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

Fintech 

FCA feedback statement on AI Live Testing 

On 9 September 2025, the Financial Conduct Authority (FCA) published a feedback statement summarising the feedback to its engagement paper on its proposed approach to the live AI testing service (FS25/5).   

Live testing will enable firms to work directly with the FCA, receiving tailored support to develop, assess and deploy AI systems live in UK financial markets. Respondents to the April 2025 engagement paper welcomed the AI live testing proposals as a constructive and timely step toward increasing transparency, trust and accountability in the use of AI systems. The statement: 

• Outlines the range of key benefits and opportunities highlighted by respondents, including real-world insights the testing will provide and the importance of collaboration between the regulator and industry.
• Summarises respondents' suggestions for how the FCA can assist firms' safe and responsible adoption of AI, including AI model evaluation and validations, scenario testing, fairness and bias mitigation, and collaboration.  

The FCA has confirmed that based on the above, it has decided to proceed with live testing as part of the existing FCA AI Lab and expects to start working with participating firms this month.  

FCA consults on application of FCA Handbook for cryptoasset activities 

On 17 September 2025, the FCA published consultation paper CP25/25 on the application of FCA Handbook to regulated cryptoasset activities, consulting on: 

• application of FCA rules relating to high-level standards, supervision, systems and controls, and business standards to cryptoasset firms; and
• draft non-Handbook guidance on how cryptoasset firms should comply with its operational resilience requirements. 

The deadline for responses to the discussion chapters was 15 October 2025, and 12 November 2025 for the consultation chapters. The FCA will consult on the issues raised in the discussion chapters later in the year. 

Payments 

BoE speech on innovation in money and payments 

On 3 September 2025, the Bank of England (BoE) published a speech on innovation in money and payments, which included comments on stablecoin regulation. The BoE plans to:  

• consult later in the year regarding revisions to its November 2023 proposals on a regulatory regime for systemic stablecoins;
• further explore wholesale financial market use cases for stablecoins in its Digital Securities Sandbox; and
• launch its synchronisation lab, to allow the full integration of central bank settlement with transactions recorded on other ledgers.  

European Commission second report on assembling payment account data under PAD 

On 11 September 2025, the European Commission published its second report on assembling specific payment account related data from member states under the Payment Accounts Directive (PAD). 

The report notes that significant data gaps, for example when information was not available in a member state, and differences in data collection methods make it difficult to draw firm conclusions on the impact of the PAD. The Commission's observations include: 

• The main measures of the PAD relating to transparency and comparability, the switching service, and the right to a payment account with basic features are all generally in place.
• The information and transparency requirements under the PAD are generally being complied with, suggesting an overall reduction in consumer detriment.
• Payment account switching is being used more in some Member States than others (as well as significant differences across Member States in the number of switching applications that are refused).
• As regards payment accounts with basic features (PABFs), the number of new account openings differs significantly across Member States. This may be partly due to differences in the ways banks offer these features to customers. 

The Commission plans to follow up with Member States on the findings of the report, including the low uptake of the switching service or high rejection rates for PABFs in some of them.  

High Court considers arguability of recovery duty on sending bank in APP fraud claim 

The High Court has considered the merits of potential claims against a sending bank relating to alleged authorised push payment (APP) fraud. A claimant who made payments to two overseas accounts from accounts held with Starling Bank Ltd subsequently notified Starling that the recipients of the payments were fake and requested to recover the money. The claimant then brought a claim against Starling to recover the amounts paid, as well as seeking damages, which Starling asked the court to strike out.  

The court held that the claim should not be struck out in its entirety, considering comments made in Philipp v Barclays Bank UK plc [2023] UKSC 25 and  Santander UK plc v CCP Graduate School Ltd [2025] EWHC 667 (KB) concerning the potential existence of retrieval (or recovery) duty for sending banks. It held that there might be an arguable allegation that Starling breached its contractual and tortious duties to execute its mandate with due care and skill by its failure to seek the claimant's instructions to recover the money paid once it had been notified that the payment had been induced by fraud. 

HM Treasury consults on consolidating PSR functions within FCA 

On 8 September 2025, HM Treasury published a consultation paper on a streamlined approach to payment systems regulation, focusing on its proposed approach to consolidating the Payment Systems Regulator's (PSR) functions within the FCA. 

Proposals include:  

• the government will integrate the PSR's functions within the FCA's current framework in the Financial Services and Markets Act (FSMA) as far as practicable;
• the FCA will take on responsibility for regulating UK payment systems (including promoting competition and innovation in payment systems);
• the transfer of the PSR's functions will not result in new categories of persons being brought in scope of payment systems regulation – instead, the FCA regime will apply to payment systems and those that participate in them.  

