UK FCA payments regulatory priorities report

The UK Financial Conduct Authority (FCA) has published its regulatory priorities report for the payments sector. These reports replace the FCA's previous portfolio letters and will now be published annually for each industry sector. The report is directed at firms authorised or registered under the Payment Services Regulations 2017 and the Electronic Money Regulations 2011. In the report, the FCA sets out four key priority areas for the next 12 months:

• Preparing for the future to support effective competition, innovation and growth: The FCA will continue policy work on open banking, stablecoins, and modernising payments regulation. It will support industry in establishing a Future Entity for open banking. It will also support HM Treasury (HMT) in introducing legislation to grant the FCA powers to set new rules for the long-term open banking regulatory framework. The FCA will work with HMT to future-proof payments regulation, including consideration of whether changes to or the development of regulation is needed to support agentic AI payments. It will also work with the sector to consider how stablecoins and other tokenised payment instruments can be brought into regulated payments.
• Ensuring firms implement the consumer duty effectively: Firms are expected to assess their products, services and processes against all the relevant rules and guidance, including the consumer duty, on an ongoing basis, and address any compliance gaps immediately. The FCA will take appropriate action against firms that fail to do this. Areas of focus for the FCA include international payment pricing transparency and the treatment of vulnerable consumers.
• Protecting financial system integrity: Firms are expected to maintain effective governance arrangements and systems and controls to combat financial crime, including money laundering and fraud (including authorised push payment fraud). Firms should also ensure they are ready to comply with regulatory change and be ready to implement the new incident and third-party reporting rules.
• Keeping customers' money safe: The FCA remains concerned that customers' money may not always be adequately protected if payments firms fail. Firms are expected to have effective governance arrangements and systems and controls and the right skills to identify, assess and mitigate risk. Firms must also be ready to comply with the new safeguarding rules which come into force in May.

Other focus areas include open finance, stablecoins and AI. The FCA plans to publish its open finance roadmap by the end of March and expects the first regulatory framework for the first scheme to be in place by the end of 2027. The FCA will publish its policy statements on the cryptoasset regime, including rules on the issuance of stablecoins in the UK, this year. In addition, the FCA will continue its Supercharged Sandbox and AI Live Testing initiatives and will publish an evaluation report from AI Live Testing by the end of the year. The report also sets out a number of key publications and speeches and refers to the Payments Forward Plan for timings on upcoming initiatives.

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