The UK’s Financial Conduct Authority (FCA) has finalized new regulations to safeguard consumers’ funds in the event of payment firm insolvencies.
Under these new rules, customer money must be kept distinct from the firm’s own finances to ensure its availability for refund if the company fails. This initiative follows findings that payment firms which became insolvent between Q1 2018 and Q2 2023 experienced average shortfalls of 65% of their customers’ funds.
E-money firms holding more than £100,000 in customer assets will be required to undergo annual audits, while all firms must implement monthly reporting on their holdings and conduct daily checks to verify the correct safeguarding of funds.
Matthew Long, FCA’s director of payments and digital assets, stated: “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. We will monitor whether firms take the opportunity to implement effective improvements as this will inform any further tightening of regulations.”
The new regulations will come into effect in May next year, allowing firms nine months to prepare. However, the consumer advocacy group Transparency Taskforce has criticized these measures as “too little, too late” for those who have suffered notable losses due to payment firm failures.
Founder Andy Agathangelou expressed that the FCA has effectively recognized a consumer protection disaster over the past seven years, citing serious impacts on individuals’ savings, deposits, and emergency funds. He called for a more prompt implementation of the rules, universal auditing requirements for all firms, and an independent review of the FCA’s shortcomings in consumer protection from 2018 to 2023.