Dear CEO Letter: FCA Priorities For Payments Portfolio Firms

On 3 February 2025, the FCA issued a Dear CEO letter outlining its expectations for Payment Institutions (PIs), Electronic Money Institutions (EMIs), and Registered Account Information Service Providers (RAISPs).

As the payments landscape evolves with Open Banking and digital finance, firms must uphold high standards to protect consumers, ensure market integrity, and drive competition. This letter is essential reading.

Here’s what you need to know:

Competition & Innovation to Meet Customer Needs

The FCA supports innovation in payments, particularly in Open Banking and Open Finance, but expects firms to fully implement Consumer Duty to ensure products and services deliver fair value and meet customer needs. A specific focus for 2025 is foreign exchange pricing transparency. The FCA will assess whether firms clearly communicate FX costs to prevent hidden or misleading fees. Payments firms should review their pricing structures to ensure clarity.

Financial System Integrity

Financial crime remains a top priority. While some firms have improved their controls, weaknesses in governance and oversight still expose them to risks. The FCA expects stronger systems to prevent misuse and fraud. New APP fraud reimbursement rules require firms to compensate victims of unauthorized and scam payments via Faster Payments and CHAPS. Firms must also enhance fraud prevention for internal transactions. On operational resilience, firms must identify key business services, set impact tolerances, and complete resilience testing by March 2025 to reduce risks from cyberattacks, IT failures, and third-party disruptions.

Keeping Customers’ Money Safe

The FCA remains concerned about inadequate safeguarding of customer funds. Firms must ensure compliance with Payment Services Regulations (PSRs) and Electronic Money Regulations (EMRs) and be prepared for new safeguarding rules in mid-2025. Additionally, firms must meet capital requirements and have clear wind-down plans to ensure orderly exits without customer losses.

How to Respond to a 'Dear CEO Lettter'

Strong governance and oversight are essential. Regulatory failures often stem from weak leadership and poor internal controls. Senior executives must actively monitor third-party agents and distributors to prevent breaches. The FCA is also working on replacing Strong Customer Authentication (SCA) rules and advancing Open Banking regulation. Firms should engage in regulatory discussions to stay ahead of these changes.

A key reminder: Firms must have their head office and key decision-makers based in the UK to meet FCA expectations.

Final Thoughts

The FCA has made it clear: payments firms must step up. The regulator will closely monitor compliance, take enforcement action against non-compliant firms, and continue engaging with the industry. Firms must review their governance, financial crime controls, safeguarding practices, and resilience strategies to stay ahead.

If you’re in the payments space, now is the time to assess how well your firm aligns with these priorities. The FCA’s supervision is increasing, and firms that fail to meet expectations risk regulatory action.

Read the full Dear CEO Letter here.