The new changes, set to go into effect in May 2026, are designed to improve safeguarding practices among payments companies, according to a Thursday (Aug. 7) press release.
“Safeguarding means that customer money must be kept separate from the firm’s own money so that it is available to be returned if the firm fails,” the release said. “Following constructive engagement with industry, the FCA has confirmed that the new rules will kick in after 9 months, giving industry time to prepare. It has also made changes to ensure that rules are proportionate for smaller firms, such as by removing the requirement for audits if a firm holds less than 100,000 pounds [about $134,000] in customer funds.”
The rules mean consumers will receive more protections, and if a payment or eMoney company fails, their customers are more likely to get a full refund with fewer delays, per the release.
The rules require annual audits by qualified auditors, monthly reporting for payment firms, daily checks to ensure the right amount of money is being safeguarded to protect customers, and better planning for failures to make sure customers get their money back sooner, the release said.
FCA findings show that payment firms that went under between the first quarter of 2018 and the second quarter of 2023 had average shortfalls of 65% of their customers’ funds, according to the release.
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“People rely on payment firms to help manage their financial lives,” said Matthew Long, director of payments and digital assets for the FCA, per the release. “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.”
In other regulatory news, the Federal Deposit Insurance Corp. (FDIC) earlier this week issued guidance allowing banks — under certain circumstances — to use auto-filled forms, thus making it easier for people to open accounts faster.
The update came amid consumer expectations for instant onboarding and competitive pressure from neobanks already using pre-population to capture deposits, PYMNTS wrote Tuesday (Aug. 5).
However, the approach eases one obstacle but also spotlights the fact that banks are still accountable for anti-money laundering (AML) and know your customer (KYC) “controls proportional to their risk profile.”
