Fintech, digital assets, payments and consumer credit | UK Regulatory Outlook July 2025

Fintech 

FATF report on implementation of AML/CFT measures to CASPs 

On 26 June 2025, the Financial Action Task Force (FATF) published a report on best practices for the Travel Rule supervision of Virtual Asset Service Providers, in relation to the transparency of information around cross-border payments, alongside an update on the implementation of its standards on cryptoassets and cryptoasset service providers (CASPs). 

Overall, jurisdictions (including those with materially-important CASP activity) have made progress in the past year on developing or implementing anti-money laundering and counter-terrorist financing regulations, as well as taking supervisory and enforcement actions. Challenges remain, however, when assessing risks associated with cryptoassets and CASPs and implementing appropriate mitigating measures.  

Payments 

Regulators revise memorandum of understanding on regulation of UK payment systems  

On 24 June 2025, the Financial Conduct Authority (FCA) published a revised version of the memorandum of understanding between it, the Bank of England, the Payment Systems Regulator and the Prudential Regulation Authority, on their roles in the regulation of UK payments, together with a press release and a useful diagram showing overlaps in workstreams. 

The memorandum of understanding, an important step in delivering the National Payments Vision, is now structured around five principles relating to:  

• Clarifying respective roles and responsibilities to improve market participants' understanding of the regulatory landscape.
• Taking a holistic approach where an authority identifies a matter of common regulatory interest with potential material impact on the advancement of another authority.
• Ensuring effective co-ordination and co-operation.
• Sharing relevant information and advice to support co-ordination and co-operation.
• Reviewing the memorandum of understanding and their co-ordination efforts on an annual basis. 

FCA review on risk management and wind-down planning at e-money and payment firms 

On 26 June 2025, the FCA published the findings of its multi-firm review of risk management and wind-down planning at e-money and payments firms. The review focused on enterprise and liquidity risk management and wind-down planning. 

The FCA concludes that none of the firms it reviewed fully met its expectations on risk management frameworks, particularly in not following the guidance on assessing adequate financial resources. The FCA identified three main areas of improvement for firms' risk management frameworks:  

• Enterprise-wide risk management frameworks remain inadequate.  

Staff in operational roles received limited oversight and challenge. Risk appetites were not clear and were not always based on the firm's activities. Financial resources levels were determined using judgement instead of quantitative methods, such as stress testing. 

• Liquidity risk management was immature.  

There were weaknesses in identifying and assessing the impact of stress events. Firms were relying on cash balances to mitigate liquidity risk without appropriate analysis, such as stress testing, to assess whether they have sufficient resources. 

• Group risk was not adequately considered.  

Risks arising from the relationships and interlinkages between entities were not adequately considered. This affected financial and non-financial resources available to the firms. 

Almost all wind-down plans (WDPs) reviewed were disconnected from the firm's risk management framework and needed more work to be credible and operable. Firms should embed wind-down planning into their risk management framework. WDPs reviewed lacked sufficient detail, testing and validation.  

Firms are expected to review their arrangements against the findings and make any necessary improvements. The FCA will continue to engage with the sector to ensure effective risk management and WDPs are in place. 

Council of EU agrees negotiating mandate on proposed PSD3 and PSR 

On 18 June 2025, the Council of the EU announced that member states' representatives agreed the Council's negotiating mandate on the legislative proposals relating to the Payment Services Directive 3 (PSD3) and the Payment Services Regulation (PSR). See this Insight for background. 

The Council highlights proposed changes, including: 

• Bringing electronic communications service providers, such as internet carriers and messaging platforms, within the scope of fraud prevention.
• Requiring ATM transactions to show all fees due and exchange rates before a transaction takes place and introducing further provisions intended to enhance transparency on payment card scheme fees and rules.
• Introducing safeguards concerning innovative ways of making payments. 

The agreement on the negotiating mandate allows the Presidency of the Council to start negotiations with the European Parliament with a view to reaching political agreement on the legislation. 

The Council published the texts of each of the mandates for negotiations with the European Parliament on 13 June 2025: proposed text for PSD3 and proposed text for PSR. 

The European Commission adopted legislative proposals for PSD3 and PSR in June 2023. The European Parliament adopted its position at first reading on the proposals in April 2024. 

Consumer Finance 

HM Treasury update on future regulation of BNPL products  

On 16 June 2025, HM Treasury published a policy paper providing an update on the regulation of buy-now, pay-later (BNPL) credit products. This follows on from the approach to domestic premises suppliers (DPS) outlined in HM Treasury's recent response to its consultation on regulating BNPL. See this Insight for more information.  

Under the proposals, DPS would be required to seek credit broking permissions to offer BNPL products as a payment option. However, in light of the concerns raised in response to the consultation and industry engagement, the government concluded that the DPS offering BNPL as a payment option presented a low risk to consumers and, therefore, considered the approach set out in the original draft BNPL legislation disproportionate. The government now intends to lay an amending negative statutory instrument to remove the requirement for DPS to have credit broking permissions to offer BNPL products. This legislation is expected to be in place to coincide with the regulation of BNPL.