Payment services providers are a crucial component of global markets. They ensure that funds are transferred from one party’s account to another promptly, making trade execution seamless and efficient. Because of the important role they play, and the potential consequences should anything go wrong, strong safeguarding measures are vital. 

The Financial Conduct Authority (FCA) has developed a regulatory framework that ensures that payment services operate to the highest standards of transparency and accountability. The FCA licenses individuals and corporate entities as authorised payment institutions (API). This allows them to provide a range of payment and other services to facilitate financial transactions, such as global trade execution. This role places them in a position of key responsibility across a variety of sectors.  

Increased scrutiny 

The FCA scrutiny of payment services providers has increased over recent years, with the organisation strengthening its authorisation and supervision teams to help manage the expanding sector. 

In 2019, The Director for Supervision for Retail and Authorisations issued a ‘Dear CEO’ letter to non-bank payment service providers. This highlighted a range of areas of concern, particularly in how well firms were meeting the safeguarding requirements. 

This was followed up in July 2020, with additional finalised guidance to payment services providers regarding safeguarding customers’ funds and prudential risk management. 

This increased scrutiny is designed to strengthen oversight and transparency in an industry that is growing rapidly, prompted by disruptive technological innovation and new entrants. 


The guidance addresses a number of different areas where safeguarding could be strengthened and reviewed by payment services providers. This included keeping records and accounts, reconciliations, appointing, selecting, and reviewing third parties and unallocated funds. 

It also touches upon when the safeguarding obligations for a payment services provider actually starts, as this can play a vital role in the scope and extent of their responsibilities. It also highlights the need for an annual audit of compliance with safeguarding requirements and disclosing information in the treatment of funds on insolvency to customers. 


Prudential risk 

A range of prudential risks applies to payment services providers such as credit, liquidity and operational insurance. These can all impact the adequacy of its financial resources, and as a result, it can adversely affect confidence in the whole financial system. 

The FCA has identified the need for institution payment service providers to develop a wind-down plan to properly manage liquidity, resolution and operational risks that should be proportional to the size and nature of the firm. The FCA has begun to seek further information from firms regarding their plans in this area. 

Governance systems and controls 

Robust risk management strategies are essential for payment services providers. The FCA requires authorised payment institutions to develop appropriate systems and controls to manage and monitor risks as part of their registration. 

Although not yet a requirement, senior management teams at payment services providers have an obligation to ensure that systems and controls are reviewed regularly. This should include governance arrangement, something that is particularly important during a period of business model growth, change and increased risk. 

A regulated and trustworthy service 

Global Investment Strategy provides regulated, trustworthy and transparent payment services to our growing list of clients. As well as a full range of payment account services we also offer global money remittance. Embracing technology and innovation, we at Global Investment Strategy are always looking for ways to streamline our services and make them more accessible. 

Call +44 (0)20 7048 9400 or email to find out more.

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