The Financial Conduct Authority is pushing for a review of fintechs that provide payment technology, out of concern that the coronavirus may be harming their financial performance.
The review will inform more detailed direction to firms to meet safeguarding requirements, and will outline the FCA’s expectations for firms that are “winding down” to ensure customers’ funds are returned in a timely manner. The review is part of a broader program that the FCA had planned on conducting later this year to set expectations for the payments industry, however, it was moved forward due to the coronavirus crisis adding further pressures on the fintechs.
There’s been an expansion of fintechs in the U.K. and other markets over the past decade, creating a marketplace that’s untested in a financial downturn. Many of these firms were formed in part to sell services to consumers that were frustrated by the performance of banks during the 2008 downturn.
“Some payments firms are unprofitable in the early stages while they seek to grow market share and many also rely on investor funds to remain solvent in the short-term,” the FCA said in its statement. “Firms may also be facing decreased revenues because of coronavirus and it could be impacting their ability to operate as well as their growth plans.”
The FCA has opened for public input from payment firms until June 5. If confirmed the new guidance will be published at the end of June.
