The Financial Conduct Authority's reformed safeguarding regime for payment and electronic money firms takes effect on 7 May 2026. Policy Statement PS25/12, published alongside new CASS 15 rules, introduces daily fund reconciliation, monthly regulatory returns, and annual audits for all authorised payment institutions and e-money issuers operating in the United Kingdom.
The scale of funds involved explains the urgency. By 2024, UK e-money institutions were safeguarding approximately GBP 26 billion and payment institutions approximately GBP 6 billion in customer funds daily. In payment and e-money firm failures between 2018 and 2023, the average safeguarding shortfall reached 65 percent. Customers in those insolvencies waited years for partial returns. The reformed rules are designed to prevent these gaps from recurring.
Under the Supplementary Regime, every affected firm must reconcile safeguarded funds daily, replacing the previous approach where reconciliation frequency was left to individual risk assessment. Firms must submit monthly returns to the FCA confirming their safeguarding status and maintain a resolution pack retrievable within 48 hours of supervisory request. The pack must contain enough detail for an insolvency practitioner to identify, locate, and return safeguarded funds without relying on the firm's operational staff.
The FCA set a proportionality threshold for the annual audit requirement. Firms holding less than GBP 100,000 in safeguarded funds across a rolling 53-week period are exempt from the mandatory annual safeguarding audit. This carves out approximately 23 percent of payment firms by number but leaves only GBP 3.2 million of the more than GBP 27 billion total outside the audit requirement.
A structural change requires firms to segregate safeguarding for electronic money services from payment services. Some firms previously commingled these pools, complicating the allocation of funds during insolvency. The new rules prohibit this practice.
The FCA adopted a two-stage implementation approach. The Supplementary Regime on 7 May builds on existing statutory provisions in the Payment Services Regulations 2017 and the Electronic Money Regulations 2011. A more comprehensive Post-Repeal Regime, which would bring payment firm safeguarding fully under the Client Assets sourcebook, has been deferred pending further consultation. When enacted, the Post-Repeal Regime will align payment firm safeguarding with the framework already governing investment firms.
The safeguarding rules apply to authorised payment institutions, authorised e-money institutions, small e-money institutions, and credit unions that issue electronic money. Small payment institutions may opt in voluntarily. Providers that exclusively offer account information services or payment initiation services fall outside scope.
Firms operating across both UK and EU jurisdictions should coordinate PS25/12 implementation with EU Digital Operational Resilience Act compliance, as both regimes impose overlapping operational resilience and third-party oversight requirements. The FCA expects full compliance from 7 May 2026.