Many payments industry professionals have recently started complaining about the FCA becoming stricter. The FCA, the UK financial services watchdog, was established in 2013 and assumed the responsibility for the conduct and relevant prudential regulation from the Financial Services Authority, in his best interest to discover in time anyone who poses a financial threat to Great Britain. Because of this FCA that it tightens its rules and emphasizes five main changes, which you will find below.

Fewer companies will get an authorisation from the FCA

At this moment, instead of a simple exchange of the written communication between the case officer and the applicant firm, very often the FCA conducts interviews on a case-by-case basis to assess the key personnel more accurately. The standards to which the FCA benchmarks the applicant will become higher because of a more intensive assessment and greater scrutiny of the applicant’s financial and business models, but at the same time they declare that the application process will become easier and more convenient to use.

FCA plainly declares that in this way they can reject more requests for authorization. In FCAs business plan says “we will expect refusal, withdrawal, and rejection rates to increase initially as we make the gateway more robust.” Emily Shepperd has been appointed as the new Executive Director for Authorization of the FCA. he was ordered to hire an additional 100 new employees to get more productive and better jobs.

More intervention and tougher supervision

The FCA anticipates intervening more often in real-time to prevent any harm to consumers and market integrity. You should expect more supervisory and enforcement actions from the FCA in 2021-2022.

FCA recognizes that the payments industry has developed rapidly since the adoption of the Payment Services Directive and the Electronic Money Directive. The FCA’s supervisory work will focus on ensuring PI/s and EMIs are financially stable, and it will identify firms at risk and contact them proactively. One of the main goals FCA is to evaluate the payments firms are able to remain within their impact tolerances (the maximum tolerable amount of disruption to an important business service) to understand how effective the FCA’s work to improve the operational resilience of the financial sector has been. Companies need to provide a business plan to obtain a license, FCA wants to make sure that companies keep up with their original plans, and if the FCA changes, it is duly notified and can assess the possible negative impact. In general, any step away from the business plan can cost a license for the company.

Higher standards and more guidance

During recent years, the FCA has been continuously raising standards for non-bank payment services providers. The regulator focuses on making sure that FinTech companies do not harm consumers and that they are resilient. Regulated entities must have adequate capital, liquidity and reserves to cover outstanding redress liabilities, and the goal of the FCA is to ensure companies it supervises cease their operations only in an orderly manner. In March 2021, the FCA has issued final rules on operation resilience aimed to increase and enhance firms operational resilience. The FCA publishes more and more guidance for different types of firms. Not so long ago,the watchdog ordered PayTechs to explain to customers the difference between safeguarding e-money accounts and FSCS coverage.

Revocation of authorisations

In the near future, the FCA expects a short-term increase in the number of firms whose authorisations will be restricted (suspended temporarily or even revoked permanently). This applies not only to not clean companies but also inactive companies.

It should be noted that many companies that do not use their licenses for different reasons. For example. Due to the fact, that a company operates as a distributor of an e-money firm or an agent of a payment institution and it does not use its own license.

Firms will have to become more transparent

FCA plan to make more company data publicly available. This will be done in order to make sure that consumers have enough information to make informed decisions, and incentivise firms to improve their conduct. The data will include regulatory data previously not available publicly, such as Financial Ombudsman Service complaints and uphold rates. Experts expect that FinTech will have to become more transparent.

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