KPMG indicated that new rules designed to protect customer funds held by payment and electronic money firms took effect on 7 May 2026, marking a significant upgrade to the UK’s financial safeguards. The Financial Conduct Authority (FCA) introduced the measures to ensure that client money remains clearly separated from a firm’s own resources, reducing the chance that consumers will lose out if a provider collapses.
Industry professionals say the changes strike a careful balance between higher standards and practical implementation, particularly for smaller businesses.
Under the updated framework, firms must now carry out daily reconciliations to confirm that the correct amounts are being protected. They are also required to submit monthly reports and undergo annual audits conducted by independent, qualified professionals.
To avoid placing an undue burden on smaller operators, those safeguarding less than £100,000 in client funds are exempt from the audit obligation.
In addition, companies must develop clearer plans for an orderly wind-down, so that any returned money reaches customers more quickly and with less disruption.
The reforms respond directly to problems uncovered in earlier failures. Between the first quarter of 2018 and the second quarter of 2023, insolvent payment firms left shortfalls averaging 65 percent of the customer funds they held.
Because these balances sit outside the Financial Services Compensation Scheme, consumers often faced delays or outright losses.
FCA Director of Payments and Digital Assets Matthew Long noted that people increasingly depend on these services for daily transactions, yet past collapses have repeatedly left them financially exposed.
While most industry feedback supported raising standards, respondents also stressed the need for rules that remain proportionate, especially for smaller participants.
Peter Harmston, Head of Payments Consulting at KPMG in the UK, described the package as a welcome advance in building resilience across the payments sector.
He observed that the timing feels particularly appropriate, given the economic headwinds many firms are currently navigating.
Harmston emphasized that safeguarding is not a one-off compliance task but an ongoing discipline.
It demands rigorous daily controls, regular independent scrutiny, and full confidence that any arrangements involving third parties or client accounts function exactly as intended.
By setting out more precise expectations around how funds are held, reconciled, and overseen, the regulator aims to shrink the risk of shortfalls.
This clarity should also make it simpler for firms to prove they are meeting their responsibilities to customers.
KPMG believes the overall effect will be greater trust in the system at a moment when digital payments continue to expand rapidly.
The FCA has pledged active support throughout the early months of implementation, including webinars and direct supervisory guidance.
KPMG concluded that regulators will monitor how effectively firms adopt the new practices and will consider whether further adjustments are needed. For consumers and businesses, the updated rules represent a concrete step toward a more secure and reliable payments landscape in the United Kingdom.