FCA tightens the screws on e-money firms; consumer groups say "too little, too late"
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Under the rules. customer money must be kept separate from the firm's own money so that it is available to be returned if the firm fails.
The move comes after the watchdog found that payment firms that became insolvent between Q1 2018 and Q2 2023 had average shortfalls of 65% of their customers' funds.
Under the new regime, e-money firms that hold more £100,000 in customer funds must undertake annual audits and all firms must begin monthly reporting on their holdings and conduct daily checks to ensure the right amount of money is being safeguarded.
Matthew Long, director of payments and digital assets, FCA, says: "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'll be watching closely to see if firms seize the opportunity and make effective improvements that their customers rightly deserve - this will help us to determine whether any further tightening of rules is necessary."
He says the the new rules will kick in after nine months in May next year, giving industry time to prepare.
Consumer advocacy group the Transparency Taskforce has branded the new measures as "too little, too late" for consumers who have suffered devastating losses from payment firm failures.
"The FCA is essentially admitting they've presided over a consumer protection disaster for the past seven years," says Taskforce founder Andy Agathangelou.
"These aren't technical failures - these are real people losing their life savings, house purchase deposits, and emergency funds because the regulator failed to act. It's simply scandalous that it's taken this long for the FCA to acknowledge what consumer groups have been warning about. It's a lax and woefully tardy response from a regulator that has been promising to be more responsive, more proactive and more effective for years.
"It seems the FCA has the capacity to watch detriment from the sidelines for far too long before eventually taking action. But even then the action taken simply doesn't go far enough. Consumers, and consumer groups just aren't being listened to; there's an asymmetry of influence over the regulator.'
The group want to see swifter implementation of the rules and enforcement of universal audit requirement regardless of firm size. It is also demanding FSCs equivalent protection for all payment firm customers and an independent review of FCA's failure to protect consumers 2018-2023.
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