The Financial Conduct Authority has introduced the most significant overhaul of payment safeguarding rules since their inception, with new requirements taking effect on 7 May 2026. The rules target payment institutions and e-money firms — the backbone of the UK fintech payments ecosystem — and mandate sweeping changes to how these firms protect customer funds.

Under the new regime, firms must perform daily reconciliation checks to ensure the correct amount of customer money is being safeguarded, submit monthly regulatory returns, and undergo annual audits by qualified auditors. Firms must also improve their books, records, and monitoring practices, and develop better planning for the event of firm failure so that customers receive their money back more quickly. A proportionality carve-out exempts firms holding less than £100,000 in customer funds from the audit requirement.

The impetus for the overhaul is stark. The FCA found that payment and e-money firms that became insolvent between 2018 and the second quarter of 2023 had an average shortfall of 65% of their customers' funds. In other words, when these firms collapsed, customers received on average only 35 pence for every pound they were owed. The new rules are designed to close this gap and ensure that customer funds are properly ring-fenced.

The impact will be felt across the fintech sector. Hundreds of FCA-authorised payment institutions and e-money firms — from established players like Revolut, Wise, and PayPal to smaller fintechs — will need to implement new systems, processes, and governance structures ahead of the May deadline. Industry observers note that the compliance costs could be particularly challenging for smaller firms and startups, potentially accelerating consolidation in the sector.

The FCA has described this as a foundational reform, setting the stage for the UK payments market to operate with greater consumer confidence at a time when digital payments continue to grow rapidly.