FCA Regulatory Priorities 2026: What Payment Institutions Should Focus On

In March 2026, the FCA launched a new approach to communicating its supervisory expectations — replacing the previous system of portfolio letters with nine sector-specific Regulatory Priorities reports. This shift aims to improve clarity, reduce regulatory burden and provide firms with a single, comprehensive reference for understanding what the FCA expects in the year ahead. For payment institutions, the 2026 priorities signal a continuation and intensification of themes that have been building since 2023. This article distils the key messages for payment firms.

The New Regulatory Priorities Format

The FCA's Regulatory Priorities reports replace the Dear CEO and portfolio letters that the regulator has used for the past several years. Each report covers a specific sector and sets out the FCA's priority areas of focus, recent supervisory findings, and expectations for firms. The reports are designed to be more accessible and action-oriented than the previous letters, with clear statements of what the FCA expects firms to do and by when.

The payment services sector falls within the FCA's broader financial market infrastructure and payments supervisory portfolio. While the FCA has not yet published a standalone payments Regulatory Priorities report, the themes relevant to payment institutions are addressed across multiple reports and through targeted supervisory communications.

Priority 1: PS25/12 Safeguarding Implementation

The implementation of PS25/12 is the FCA's single most important priority for payment institutions in 2026. The regulator expects all authorised PIs to be fully compliant with the new safeguarding regime from 7 May 2026. This includes the statutory trust framework, daily reconciliation, board-level safeguarding officer appointment, and readiness for the REP020 monthly return. The FCA has signalled that it will not offer a grace period and will take supervisory action against firms that are not compliant from the effective date.

Priority 2: Financial Resilience

The FCA continues to focus on the financial resilience of payment institutions. Recent supervisory reviews have found that some firms are operating with thin capital buffers, inadequate wind-down planning and unclear financial projections. The FCA expects payment institutions to maintain capital resources comfortably above regulatory minimums, to conduct regular stress testing, and to have credible wind-down plans that ensure customers can be made whole in the event of firm failure.

Priority 3: AML Controls

Anti-money laundering remains a perennial priority. The FCA's enforcement actions in 2025 — which included record fines for AML failures — underscore the regulator's expectation that firms maintain robust, risk-based AML frameworks. For payment institutions, the FCA is particularly focused on transaction monitoring effectiveness, sanctions screening, source of funds checks for high-risk corridors, and the adequacy of ongoing monitoring programmes.

Priority 4: Consumer Duty Embedding

The Consumer Duty is now firmly established as the FCA's overarching conduct standard. For payment institutions, this means demonstrating that products and services deliver good outcomes for customers, that pricing provides fair value, that customer communications support understanding, and that customer support is accessible and effective. The FCA is moving beyond implementation assessment to outcomes testing — using data and mystery shopping to evaluate whether firms are delivering the required outcomes in practice.

Priority 5: Operational Resilience

The FCA's operational resilience framework requires firms to identify important business services, set impact tolerances for maximum tolerable disruption, and conduct scenario testing. Payment institutions must demonstrate that they can continue to provide critical payment services during severe operational disruptions, including cyber attacks, third-party service provider failures and technology outages.

What Firms Should Do Now

1. Review the FCA's Regulatory Priorities reports and map the priorities to your firm's current compliance posture.
2. Conduct a self-assessment against each priority area and identify any gaps.
3. Prioritise PS25/12 safeguarding implementation as the most time-critical obligation.
4. Ensure your financial resilience framework includes stress testing and wind-down planning.
5. Review your AML framework against the FCA's latest enforcement findings and supervisory expectations.

Regulatory Counsel helps payment institutions prepare for FCA supervisory priorities through compliance gap analysis, framework development and ongoing advisory support. Contact us for a free initial consultation.