Britain's financial watchdog is proposing to clamp down on customers' funds held in e-money institutions including Revolut and Wise PLC (LSE:WISE).
The Financial Conduct Authority said today that it has opened a consultation on a proposed safeguarding regime on the matter.
E-money platforms, which encompass some of Britain’s largest fintechs, are not registered as banks and therefore are not subject to the Financial Services Compensation Scheme.
This puts the onus on the individual companies to protect their customers’ funds, but the FCA has said it “continues to see poor safeguarding practices from firms”.
Revolut is set to move from an e-money institution to a bank after finally winning approval from the Bank of England's PRA arm this summer.
Though the FCA has not singled out any e-money firms, the regulator said it has opened “supervisory cases” on approximately 15% of firms that safeguard funds.
In a consultation paper published today, the FCA has proposed new safeguarding rules, including enhanced monitoring, reporting and record keeping, more robust segregation of funds and handling requirements, and the implementation of a statutory trust.
“We’re consulting on proposals to make safeguarding rules stronger and clearer for payment and e-money firms so customers get as much of their money back as quickly as possible if the firm goes out of business,” said Matthew Long, the FCA’s director of payments and digital assets.
Firms can respond to the FCA’s consultation by 17 December 2024.