The FCA will continue to perform its wider role as conduct and prudential regulator, including its existing functions relating to payment services and e-money legislation, as usual. There are no plans by HM Treasury to create any new regulated activities in connection with payment systems regulation – rather, the scope of payment systems regulation will broadly continue to be determined by which payment systems HM Treasury decides to designate. The consultation closed on 20 October 2025 and legislation will follow once responses have been considered.  

BoE policy statement on expanding mandatory ISO 20022 enhanced data in CHAPS 

On 22 September 2025, the BoE published a policy statement on expanding mandatory ISO 20022 enhanced data in CHAPS from 2027. In light of feedback to its April 2024 consultation, the BoE has updated its position on the two proposed policy positions: 

• Purpose Codes. From November 2027, the BoE will expand mandatory requirements for Purpose Codes to all CHAPS payments.
• Payment initiation channels outside CHAPS Direct Participants' control. The BoE will not expand mandatory enhanced data requirements to payment initiation channels outside CHAPS DPs' control in 2027.  

HM Treasury consults on commercial credit data sharing 

On 26 September 2025, HM Treasury published a consultation paper and call for evidence on proposals to improve the UK commercial credit data sharing (CCDS) scheme, under which banks designated by HM Treasury must share all their credit data on in-scope small and medium-sized enterprise (SME) customers with designated credit reference agencies (CRAs).  

HM Treasury's proposals cover a number of issues, including: 

• Addressing issues relating to the definition of an SME, which can, for example, cause the data footprint of an SME to fall in and out of the scope of the regulations.
• Extending the application of the CCDS regime to a wider set of designated finance providers to reflect diversification of the lending market.
• Excluding certain products if they are not valuable to enhancing access to credit for SMEs (for example, explicitly excluding stocking loans as this is not a common type of loan and the reporting is cumbersome and time-intensive) 

Responses to the consultation and call for evidence are welcomed by 20 November 2025. 

Consumer finance 

Changes in motor insurers' settlement and compensation practices post FCA review 

On 19 September 2025, the FCA published a press release, stating that motor insurers have changed their settlement and compensation practices following its multi-firm review (which pre-dated the Consumer Duty) into insurers' claims-handling processes for valuing vehicles that have been stolen or written off (total-loss claims). 

Insurers have reportedly now paid £129 million in compensation to 150,000 consumers for historic claims that were unpaid when firms breached rules on handling claims fairly. The FCA estimates that 270,000 consumers are expected to receive £200 million in compensation. 

FCA consumer duty focus areas for 2025/26 

On 30 September 2025, the FCA published its areas of focus for the consumer duty for 2025/26, under four headings: 

• embedding the consumer duty and sharing good practice: the FCA will carry out multi-firm projects to look at how the duty is being embedded across sectors;
• vulnerability and data protection: together with the Information Commissioner's Office, the FCA will provide further clarity on the interaction between vulnerability, data sharing and data protection expectations in Q1 2026;
• supporting firms in delivering good outcomes under the price and value outcome: priorities include the FCA's  market study into pure protection insurance (interim report and proposed next steps expected around the end of 2025);
• sector-specific priorities: including future work in retail banking relating to fair value in SME business current accounts, consumer understanding in the credit card market and its expectations for wealth and advice firms when assessing fair value. It expects to start work in Q4 2025 and publish findings in summer 2026. 

FCA letter to HM Treasury on application of consumer duty to wholesale firms 

On 30 September 2025, the FCA published a letter sent to HM Treasury relating to the application of the consumer duty to firms primarily engaged in wholesale activity.. 

In the light of feedback received, the FCA will: 

• provide greater clarity on its supervisory approach and expectations under the duty when firms work together to manufacture products for retail customers; 
• consult on plans to update the client categorisation framework, given that there is a subset of investors who have the knowledge, experience, sophistication or resources, which means they do not need retail protections;
• consult on changes to rules on the application and requirements of the duty including through distribution chains; and
• consider removing business with non-UK customers from the scope of the duty. 

FCA update on consumer duty rule review 

On 30 September 2025, the FCA provided an update on how it is streamlining its rules and reducing complexity for businesses following the introduction of the consumer duty. 

The FCA: 

• will not proceed with broader reviews of its product governance, client asset and training and competence sourcebooks, although this will be kept under review;
• will deliver focused work later in 2025 on its systems and controls requirements relating to the management of conflicts of interests and will be taking forward reforms to the senior manager regime. 

The FCA will update on next steps in 2026.