Nearly half of UK payments executives say regulatory expectations are changing faster than their systems can adapt, according to new research from Kani Payments.
The findings, published in Kani’s latest whitepaper, The Confidence Gap, show a sector that understands the direction of regulatory change but is still working through what it means at the level of systems, data, controls and day-to-day operations.
Based on a survey of 75 senior leaders across UK card processors, e-money institutions, issuers, acquirers and neobanks, the research found:
- 49% say regulatory expectations are changing faster than their systems can adapt
- 45% say compliance costs are rising faster than company revenue
- 21% identify legacy systems as the biggest barrier to modernisation; 19% cite regulatory uncertainty
The findings suggest the payments industry is entering a new phase of regulatory change, where the challenge is not simply understanding what regulators expect. Firms also need the operational infrastructure to evidence compliance consistently, through reliable data, repeatable controls, reconciled positions and audit-ready records.
Regulation is becoming an operating-model challenge
Kani’s research points to a familiar pressure across the payments industry. Each new regulatory requirement creates work across multiple areas at once: compliance interpretation, data preparation, reconciliation logic, reporting, evidence retention and senior oversight.
That pressure is now showing up in the numbers. Nearly half of respondents (49%) said regulatory expectations are changing faster than their systems can adapt. A similar proportion (45%) said compliance costs are rising faster than company revenue.
For firms relying on manual processes, fragmented systems or key-person knowledge, regulatory change can quickly become difficult to scale. More rules mean more evidence to produce, more controls to maintain and more operational strain on the teams responsible for keeping the business compliant.
Aaron Holmes, CEO of Kani Payments, said:
“Most firms understand what regulators expect of them. What many are finding is that their systems and processes weren’t built to evidence it at the pace regulation now demands.
Every new regulation creates a hiring need as much as a technology one. Firms are bringing in compliance specialists to interpret and implement the volume of change, while also investing in the systems to support it. When compliance headcount and infrastructure costs both grow faster than the business itself, that is an operational challenge, not only a compliance one.”
The report follows the FCA’s updated safeguarding regime, which came into force in May 2026 and increased expectations around reconciliation, reporting, records and operational controls for payment and e-money firms.
Kani’s earlier safeguarding research found that although many firms describe themselves as prepared for the new CASS 15 regime, almost nine in 10 do not currently operate at the daily reconciliation cadence the rules now require. That gap shows the difference between understanding the direction of regulation and being able to run the process it demands.
The back office is now central to regulatory readiness
The whitepaper argues that payments compliance is increasingly won or lost in the back office.
Policies, governance structures and ownership models remain important. But regulators are also looking for the evidence beneath them: the records, reconciliations, workflows and data controls that show whether a firm’s operating model is working in practice.
That shift was visible when senior leaders were asked to name their single greatest operational priority for 2026. Responses included reconciliation automation, robust CASS 15 safeguarding controls, live resolution pack capability and reduced reliance on manual work or individual expertise.
The same pattern appears in the modernisation data. There is no single blocker holding firms back. Legacy systems and competing priorities were the joint-top barriers to faster modernisation, each cited by 21% of respondents. Regulatory uncertainty followed at 19%, with budget and talent gaps both cited by 17%.
For payments firms, the challenge is not simply choosing a new tool or funding one major transformation project. It is dealing with several constraints at once: legacy infrastructure, competing internal priorities, regulatory uncertainty, limited resources and the need to keep day-to-day operations running.
AI adds to the modernisation question
The Confidence Gap also considers the role of AI in payments compliance and back-office modernisation.
AI is becoming a natural part of the conversation because regulatory operations depend on high volumes of data, exceptions, reconciliations, controls and reporting outputs. These are areas where firms are already looking for greater leverage.
Executive confidence is high. Some 63% of respondents said their organisation has the in-house expertise needed to adopt AI responsibly.
But the report cautions against treating AI confidence as the same thing as operational readiness. In regulated environments, new technology still depends on the quality of the underlying data, the strength of existing controls and the ability to explain how outputs are produced.
The wider market shows the same tension. The Bank of England and FCA’s 2024 survey found that 75% of UK financial services firms are already using AI, but 46% said they had only a partial understanding of the AI systems they had deployed.
For payments firms, AI may become a powerful tool in regulatory operations, but it will not remove the need for strong data foundations, reliable reconciliation processes, clear governance and evidence produced as part of the workflow.
The firms best placed to use AI in compliance operations will be those that strengthen the operating model underneath it.
Closing the confidence gap
Taken together, the findings show a sector moving in the right direction, but still closing the gap between regulatory intent and operational execution. The next phase of compliance will depend on whether firms can build the evidence, controls and resilience into the way they run day to day.
Aaron Holmes concluded:
“When systems are already struggling to adapt and compliance costs are outpacing revenue, that points to a structural issue. The firms that come through the next few years well will be those that build compliance into how they operate, rather than bolting it on after the fact.”
The Confidence Gap explores how regulatory change, safeguarding reform, AI adoption and modernisation challenges are reshaping operational priorities across the UK payments industry.
Want the full picture?
Explore Kani’s Confidence Gap whitepaper on payments regulation and back-office readiness for the full findings on regulatory change, safeguarding reform, AI adoption and modernisation across the UK payments industry.
