The UK’s Financial Conduct Authority (FCA) has imposed customer onboarding restrictions on Payments-as-a-Service provider Modulr until it aligns with new regulations.
At the start of October 2023, the FCA restricted Modulr from bringing on new partner clients, including agents and distributors utilizing its payment infrastructure for cards or accounts. Modulr supports over 200 top-tier customers, such as Revolut, Wagestream, Sage, and BrightPay, and currently processes an annualized transaction value exceeding £100 billion.
In a statement to Sifted, Modulr explained that it agreed to temporarily pause the onboarding of certain new customer segments in the UK in response to new and revised regulations set to take effect in 2023 and 2024. These regulatory changes include the new UK consumer duty, updates to push payment fraud reimbursement, and a ban on incentive marketing for high-risk assets like cryptocurrency.
Modulr has begun notifying new partners that onboarding may be delayed until the first quarter of 2024, although the company did not comment on the specific timeframe.
Update 03/11/2023:
In a statement, Modulr elaborated, "One area of concentrated growth in the business has been through Agent & Distributor (A&D) Partnerships, which brings particular risks and challenges to oversee and manage. Due to the scale and speed of this growth, we have agreed with the FCA to pause the onboarding of new A&D partners to ensure our governance, systems, and controls align with the scale of the business and regulatory requirements."
The statement continued, "We will also take this opportunity to future-proof our operations in light of regulatory changes such as the Consumer Duty, APP Fraud Reimbursement, and Financial Promotions Requirements. This decision does not impact any of our existing partners, the onboarding of new direct customers, or the growth of our European business."