The FCA has written a letter setting out its priorities for payments portfolio firms.
Since its previous letter in March 2023, the regulator noted that it had seen improvements in governance arrangements, risk management frameworks and customer outcomes, but that there is still further work for firms to do. In particular, it remains concerned that there are risks of harm to consumers and financial system integrity.
The FCA has therefore set out three key outcomes for firms:
(1) Effective competition and innovation to meet customers’ needs, characteristics and objectives
- The FCA noted its commitment to supporting firms to innovate in the interests of consumers and markets, and encourage market participants to attend its Tech and Policy sprints to share insights.
- In terms of Consumer Duty implementation in the payments sector, the FCA is focussed particularly on examining the clarity of foreign exchange pricing in payment services, and assessing the extent to which firms ensure consumers are able to clearly understand the price they pay for such services.
(2) Firms do not compromise financial system integrity
- For financial crime prevention, the FCA stressed that firms should ensure their governance arrangements and systems and controls, including reporting mechanisms, are effective and proportionate to the nature, scale, complexity and risk profile of the business.
- It also urged firms to read its October 2024 Dear CEO letter regarding the PSR’s reimbursement requirements for APP fraud, and its guidance on the recent payment delays legislation.
- The FCA has seen weaknesses in some firms’ technological resilience, coupled with a lack of oversight of change programmes, which has resulted in weakened resilience and / or business interruption.
- It reminds firms of its rules and guidance on new requirements to strengthen operational resilience (the transition period for which ends 31 March 2025), and that firms must have performed mapping and testing to ensure it is able to remain within impact tolerances.
(3) Firms keep customers’ money safe
- The FCA asks firms to ensure they are appropriately safeguarding customers’ funds in line with the PSRs/EMRs, and the guidance set out in its Approach Document. It also reminded firms of the incoming amendments to the safeguarding rules.
- The FCA also reminds firms of their prudential risk obligations, and the importance of maintaining effective and actionable wind-down plans that include clear triggers to commence orderly, solvent wind down.