FCA criticises ‘unacceptable’ risk posed by payments firms

The UK’s financial watchdog has said that some payments firms with insufficient controls pose an “unacceptable risk of harm” to their customers.

In a letter to almost 300 company chief executives, the Financial Conduct Authority’s (FCA) director of payments and digital assets warned payment services providers that it could shut down businesses that don’t resolve issues negatively impacting consumers.

The regulator welcomes competition and innovation in the sector but expressed concerns that the risk of customer harm by some firms is being exacerbated by tighter economic conditions and the cost-of-living crisis.

Despite the FCA publishing guidance in 2020 which requires firms that undertake a statutory audit to also conduct an annual audit of their safeguarding arrangement, the organisation said that some firms have not yet appointed auditors.

These companies are not consistently informing the FCA of adverse findings or actions being taken to address them, said the authority's payments director, adding that it expects payments firms to make keeping customer money safe a "top priority".

“We have seen good examples of positive innovation by payments firms which has created tangible benefits for customers and the payments ecosystem including the development of Open Banking, which is now used by 6.5 million users in the UK,” wrote Matthew Long, payments director at the FCA. “However, we also continue to see examples of products and services which do not consistently deliver good customer outcomes and payment firms not acting in customers’ best interests.”

He also warned that the FCA's work with firms over the past two years has identified "material issues" with financial crime systems and controls at payment institutions and e-money companies.

Long explained that the ability for these kinds of businesses to provide "bank-like" services, alongside their willingness to service high-risk customers, make them a target for bad actors.

Long's comments follow a similarly scathing letter sent to UK payments firms last month, in which the FCA said that the upcoming Consumer Duty would require a significant “shift in culture and behaviour” across the e-money market.

In the letter, the FCA said that it expects "significantly more" from payments firms, including a more “outcomes-focused” approach to consumer protection.

    Share Story:

Recent Stories


The human firewall: Activating employees to safeguard financial data
As financial services increasingly embrace SaaS and cloud-based technologies, they face emerging threats to safeguard sensitive customer data. While comprehensive IT security measures are essential, the active involvement of employees across organisations is pivotal in ensuring the protection of sensitive data.

Building a secure financial future for instant payments: The convergence of ISO 20022 and fraud detection
The financial landscape is rapidly evolving its approach to real-time transactions under the ISO 20022 standard, and financial institutions must take note. With examples such as the accelerated adoption of SEPA Instant Credit Transfers in Europe and proposed New Payment Architecture (NPA) programme in the UK, the need for swift and effective fraud detection is more crucial than ever.

Data Streaming and Consumer Duty: Transforming customer experience in banking
Introduced at the end of July, the Consumer Duty is a game-changing new set of rules and guidance for financial services institutions in the UK, and companies must look to modernise their systems in adherence with it in mind to create the best customer experience possible.

From insight to action: Empowering financial institutions through advanced technology and collaborative information sharing
The use of Information sharing in enhancing financial crime prevention has been universally agreed as being beneficial. However no-one has been able to agree on how information can be shared safely without breaching data protection laws or having the right systems to facilitate this, Information sharing has re-emerged as a major consideration for financial institutions (FIs) ahead of the Economic Crime and Corporate Transparency Bill being made into law in the UK.