FCA safeguarding rules: what payments and e-money firms must change

Where this stands now (updated September 2026): the FCA finalised the interim-state safeguarding rules in Policy Statement PS25/12 (August 2025) and they have applied since 7 May 2026. UK payment and e-money firms are now subject to the enhanced books-and-records, daily reconciliation, monthly safeguarding return and annual safeguarding audit requirements described below. The end-state rules, including the statutory trust, remain dependent on legislative change and will follow. The Central Bank of Ireland has moved in the same direction, introducing a Pre-Approval Controlled Function for the Head of Safeguarding in its 2026 Regulatory and Supervisory Outlook. Firms operating in both jurisdictions should read the two regimes together.

Safeguarding in the Payments and E-Money Sector: FCA's Updated Proposals

The Financial Conduct Authority (FCA) has released its Consultation Paper CP24/20, outlining significant changes to the safeguarding regime for payments and e-money firms. These reforms aim to address weaknesses in safeguarding practices and enhance consumer protection. With a growing number of consumers relying on e-money services, the FCA's proposals are designed to ensure that consumer funds are better protected in the event of firm insolvency.

Why Safeguarding Matters

Safeguarding refers to the regulatory requirement for payments and e-money firms to protect consumer funds by keeping them separate from the firm's own assets. This ensures that, if a firm fails, consumers can recover their funds promptly and in full. However, recent insolvencies have exposed shortcomings in the current safeguarding practices, leading to substantial consumer harm. The FCA's proposals focus on strengthening these safeguarding mechanisms to reduce risks and improve outcomes for consumers.

Key Proposed Changes

1. Improved Books and Records:
   • Firms will be required to implement more rigorous record-keeping and reconciliation practices. This includes daily reconciliations of safeguarded funds, ensuring they are accurately tracked and segregated from the firm's own funds.
   • The introduction of a "resolution pack" will streamline the insolvency process, making it easier for administrators to identify and distribute consumer funds.
2. Enhanced Monitoring and Reporting:
   • Payments firms will need to submit monthly reports on their safeguarding practices, including the amount of safeguarded funds and any discrepancies identified during reconciliations.
   • Regular audits of safeguarding practices will be mandatory, with audit reports submitted directly to the FCA.
3. Strengthening Safeguarding Practices:
   • Firms will be required to exercise greater diligence in selecting third parties, such as banks or custodians, for safeguarding accounts.
   • The rules will also mandate that relevant funds are deposited directly into designated safeguarding accounts, ensuring better segregation from non-safeguarded funds.
4. Statutory Trust:
   • A key feature of the FCA's proposals is the creation of a statutory trust over safeguarded funds. This would provide consumers with enhanced legal protection, ensuring their funds are held in trust and are not available to other creditors if a firm fails.
5. Safeguarding by Insurance or Guarantee:
   • Firms that choose to safeguard funds via an insurance policy or comparable guarantee will face stricter requirements, including ensuring that the value of the cover always exceeds the amount of safeguarded funds.

The Road Ahead: Interim and End-State Rules

The FCA's approach involves a two-stage implementation process. Interim rules will be introduced to improve compliance with current safeguarding regulations, followed by more extensive changes in the end-state rules, which will replace existing regulations under the Payment Services Regulations (PSRs) and E-Money Regulations (EMRs). The end-state rules will fully integrate the statutory trust and address lingering legal ambiguities.

Impact on Firms and Consumers

The FCA's proposals will have a broad impact across the payments and e-money sector. While the changes will impose additional compliance costs on firms, they are expected to significantly reduce consumer harm by minimising shortfalls in safeguarded funds and ensuring quicker distribution in insolvency scenarios.

By implementing these reforms, the FCA seeks to foster trust in the UK's payments sector and provide a safer environment for both consumers and businesses.

If your firm needs an independent view of its safeguarding arrangements against the interim-state rules, or is preparing for a CBI safeguarding thematic, see how Finvisor supports payment and e-money firms.