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Consumers using payment and e-money firms in the UK will benefit from stronger protections from next year under new safeguarding rules finalised by the Financial Conduct Authority (FCA).

The  are intended to ensure that customer funds are properly safeguarded and can be swiftly returned in the event of firm failure, addressing persistent weaknesses identified by the regulator in past insolvencies. 

“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,” said Matthew Long, the FCA’s director of payments and digital assets. 

“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.”

Long added, “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.” 

As covered by 91����ԭ��, the FCA began consulting on safeguarding in autumn 2024, after criticising firms in their Dear CEO letters and recent court cases, such as the Igapoo administration . 

As the FCA points out, between Q1 2018 and Q2 2023, failed payment firms had average shortfalls of 65 percent of their customers’ funds, highlighting systemic flaws in safeguarding practices.

What are the new rules?

Under the new framework, known as the Supplementary Regime, payment and e-money institutions authorised by the FCA will be required to: 

• Conduct daily reconciliations, excluding weekends and public holidays, to ensure the correct amount of customer funds is being safeguarded.
• Arrange annual safeguarding audits carried out by qualified auditors, unless the firm holds less than £100,000 in customer funds.
• Submit monthly safeguarding reports to the FCA.
• Develop and maintain resolution packs to facilitate a faster return of customer funds in insolvency events.
• Undertake due diligence on third parties managing or holding customer funds.
• Ensure safeguarding insurance or guarantees are free from payout restrictions.
• Implement contingency plans three months ahead of any insurance policy expiry date, defaulting to segregation of funds if needed.

The regulator consulted extensively with industry and consumer groups, receiving 85 responses, and has made several adjustments to improve proportionality and reduce implementation burdens. 

These include removing the audit requirement for firms holding no customer funds, introducing the £100,000 audit threshold and extending the implementation period from six to nine months to allow firms more time to prepare.

The FCA said it would monitor the success of the regime by tracking declines in fund shortfalls and supervisory interventions linked to safeguarding failures. A further review of the rules may follow once a full audit cycle is complete.

The updated requirements will be implemented across multiple sections of the , including CASS 10A, CASS 15, SUP 3A and SUP 16.14A. 

Payment firms are expected to establish appropriate systems and controls ahead of the May 7, 2026 deadline.

The regulator has also said it is considering future consultation on insolvency arrangements outside the Payment and Electronic Money Institution Insolvency Regulations 2021 (PESAR). This would apply particularly where third parties used for safeguarding fail.