FCA Sets Priorities for Payment Firms Amid Economic Challenges

The FCA recently published a Dear CEO letter issuing payment fintech firms with a clear message: amidst the backdrop of economic challenges and a cost-of-living crisis, ensuring client money safety and maintaining financial system integrity are top priorities. In this blog post, we will explore the FCA's key outcomes and offer actionable advice for firms looking to navigate these priorities.

We will continue to intervene using our full range of supervisory tools. In cases where firms can’t meet the conditions for authorisation, we will take more assertive action sooner and will remove or sanction firms who cannot or will not meet our standards.

Firms should ensure the following:

1. Ensure client money safety: Safeguarding, prudential risk management, and wind-down planning are three crucial components for keeping client money secure. Payment fintech firms must ensure they have robust safeguarding arrangements in place, regularly review their prudential risk management, and maintain up-to-date wind-down plans to minimize harm from potential firm failure.
2. Preserve financial system integrity: Payment firms must have comprehensive and proportionate systems in place to manage money laundering risks and comply with UK regulations. They should also have effective measures to manage sanctions exposure and risk. In addition, addressing weaknesses in fraud prevention systems is paramount to maintaining financial system integrity. Payment firms must stay vigilant, regularly review their risk management strategies, and submit accurate Suspicious Activity Reports (SARs) to uphold this priority.
3. Meet customer needs: The FCA acknowledges the innovation and competition in the payments sector, but emphasizes the need for high-quality products and services, as well as adherence to the FCA Consumer Duty. Payment fintech firms should take appropriate action to ensure compliance with the Consumer Duty, always keeping their customers' best interests at the forefront.

To support these outcomes, payment firms should focus on three cross-cutting priorities: governance and leadership, operational resilience, and regulatory reporting. By having knowledgeable personnel in key functions, ensuring robust governance arrangements, and properly monitoring agents and distributors, payment firms can maintain a strong foundation for success.

Operational resilience is also vital, and firms should regularly review their important business services and impact tolerances. Payment fintech firms must be prepared for contingencies, especially when it comes to dependencies on critical service providers.

In the realm of regulatory reporting, compliance is non-negotiable. Payment firms should be diligent in meeting FCA reporting requirements, as non-compliance could result in administrative charges or enforcement action.

The FCA also reminds firms about the importance of robust assessment when seeking authorization, registration, or varied permissions. Prior approval for changes in control is a requirement, and non-compliance carries consequences. Finally, payment firms should be familiar with the FCA's ESG strategy and prioritize diversity and inclusion in their operations.

In conclusion, navigating the FCA's priorities requires payment fintech firms to be proactive, vigilant, and committed to ensuring client money safety, preserving financial system integrity, and meeting customer needs. By focusing on these key outcomes and supporting initiatives, payment firms can continue to thrive in an increasingly competitive and challenging landscape.

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