The Financial Conduct Authority (FCA) has overhauled its supervisory approach for the payments industry, replacing more than 40 individual portfolio letters with a single annual Regulatory Priorities report. The move signals a shift toward a more “smarter” and “proportionate” regulatory model designed to support the UK’s National Payments Vision while tightening the net on firms failing to protect customer funds.
By streamlining its communications, the regulator aims to provide a “one-stop shop” for boards and executives to understand exactly where to focus their compliance efforts. This new framework is underpinned by a risk-based approach, where firms doing the right thing face less intensive supervision, while those posing the greatest harm meet stronger, faster enforcement action.
Matthew Long, Director of Payments and Digital Assets at the FCA, explained that the sector is evolving at pace, driven by open banking and new digital payment methods. “By setting out our priorities clearly, we want firms to understand where to focus their efforts — helping to deepen trust, rebalance risk and support sustainable growth,” Long said.
Future Infrastructure and Open Banking
A primary focus for the year ahead is the expansion of open banking and the transition toward a “Future Entity” to lead the ecosystem. With over 16 million people and businesses in the UK using open banking in 2025, the FCA is now working with the Treasury to introduce legislation that would grant the regulator permanent powers to set rules for a long-term framework.
This includes the development of commercial models for variable recurring payments (VRPs) and laying the groundwork for e-commerce use cases. However, the report raises questions about how quickly the industry can move toward “agentic AI payments,” an area the FCA is currently reviewing to determine if existing regulations are fit for purpose.
Strengthening the Safeguarding Net
The regulator remains vocal about its concerns regarding the safety of customer money, particularly if payments firms fail. In response to persistent weaknesses, the FCA is set to implement its Safeguarding Supplementary Regime in May 2026.
Electronic money institutions safeguarded approximately £26billion in 2024, yet the FCA warned that many firms still lack robust risk management frameworks and wind-down plans. The regulator noted it expects an increase in “adverse” audit opinions in the short term as standards are tightened across the sector.
Integrity and Financial Crime
Protecting financial system integrity remains a top priority, with a specific focus on slowing the growth of authorised push payment (APP) fraud and money laundering. Firms are expected to invest in “right skills” to design and test systems and controls, rather than relying on legacy processes.
The FCA also confirmed it will continue to consolidate the functions of the Payment Systems Regulator (PSR) into its own operations where possible ahead of formal legislation. This is intended to create a more agile and responsive environment, though it places the onus on firms to manage a shifting regulatory landscape while maintaining the high standards required by the Consumer Duty.
As the FCA moves toward publishing final policy statements on its cryptoasset regime and stablecoin issuance later this year, the industry must now decide if it can innovate at the speed the regulator expects while meeting these increasingly rigorous safety requirements.
