The 2025 UK Payments Regulatory Outlook, held on 30 January 2025 at the Banking Hall in London, brought together industry leaders, compliance experts, and financial stakeholders to discuss regulatory priorities for the year ahead. Discussions from the panel of fscom experts, Head of Advice, Greg James, Head of Audit, Nicola Hanratty and Financial Crime Expert, Anna Sweeney, and moderated by Head of Payments, Alison Donnelly, centred around five key themes: safeguarding, payments fraud, market conditions, operational resilience, and Consumer Duty.
An interactive poll asking the audience “Which of the below themes do you think will be most topical in your business for the year ahead?” initially showed payments fraud on top but concluded with safeguarding garnering 29% of the vote, payments fraud 25%, market conditions at 22% and operational resilience at 21% with Consumer Duty falling to a mere 4%. The panel proceeded to provide a horizon summary of these key themes which we have summarised below.
2025 Regulatory priorities: Five key themes
1.1 Safeguarding: Increased oversight, complex implementation
- The FCA’s safeguarding consultation has introduced interim rules emphasising enhanced record-keeping, control mapping, and statutory audits.
- The cost and operational implications of implementing and maintaining the changes appear to be under-estimated and there was a strong call to the FCA to recognise this in response.
- Firms face challenges in identifying when the obligation begins and ends in their model, with the proposed new rules and guidance still leaving uncertainty.
- Requiring funds to be received directly into safeguarding accounts is likely to cause operational inefficiencies, increased compliance costs, and liquidity challenges and complicates banking relationships, especially cross-border.
Key takeaway: Without clearer, proportionate regulations, safeguarding measures risk stifling innovation and efficiency rather than enhancing consumer protection. PIs and EMIs should prepare now for the interim rules as they are likely to be adopted by the FCA and the currently proposed deadlines will be tight.
1.2 Payments fraud: Shifting patterns and rising burdens
- Fraud trends data indicates fraud patterns shifting towards unauthorised card fraud (£358 million in early 2024).
- AI-driven fraud and “fraud-as-a-service” models are emerging globally, complicating prevention efforts.
- There is some inconsistency in the interpretation of who is in and out of scope of the authorised push payment fraud reimbursement regime, creating uneven consumer protection and an unlevel playing field.
- Operational burdens are increasing, our audits indicate one in ten firms already have transaction monitoring backlogs.
Key takeaway: Industry-wide intelligence sharing remains a priority for the sector along with availing of AI-powered monitoring for fraud and other financial crime detection.
1.3 Market Conditions: Rising barriers and compliance costs
- Regulatory scrutiny continues to challenge market entry, with expectations of significant upfront investment in people and deep preparation even before the application has been submitted. The FCA appears to have little appetite for working with applicants in a business-friendly manner.
- The FCA has questioned selected firms on their wind-down plans, highlighting the need for a clear exit strategy along with access to sufficient resources to wind-down solvently.
- Rising compliance costs disproportionately impact the sector, which is often operating in a low-margin environment, with smaller firms expected to meet the same standards as larger institutions.
Key takeaway: A more proportionate regulatory framework could ease the burden on the non-bank sector, fostering innovation without compromising compliance.
1.4 Operational Resilience: Strengthening frameworks and governance
- By 31 March 2025, firms must achieve full compliance with FCA requirements, including business service mapping, impact tolerances, and scenario testing.
- Clients have valued health checks of implementation status, particularly seeking advice on how to handle impact tolerances for critical services which have been defined broadly, and facilitated scenario testing.
- Crisis communication remains a key vulnerability, with firms needing to clarify roles and responsibilities during disruptions.
Key takeaway: Proactive resilience planning, including rigorous scenario testing, will be essential to maintain operational continuity under regulatory scrutiny.
1.5 Consumer Duty: From compliance to cultural integration
- The FCA’s multi-firm review found that only 50% of firms met expectations, emphasising that Consumer Duty is an ongoing cultural shift rather than a one-time exercise.
- Data management, governance, and reporting remain key focus areas, alongside renewed scrutiny of FX pricing in payment services.
- The FCA’s removal of the Consumer Duty Champion requirement is a relatively minor change that may not be taken up by some firms as we have seen some examples of a very positive impact created by Consumer Duty Champions.
Key takeaway: Firms must prioritise robust data management and governance structures to demonstrate customer-centric outcomes effectively.
Looking ahead: 2025 expectations and strategic focus
As the payments landscape evolves, firms must navigate heightened compliance demands while seizing opportunities for growth and innovation:
- Fintech expansion: Continued innovation and international expansion will drive industry growth, though high compliance costs may deter new entrants.
- AI adoption: AI will play a dual role, enhancing efficiency while introducing new fraud risks that require advanced monitoring.
- Fraud-as-a-service: This emerging threat demands stronger cross-border intelligence sharing and real-time fraud detection capabilities.
- Regulatory evolution: Shifting geopolitical landscapes and evolving sanctions frameworks will necessitate agile compliance strategies.
Conclusion: Walking the tightrope
In 2025, payment and e-money institutions can be hopeful that the government’s growth agenda will push the FCA to a more open and collaborative stance but they should continue to prepare for scrutiny on financial crime, resilience (both financial and operational) and Consumer Duty.
Ultimately, success in 2025 will hinge on striking the right balance between robust consumer protection, regulatory clarity, and a dynamic, competitive payments ecosystem.
This post contains a general summary of advice and is not a complete or definitive statement of the law. Specific advice should be obtained where appropriate.
