Financial Conduct Authority to add new protections for consumers’ funds

The UK’s Financial Conduct Authority (FCA) is to tighten up its regulations “to ensure payments firms are adequately protecting customer funds” amid concerns that the impact of Covid-19 will affect their financial viability.

FCA logo

“We welcome the innovation and competition we are seeing in payment services,” the FCA says. “But, as with all growing markets, we are also monitoring it closely for any harm to consumers or market integrity it may cause.”

“Some payment services firms are growing rapidly and many are unprofitable in the early stages, while they try to grow market share,” it adds.

“We are also concerned that the pandemic will affect these firms’ financial strength and may affect the availability of their external funding.”

The FCA has also found evidence that “some firms have not implemented the Electronic Money Regulations 2011 or Payment Services Regulations 2017 as we expect,” it says.

“Examples include co-mingling of customer and firm funds, firms keeping inaccurate records and accounts, and not having sufficiently effective risk management procedures.

“So, we are bringing forward a short consultation on temporary guidance to provide additional clarity to help strengthen firms’ prudential risk management and their arrangements for safeguarding customers’ funds to help them meet our authorisation and supervisory expectations in these areas. The proposed guidance also outlines how firms can put in place more robust plans for winding down.”

Next: Visit the NFCW Expo to find new suppliers and solutions