Deep Patel, Partner & UK Payments Lead at global management and technology consultancy Capco, comments on the changes to payment safeguarding rules introduced by the FCA today.

“The FCA’s introduction of tougher safeguarding rules for payment and e-money firms is a welcome move and reflects a broader shift towards stronger consumer protection across financial services. The additional requirements, including daily reconciliation checks, monthly reporting, annual audits and faster repatriation of customer funds in a failure scenario, should help give consumers greater confidence that their money is protected with their provider of choice. This is particularly important in a sector that has seen rapid growth and innovation in recent years.

“While many established providers are likely already operating controls and procedures that align closely with the new regulations, some firms may face increased compliance and operational costs as they adapt. Businesses will need to invest in stronger oversight, more robust reconciliation processes and enhanced wind-down planning capabilities to meet the FCA’s expectations. In addition, the reforms are likely to increase supervisory focus on firms’ operational resilience and governance arrangements. Companies will need to demonstrate not only that safeguarding controls are in place, but that they are subject to effective oversight, testing and clear accountability.

“Although this may initially feel like a significant operational burden, over the longer term the reforms should help create a more resilient and trusted payments ecosystem, benefiting firms through improved customer confidence, retention and sustainable growth. As per regulators expectations, firms that can evidence strong risk management and resilience capabilities are likely to be better positioned to maintain customer trust and regulatory confidence.”

“The new rules may also contribute to greater consolidation within the market. Smaller firms and newer entrants could find the additional compliance obligations challenging to absorb, particularly at a time of intense competition. However, raising safeguarding standards across the industry should ultimately help strengthen the credibility of the sector as a whole and support healthier long-term competition.”