Author: James Borley, Director of Payment Services
As previously heralded, the Financial Conduct Authority (“FCA”) Regulatory Priorities Report for Payments (“the Report”) forms part of the FCA’s broader shift away from fragmented portfolio (“Dear CEO”) letters toward a consolidated suite of sector-specific priority documents. This structural change is not merely cosmetic. It reflects a deliberate attempt to simplify regulatory communication while sharpening focus and accountability at firm level.
The Report is explicitly positioned as a “one-stop shop” for supervisory and policy priorities, requiring firms to assess applicability, embed changes and evidence outcomes. This places a renewed emphasis on governance: boards are expected not only to understand regulatory priorities, but to operationalise them within risk frameworks, product design and customer journeys.
The underlying message reinforces the concerns and direction of travel set out in previous Dear CEO letters, and that regulatory engagement is no longer reactive. Firms must anticipate, interpret and implement, in anticipation of the proverbial tap on the shoulder from the FCA.
The Four Strategic Priorities: Again
It is no surprise to me that the four principal priorities for the payments sector are broadly restatements of the previous Portfolio letters in 2023 and 2025, each reflecting longstanding themes and emerging risks:
- Preparing for the future to support competition, innovation and growth;
- Ensuring effective implementation of the Consumer Duty;
- Protecting financial system integrity; and
- Safeguarding customer funds.
Taken together, these priorities represent a balancing act between enabling innovation and maintaining trust; arguably the defining regulatory challenge in payments.
Enabling Growth and Innovation: Regulation as an Enabler, not a Constraint
A notable evolution in tone is the FCA’s explicit stated support for innovation and competition. The Report aligns closely with the UK’s broader National Payments Vision, signalling that regulation should facilitate, rather than hinder, technological advancement and market entry.
This includes continued focus on open banking, variable recurring payments and the development of future payments infrastructure, suggesting a willingness to create a competitive ecosystem in which non-bank payment service providers can scale, innovate and challenge incumbents.
However, this support is conditional. Innovation must be accompanied by robust governance, effective risk management and demonstrable consumer benefit. In practice, this means firms leveraging new technologies, such as AI, data analytics and embedded finance, that must evidence control frameworks that keep pace with complexity.
Consumer Duty: From Implementation to Evidencing Outcomes
If one theme dominates the Report, it is the continued embedding of the Consumer Duty. Payments firms must move beyond implementation and into demonstrable delivery of good customer outcomes.
This is particularly significant for the payments sector, where firms have historically viewed themselves as lower risk and secondary, relative to investment or credit products. The FCA has challenged this assumption, highlighting that payments services still present “significant inherent risks of poor consumer outcomes” if not properly governed. Especially given that’s payments are the plumbing that runs throughout the UK financial system and society as a whole.
The regulator expects firms to:
- Clearly define target markets;
- Monitor outcomes using meaningful management information;
- Identify and remediate harm proactively; and
- Ensure communications are clear, fair and not misleading.
Firms must evidence not only that frameworks exist, but that they function as intended in real-world scenarios. Again, the FCA is expecting evidence of discussion at Board-level, and implementation of decisions, not just lip-service.
Financial Crime and System Integrity
The priority of protecting financial system integrity reflects the continued elevation of financial crime within the FCA’s agenda. Payments firms sit on the front line of fraud, money laundering and sanctions evasion, making them critical gatekeepers in the financial system.
The Report reinforces expectations around:
- Transaction monitoring and fraud detection;
- Data sharing and collaboration across the ecosystem; and
- Robust controls aligned to evolving threats.
This aligns with wider regulatory and governmental focus on fraud prevention, particularly Authorised Push Payment (“APP”) fraud and increasingly sophisticated scam typologies.
Crucially, the FCA signals a willingness to act decisively where firms fall short. The “smarter regulator” model is not synonymous with lighter touch supervision; rather, it implies more targeted, and potentially more intrusive, intervention where harm is greatest. And, of course, we have seen plenty of recent examples of Voluntary Requirements (“VREQs”) and Own-Initiative Requirements (“OIREQs”), where the FCA has done just that.
Safeguarding
Safeguarding of customer funds remains a cornerstone of payments regulation and, given the imminent transition to the CASS 15 regime, this area will continue to attract increased supervisory scrutiny.
For electronic money institutions and payment institutions, safeguarding failures represent one of the most tangible risks to consumers and continues to manifest with almost every firm failure. The FCA’s focus is therefore unsurprising, but its expectations are evolving.
Firms must ensure:
- Segregation of client funds is robust and operationally effective;
- Reconciliation processes are timely and accurate; and
- Governance arrangements provide clear oversight and accountability.
Given recent market failures and the increasing scale of non-bank payment firms, safeguarding is likely to remain a key priority across Authorisations, Supervision and Enforcement.
Data, Supervision and Proportionality
Beyond thematic priorities, the Report provides insight into how the FCA intends to supervise the sector.
The regulator emphasises:
- More targeted data collection;
- Increased use of analytics to identify risk; and
- A more risk-based allocation of supervisory resources.
This approach aims to reduce burden for well-controlled firms while enabling faster intervention where issues arise.
For firms, this translates into a dual challenge: ensuring data quality and consistency, while also recognising that regulatory scrutiny will be increasingly data-driven and continuous.
Implications for Firms
The overarching message of the Payments Report is that compliance can no longer be treated as a discrete function or a tick-box exercise. Instead, regulatory priorities must be embedded within corporate governance, business strategy, product development and operational design.
Key actions for firms include:
- Conducting gap analyses against each priority area;
- Enhancing governance frameworks to ensure board-level oversight and responsibility;
- Investing in data capabilities to evidence outcomes;
- Reviewing safeguarding and financial crime controls; and
- Aligning innovation strategies with regulatory expectations.
Summary
Whilst the FCA Priorities may not seem new, the FCA’s Payments Report nevertheless builds on established themes, consumer protection, financial crime, safeguarding and Consumer Duty, while embedding them within a broader narrative of growth, innovation and regulatory efficiency.
The Report signals a clear continuation in the FCA’s direction of travel: one that expects firms to match its pace, align with its objectives and evidence their contribution to well-functioning markets. An overarching message throughout the Report is that the FCA “will take appropriate action against firms.” As was ever the case.
How Complyport Can Help
Complyport supports payment and e-money firms in managing evolving FCA expectations and embedding regulatory priorities effectively. Our services include:
- Gap analysis against FCA regulatory priorities and supervisory expectations;
- Governance and Board effectiveness reviews;
- Consumer Duty implementation and outcomes testing;
- Safeguarding framework design and independent reviews;
- Financial crime framework enhancement; and
- Data governance and regulatory reporting support.
Book a Meeting with a Complyport SME
To ensure your firm is aligned with the FCA’s Regulatory Priorities for Payments and prepared for increased supervisory scrutiny, contact Complyport today to arrange a meeting with one of our Subject Matter Experts.
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