FCA Safeguarding Reforms Will Strengthen Consumer Trust in Payments Sector

WHY THIS MATTERS

The FCA’s introduction of a new “Supplementary Regime” for safeguarding, finalized in Policy Statement PS25/12 and effective as of May 7, 2026, represents the most significant overhaul of the UK’s payment and e-money sector in years. This move is a direct response to systemic weaknesses that left consumers exposed during recent high-profile firm failures, where shortfalls averaged a staggering 65% of customer funds. By bringing safeguarding standards closer to the CASS (Client Assets) rules used by investment firms, the regulator is signaling that the “move fast and break things” era of fintech must now be underpinned by institutional-grade operational rigor.

For the industry, the shift from high-level guidance to prescriptive rules means that “compliance” is no longer a periodic check but a daily operational reality. The requirement for daily reconciliations, monthly reporting, and a statutory trust over customer funds removes the ambiguity that historically allowed firms to co-mingle funds or lose track of customer balances. For consumers, the most tangible benefit is the mandate for resolution packs, which must be retrievable within 48 hours, ensuring that if a provider fails, their money is returned in days or weeks rather than months or years.

Deep Patel, Partner & UK Payments Lead at global management and technology consultancy Capco, comments on the changes to payment safeguarding rules introduced by the FCA today.

“The FCA’s introduction of tougher safeguarding rules for payment and e-money firms is a welcome move and reflects a broader shift towards stronger consumer protection across financial services. The additional requirements, including daily reconciliation checks, monthly reporting, annual audits and faster repatriation of customer funds in a failure scenario, should help give consumers greater confidence that their money is protected with their provider of choice. This is particularly important in a sector that has seen rapid growth and innovation in recent years.

“While many established providers are likely already operating controls and procedures that align closely with the new regulations, some firms may face increased compliance and operational costs as they adapt. Businesses will need to invest in stronger oversight, more robust reconciliation processes and enhanced wind-down planning capabilities to meet the FCA’s expectations. In addition, the reforms are likely to increase supervisory focus on firms’ operational resilience and governance arrangements. Companies will need to demonstrate not only that safeguarding controls are in place, but that they are subject to effective oversight, testing and clear accountability. 

“Although this may initially feel like a significant operational burden, over the longer term the reforms should help create a more resilient and trusted payments ecosystem, benefiting firms through improved customer confidence, retention and sustainable growth. As per regulators expectations, firms that can evidence strong risk management and resilience capabilities are likely to be better positioned to maintain customer trust and regulatory confidence.” 

“The new rules may also contribute to greater consolidation within the market. Smaller firms and newer entrants could find the additional compliance obligations challenging to absorb, particularly at a time of intense competition. However, raising safeguarding standards across the industry should ultimately help strengthen the credibility of the sector as a whole and support healthier long-term competition.”

FF NEWS TAKE

The FCA is essentially “cleaning house” in the payments sector. By enforcing an annual safeguarding audit for any firm holding more than £100,000, the regulator is raising the cost of doing business to a level that may trigger a wave of market consolidation. Smaller players and “zombie” fintechs that have relied on loose internal controls will find the new reporting and diversification requirements—such as reviewing third-party banks at least annually—too burdensome to maintain. This isn’t just about protection; it’s about forcing a “professionalization” of the sector to ensure it can support long-term, stable growth.

However, the “9-month lead-in” that culminated today was just the beginning. The FCA has already signaled a “Post-Repeal Regime” in the future, which could introduce even stricter CASS-style frameworks. For now, firms like those advised by Deep Patel must focus on the “Supplementary Regime” as a baseline. The firms that will thrive in this environment are those that treat these rules not as a “burden,” but as a way to secure a “trust premium” from customers who are increasingly wary of where they store their digital cash.

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