The April 2025 Regulatory Initiatives Grid lays out a pivotal regulatory roadmap for the UK payments sector.
We’ve broken down the key initiatives you need to know—from safeguarding reforms to crypto market rules—and what they mean for businesses navigating the next wave of compliance.
Strengthening safeguarding rules
The FCA plans a two-stage overhaul of safeguarding rules for e-money and payments firms. Initially, interim rules will strengthen compliance with existing obligations under the E-Money and Payment Services Regulations—expected to be finalised by mid-2025 and enforced in H1 2026. Longer term, pending legislative changes by HMT, a new end-state regime will require relevant client funds to be explicitly held on trust for consumers, offering greater legal clarity and protection.
Safeguarding is already a core compliance area. Under existing FCA rules, firms must:
- Perform daily reconciliation between internal records and safeguarded accounts
- Use segregated safeguarding accounts
- Conduct annual audits and maintain safeguarding documentation for at least five years
With more emphasis placed on safeguarding compliance in the next 18 months, payments and e-money businesses will have to reassess how well their existing financial control processes adhere to these fundamentals.
Requirements for a new cryptoassets regime
Following Treasury legislation, the FCA will take on responsibility for new Regulated Activities Order (RAO), including secondary markets, admissions and anti-market abuse controls. This will align crypto oversight with that seen in securities markets. The FCA’s roadmap includes at least four consultation papers and one discussion paper in 2025, detailing rules on disclosure, admission standards and governance.
This builds on existing AML registration rules and follows similar efforts in the EU (MiCA) and US. Custodians and exchanges may need reconciliations akin to CASS rules, especially for segregating client and proprietary assets.
Payment services contract termination rules
HMT intends to legislate reforms to the Payment Services Regulations in H1 2025 to restrict arbitrary or opaque provider-initiated contract terminations, especially those impacting SME customers or fintechs in correspondent arrangements.
Contractual risk tip: Firms should review termination clauses and onboarding/offboarding procedures to ensure they align with expected fairness and transparency standards.
Digital pound design phase
Following the National Payments Vision, the BoE and HMT are progressing with the design phase for a potential UK central bank digital currency (CBDC). No final implementation decision has been made, but the intent is to enshrine user privacy via primary legislation if launched.
Strategic tip: CBDCs may eventually interact with commercial PSP systems and require real-time reconciliations, programmable wallets and fraud/AML traceability layers. Forward-looking firms should track BoE and Treasury engagement forums.
Review of RTGS and CHAPS settlement hours
The BoE may extend Real-Time Gross Settlement (RTGS) and Clearing House Automated Payment System (CHAPS) operating hours to support 24/7 domestic payments. A phased approach is planned, with no changes before 2027. In 2025, the Bank will publish a consultation paper on its phased implementation, and at least one year’s notice will be given before changing current hours.
Reconciliation impact: Firms operating near real-time or batch settlement workflows should prepare for longer operating hours, potentially including overnight liquidity coverage and intraday automated reconciliation.
Financial services regulation of cryptoassets
Draft legislation in 2025 will establish a comprehensive regulatory regime for cryptoassets, including stablecoins, under the FSMA framework. This will address authorisation, prudential standards and consumer protection rules.
Regulatory alignment: This legislation bridges gaps between crypto and traditional financial systems, suggesting future CASS-style reconciliation and reporting obligations for crypto businesses.
APP scam prevention and compensation
The PSR is embedding its new reimbursement requirements for Authorised Push Payment (APP) fraud. In 2025, it will launch a consultation on claims management systems and publish reports on historical fraud outcomes. An independent evaluation is due in 2026.
Tip: Firms should enhance their fraud resolution and claims processing logic, ensuring timely reconciliation between fraud detection and dispute management systems.
Market review: Card fees & cross-border charges
The PSR will conclude its market review into UK card scheme and processing fees in early 2025 and consult on remedies. A separate review into the post-Brexit increase in cross-border interchange fees between the UK and EEA is also progressing, with remedies expected in 2025/26.
Insight: The review could lead to potential caps or structural changes affecting issuer/acquirer fee reconciliations, especially for cross-border e-commerce PSPs.
Repeal of EU payments law
The UK will revoke and replace retained EU law including the PSRs, EMRs and Interchange Fees Regulation. The FCA and HMT will announce their consultation plans later in 2025.
Compliance tip: Begin impact assessments for areas tied to EU law (e.g., 8-week refund rights, SCA exemptions, FX disclosure rules). A UK-specific framework may streamline these—or increase divergence for cross-border PSPs.
Summary of key actions:
- Review safeguarding processes now to prepare for upcoming trust-based safeguarding requirements
- Track crypto consultation papers and consider future RAO authorisation requirements
- Audit contract termination policies in line with upcoming fairness rules
- Monitor digital pound developments and plan for potential PSP system impacts
- Prepare for extended RTGS/CHAPS hours with liquidity and operational adjustments
- Anticipate cryptoasset prudential regulation under the FSMA framework
- Strengthen APP scam management and fraud reconciliation systems
- Prepare for possible changes to card and cross-border fee structures
- Begin EU law replacement assessments ahead of UK-specific reforms
This article summarises regulatory developments and should not be construed as legal advice
