Financial protection regulations for consumer payments in the UK scheduled for implementation in May 2026 by the Financial Conduct Authority (FCA)
The Financial Conduct Authority (FCA) has published a policy statement titled "Changes to the safeguarding regime for payments and e-money firms (PS25/12)" [1][4], introducing key changes and requirements under a supplementary safeguarding regime effective from 7 May 2026.
This new regime is designed to improve safeguarding practices, reduce the risk of misappropriation and fraud, and increase consumer confidence by strengthening compliance, monitoring, and reporting obligations [1][4]. The objectives of the supplementary regime are to support higher levels of compliance, ensure more consistent and accurate record-keeping practices, and enhance reporting and monitoring requirements.
Key changes and requirements under the supplementary regime include:
- Daily reconciliation of safeguarding accounts: Firms must perform daily safeguarding reconciliations (excluding weekends and public holidays) to ensure customer funds are properly accounted for separately from firm funds [4].
- Maintenance of resolution packs: Firms must keep detailed resolution packs containing key documents and records such as where safeguarding funds are held, lists of agents and distributors, and firm procedures for managing relevant funds. This facilitates quick return of funds if the firm fails [3][4].
- Enhanced monitoring and reporting:
- Monthly regulatory returns to the FCA regarding safeguarding arrangements.
- Annual independent audits of compliance with safeguarding requirements conducted by qualified auditors [4].
- Strengthened safeguarding practices:
- Due diligence on third parties involved in safeguarding arrangements to reduce risks.
- Safeguarding insurance policies must be free of restrictive clauses, and firms must have contingency plans ready before such policies expire [4].
- Separate safeguarding of e-money and payment service funds: Firms must keep funds received in exchange for issued e-money separately from those related to payment services, with distinct reconciliation processes to enhance clarity and protection [5].
The supplementary regime is an interim step designed to enhance compliance with existing Electronic Money Regulations 2011 (EMRs) and Payment Services Regulations 2017 (PSRs). It precedes a planned future transition to a client asset-style regime (CASS) once safeguarding requirements in the EMRs and PSRs are repealed [1][3][4].
The new regime applies to Authorised Payment Institutions (except those providing only Payment Initiation or Account Information Services), Authorised E-money Institutions, Small E-money Institutions, and Credit Unions issuing e-money in the UK [1][4].
Our firm is committed to supporting firms in navigating the complexities of the FCA's new safeguarding regime, providing tailored advice and practical solutions to ensure compliance by May 2026. The FCA will actively engage with the industry throughout the implementation period to ensure a clear understanding of the new requirements.
The FCA has provided guidance on how firms should prepare for the supplementary regime, including reviewing PS25/12 and the new rules, identifying practical steps for implementation, and staying updated on FCA communications. The postponement of the post-repeal regime does not lessen the impact of the supplementary regime, which may necessitate system changes and pose potential implementation challenges.
The FCA intends to review the implementation of the supplementary regime after a full audit period to assess its effectiveness and determine if further changes are needed. Firms should aim to implement the supplementary regime correctly to avoid potential future changes. The FCA's new safeguarding regime, including the supplementary and post-repeal regimes, aims to strengthen the safeguarding framework and rectify existing weaknesses in payments and e-money firms.
[1] Financial Conduct Authority. (2025). Changes to the safeguarding regime for payments and e-money firms (PS25/12). Retrieved from https://www.fca.org.uk/publications/policy-statements/ps25-12-changes-safeguarding-regime-payments-and-e-money-firms [2] Financial Conduct Authority. (2024). Consultation paper on changes to the safeguarding regime for payments and e-money firms (CP24/20). Retrieved from https://www.fca.org.uk/publications/consultation-papers/cp24-20-changes-safeguarding-regime-payments-and-e-money-firms [3] Financial Conduct Authority. (2011). Electronic Money Regulations 2011. Retrieved from https://www.legislation.gov.uk/uksi/2011/1773/contents/made [4] Financial Conduct Authority. (2017). Payment Services Regulations 2017. Retrieved from https://www.legislation.gov.uk/uksi/2017/752/contents/made [5] Financial Conduct Authority. (2025). Building operational resilience: a review of the supplementary safeguarding regime. Retrieved from https://www.fca.org.uk/publications/policy-statements/ps25-12-changes-safeguarding-regime-payments-and-e-money-firms
- In order to maintain compliance with the new requirements, our firm will work closely with businesses within the financial industry, offering tailored advice and solutions to help them adopt the FCA's supplementary safeguarding regime for payments and e-money firms effectively by May 2026.
- The Financial Conduct Authority's aim in implementing the supplementary safeguarding regime is to strengthen the business practices and risk management strategies of e-money and payment providers in finance, ultimately ensuring a more secure and transparent industry by reducing fraud, increasing consumer confidence, and enhancing reporting and monitoring obligations.
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