The Financial Conduct Authority (FCA) has published its final policy statement, PS25/12, confirming a package of measures to reinforce the safeguarding of customer funds held by payment institutions and e-money firms.
The changes are designed to close gaps identified through supervisory work, past enforcement cases, and recent insolvencies in the sector. They form part of the FCA’s wider strategy to ensure customer protection and market stability across firms operating outside the traditional banking system.
Why the Changes Matter
Safeguarding is the cornerstone of consumer trust in the payments and e-money sector. Customers expect their funds to be protected in the event of firm failure, yet FCA reviews have revealed inconsistent standards of compliance, weaknesses in record-keeping and poor wind-down planning across the market.
The insolvencies of several non-bank payment providers in recent years highlighted how delays or deficiencies in safeguarding can cause significant losses and disruption for consumers and businesses. The FCA’s new rules seek to strengthen resilience, reduce ambiguity and ensure safeguarding operates as intended in practice.
Key Policy Changes in PS25/12
The FCA has introduced a series of rule and guidance changes, with amendments to the Payment Services Regulations 2017 (PSRs), Electronic Money Regulations 2011 (EMRs), and related parts of the FCA Handbook, including the Approach Document and relevant sourcebooks such as SUP and FEES.
The most significant changes are:
- Daily Reconciliation of Customer Funds
Firms must complete reconciliation of relevant funds by the end of the business day following receipt.
This requirement reduces the risk of delays in segregating client money and ensures that safeguarding protections are applied more promptly.
- Enhanced Record-Keeping Obligations
Firms must maintain clear, accurate and up-to-date records to evidence compliance with safeguarding obligations.
The FCA expects firms to have systems that clearly show the exact amount of safeguarded funds and the timing of reconciliation. Poor record-keeping has been a recurring deficiency in past supervisory interventions.
- Clarified Prudential Requirements
Updated guidance clarifies the treatment of safeguarded funds and the minimum prudential resource requirements firms must hold.
This provides firms with greater certainty when structuring their capital and safeguarding frameworks, reducing interpretative risk.
- Independent Audit of Safeguarding Arrangements
Certain firms must now commission an annual independent audit of their safeguarding systems, controls and compliance.
The audit should assess not only policies but also operational effectiveness, offering assurance to both the FCA and customers. Further details on audit scope and qualifications are set out in the final rules and related guidance.
- Improved Wind-Down Planning
Firms are required to strengthen wind-down strategies to ensure customer funds remain protected in the event of business failure.
The FCA has emphasised that insufficient planning for insolvency or disorderly exit poses systemic risks to customers and counterparties and will be met with regulatory scrutiny.
The FCA’s Message
The FCA has been explicit: safeguarding failures have serious, direct consequences for customers and undermine confidence in the sector. By finalising these reforms, the FCA aims to:
- Strengthen consumer protection by ensuring customers can access their funds quickly and securely if a firm fails;
- Increase resilience across the payments and e-money industry; and
- Reinforce trust in firms operating outside the banking system, which play an increasingly vital role in the UK’s financial services ecosystem.
These changes align with the FCA’s broader commitments to operational resilience, governance, and high standards of risk management across regulated firms.
What Firms Should Do Next
All payment institutions and e-money firms should act without delay to ensure compliance with PS25/12. Key actions include:
- Policy Review: Assess existing safeguarding policies, procedures and controls against the new rules.
- Systems and Processes: Confirm reconciliation processes meet the new daily timeline and that record-keeping systems provide clear evidence of compliance.
- Audit Readiness: Determine whether your firm falls within scope for the new audit requirement and prepare documentation accordingly.
- Wind-Down Plans: Update plans to ensure they fully address FCA expectations and provide robust protection for customers in case of firm failure.
- Implementation Timelines: Monitor and comply with the deadlines set out in PS25/12. The FCA has stated that firms failing to implement changes in time risk supervisory or enforcement action.
How Complyport Can Help
Complyport specialises in supporting payment institutions and e-money firms meet regulatory obligations with confidence. Our expert team provides tailored support across the full safeguarding framework, including:
- Comprehensive safeguarding health checks and reviews: We assess your existing safeguarding arrangements to ensure they meet FCA expectations and identify areas for improvement.
- Gap analyses against the new FCA requirements: We compare your current policies and controls with PS25/12 to highlight any compliance shortfalls.
- Development and testing of wind-down plans: We help design and test wind-down strategies that protect customer funds and meet regulatory standards.
- Advisory on prudential resources and record-keeping standards: We provide expert guidance on maintaining adequate capital and robust records to support regulatory compliance.
- Independent safeguarding audits and assurance reviews: We conduct objective audits to validate the effectiveness of your safeguarding systems and provide assurance to stakeholders.
- Ongoing compliance and risk management advisory services: We offer continuous support to help your firm manage regulatory risks and maintain strong compliance frameworks.
Get in touch with our specialists today to discuss how we can assist your firm in meeting the new safeguarding requirements.
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