Financial Conduct Authority Priorities for Payments Firms

The Financial Conduct Authority (FCA) recently re-released its priorities for Payment Firms over the next few years from 2022 to 2025. The FCA identified three core areas in which Firms should identify as key areas for action and take the appropriate measures. Overall, the message from the FCA was one of reducing the impact of harm on consumers and on the market.

The three main areas the FCA identified all focus around the new Consumer Duty requirements, including identification of the necessary actions to deliver outcomes to ensure that customers’ money is safe, that the firm does not compromise financial system integrity that firms meet its customers’ needs, including through high quality products and services, competition and innovation, and robust implementation of the FCA Consumer Duty.

Identifying the link between better governance and service delivery by firms and a reduction in the negative harm a badly organised firm can inflict, reducing claims and payments from the Financial Services Compensation Scheme, and helping to reduce and prevent serious harm. To achieve this, the FCA wants to set and test higher standards and promote positive change in how it will measure its own performance and that of the firms it regulates. Towards this aim, the FCA stated that it wants to “find new ways to reduce the regulatory burden on firms at all stages of regulation, balancing the need for efficiency with effective oversight” in the following ways.

The FCA states it will use formal powers to reduce and prevent harm, accepting a higher risk of legal challenge and adapting its response to the circumstances so they match the risks they pose. This suggests the FCA will require that Payment Firms meet stricter standards to meet however this may seem contrary to the stated goal in the reduction of regulatory burden.

An expected stated aim mentioned by the FCA is the stopping of financial crime and to measurably reduce financial crime, and the risk of financial crime. Another reduction the FCA wants to influence is market abuse by Payment Firms, by expecting them to have the “right culture and safeguards in place to spot, report and reduce the risk of market abuse”. Similiairy “issuers of securities must be able to identify, control and ensure the accurate and timely release of inside information to reduce the risk of market abuse” by encouraging “timely and accurate disclosures, to reduce the gap between investors – particularly young investors’ – risk appetite and the actual risks associated with the investments they choose”.

All of these stated aims correlate with the FCA’s main functional objectives,to regulate financial firms and protect consumers from harm caused by financial institutions in the following areas:

Consumer education and awareness: The FCA works to educate consumers about financial products, services, and risks. The FCA provides information and guidance to consumers on how to make informed decisions about their finances and avoid financial scams and fraud.

Supervision and enforcement: The FCA supervises and regulates financial firms to ensure that they comply with rules and regulations designed to protect consumers. The FCA has the power to take enforcement action against firms that breach the rules, such as imposing fines or suspending the firms' activities.

Rules and regulations: The FCA sets rules and regulations for financial firms to ensure that they treat their customers fairly and transparently. For example, the FCA requires firms to provide clear and accurate information about their products and services, and to act in their customers' best interests.

Innovation and competition: The FCA encourages innovation and competition in the financial industry to benefit consumers. The FCA supports the development of new financial products and services that can improve consumer outcomes, while ensuring that they are safe and appropriate.

If you want to catch up on the document and the strategy of the FCA going forward, you can find it here: https://www.fca.org.uk/publication/corporate/our-strategy-2022-25.pdf