FCA Sets Out Changes to Payment Safeguarding Rules

By Lauren Towner · 6 May 2026

WHY THIS MATTERS: This new mandate for enhanced customer fund protection represents far more than an updated checklist for UK payment and e-money institutions. It signifies a fundamental and necessary regulatory shift toward mandatory operational resilience across the payments sector. For too long, the system relied on post-failure remediation, leaving customers exposed, as evidenced by catastrophic shortfalls averaging 65% in recent insolvencies. This move corrects that failure by embedding continuous, verifiable controls—namely daily fund checks and formal annual audits. The requirement is a value-first wake-up call for leaders: compliance is no longer a periodic exercise but a 24/7 technical commitment. As regulators internationally push for greater trust, the UK is setting a new benchmark. Critically, data suggests that a vast majority of firms were unprepared for this operational pivot right up to the compliance deadline, highlighting a structural gap between confidence and capability. Consumers will be better protected when they use payment firms, with the introduction of new rules to protect their money from May 2026. These changes will improve safeguarding practices among payment firms.

Safeguarding means that customer money must be kept separate from the firm’s own money so that it is available to be returned if the firm fails. Following constructive engagement with industry, the FCA has confirmed that the new rules will kick in after 9 months, giving industry time to prepare. It has also made changes to ensure that rules are proportionate for smaller firms, such as by removing the requirement for audits if a firm holds less than £100,000 in customer funds. These rules mean that consumers are better protected, and if a payment or e-money firm fails they are more likely to get a full refund and with fewer delays. The new rules require:

Annual audits by qualified auditors.
Monthly reporting for payment firms.
Firms to conduct daily checks to make sure the right amount of money is being safeguarded to protect customers.
Better planning if firms fail so customers receive their money back sooner.

These rules will address issues the regulator has found in previous failures of payment firms. Payment firms that became insolvent between Q1 2018 and Q2 2023 had average shortfalls of 65% of their customers’ funds. Matthew Long, director of payments and digital assets, FCA, said: 'People rely on payment firms to help manage their financial lives. But too often, when those firms fail, their customers are left out of pocket. 'Most of those who responded to our consultation agreed we need to raise standards to protect people’s money and build trust, but any changes needed to be proportionate, especially for smaller firms. 'We’ll be watching closely to see if firms seize the opportunity and make effective improvements that their customers rightly deserve – this will help us to determine whether any further tightening of rules is necessary.' FF NEWS TAKE: Yes, this absolutely moves the needle by shifting accountability from guidance to enforceable rules. The real change, however, will be felt in the operational back office. With a majority of firms struggling to implement the required automated, daily reconciliation processes (D+1), we anticipate an acceleration of consolidation within the payments sector. Smaller players unable to absorb the investment in continuous controls and wind-down planning will face steep challenges. We must watch for subsequent market exits and the regulator's first enforcement actions to gauge the true effectiveness of this stricter regime

Companies in this story: Financial Conduct Authority

People in this story: Matthew Long

FCA Sets Out Changes to Payment Safeguarding Rules

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