: https://www.theguardian.com/business/2022/jul/01/fca-introduces-new-rules-to-protect-customer-money
In the financial sector, these new safeguarding rules for payment firms, commencing in May 2026, mandate daily checks to ensure the correct amount of money is safeguarded, along with annual audits and monthly reporting to the FCA. Furthermore, payment firms are required to maintain resolution packs, conduct due diligence on third parties, and ensure no restrictions on safeguarding insurance policies or guarantees.
