The FCA is stepping in to better protect customers when payments and e-money firms go out of business.
Use of payments firms has grown in recent years, but the FCA says it continues to see poor safeguarding practices from firms.
Funds held by payments and e-money firms are not directly protected by the Financial Services Compensation Scheme (FSCS). Instead, firms must safeguard funds which can mean customers lose money or experience delays to funds being returned if the firm fails.
The FCA wrote to payments and e-money CEOs in March 2023 about their safeguarding and wind-down arrangements and has since opened supervisory cases relating to approximately 15% of firms that safeguard, to address its concerns.
Matthew Long, Director of Payments and Digital Assets, said:
‘We’re consulting on proposals to make safeguarding rules stronger and clearer for payment and e-money firms so customers get as much of their money back as quickly as possible if the firm goes out of business.’
Under the FCA’s proposals, the existing e-money safeguarding regime will be replaced with a client assets (CASS) style regime designed to work with payments firms’ business models. It will also publish strengthened interim safeguarding rules for firms by the middle of next year.
The FCA’s cost benefit analysis (CBA) of its proposals has also been subject to review by the new independent CBA Panel.
Firms can respond to the FCA’s consultation by 17 December 2024.