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

Individual sentenced to four years in prison for illegal crypto activity worth over £2.5m

On 28 February 2025, the Financial Conduct Authority (FCA) announced the sentencing of Olumide Osunkoya, who illegally operated crypto ATMs (machines that convert money into cryptoassets or vice versa) at 28 different locations, despite being refused registration with the FCA – the first sentence for unregistered cryptoasset activity in the UK. See this Regulatory Outlook for background.

Among other things, Mr Osunkoya failed to carry out the necessary checks to ensure that the ATMs were not being used by criminals to launder the proceeds of crime. He was also convicted of forgery, using false identity documents, and possessing criminal property.

The FCA asked the court to initiate confiscation proceedings under the Proceeds of Crime Act 2002, which would seek to recover any financial benefit obtained as a result of criminality.

Payments

PSR final report on market review into card scheme and processing fees

On 6 March 2025, the Payment Systems Regulator (PSR) published the final report on its market review into card scheme and processing fees.

Confirming the provisional findings in an interim report published in May 2024 (see this Regulatory Outlook), the PSR has concluded that the supply of scheme and processing services is not functioning well:

• The largest players do not face effective competitive constraints when dealing with merchants and card acquirers (who process card payments on behalf of merchants).
• Fees have risen substantially in recent years, with no clear evidence that new fees are set on the basis of detailed cost analysis, competition or innovation.
• The failure of market leaders to provide sufficiently clear and detailed information creates poor outcomes for acquirers and merchants.

Concluding that intervention is warranted in this case, the PSR will shortly publish a consultation paper on potential remedies to address the harms identified in the final report.

HM Treasury to abolish PSR

HM Treasury has announced that it will abolish the PSR as part of an efficiency drive. This decision follows complaints from businesses that the regulatory environment is too complex. Currently, payment system firms must engage with three different regulators, costing them time, money and resources. This has a greater impact on smaller firms that are trying to scale and grow.

In a letter sent to the Treasury Select Committee, HM Treasury explains that as part of its Plan for Change, the government wants to see a more streamlined regulatory environment that manages the burdens on all businesses, with minimal overlap between regulators' responsibilities. So it has decided to consolidate the PSR and its functions primarily within the FCA.

The FCA will take on responsibility for ensuring the payments landscape promotes innovation and competition, and supports the interests of consumers and businesses. However, there are no immediate changes to the PSR's remit or ongoing programme of work. It will continue to have access to its statutory powers until legislation is passed by Parliament to enact these changes. In the interim period, the PSR and FCA will work closely to deliver a smooth transition of responsibilities to ensure the market remains competitive.

The PSR responded to the announcement in a press release in which it committed to working on the transfer of its regulatory responsibilities. The FCA's chief executive stated that with a changed payments landscape, a more streamlined regulatory framework is a natural next step following recent work to improve co-ordination and clarity on regulatory responsibilities. The government will consult on the details of this reform over the course of the summer and will legislate as soon as possible. See our Insight for more.

PSR policy statement on publication of 2024 APP scams data

On 12 March 2025, the PSR published a policy statement discussing its approach to the publication of 2024 authorised push payment (APP) scams data, in light of new reimbursement rules that came into effect in October 2024. It intends to publish two separate updates:

• A pre-reimbursement requirement update in October 2025: to cover APP scams where the fraudulent transaction took place over Faster Payments before 7 October 2024 and where the case was closed between 1 January 2024 and 31 December 2024. It will reflect data collected from the 14 largest banking groups in the UK.
• A snapshot of industry performance post-reimbursement in spring 2025: to cover APP scams where the fraudulent transaction took place across Faster Payments on or after 7 October 2024 and where the case was closed between 7 October 2024 and 31 December 2024. It will reflect data provided by Pay.UK.

ECB confirms introduction of verification of payee service

The European Central Bank (ECB) has published a news release announcing that the Eurosystem had positively concluded its exploratory work for offering a verification of payee service for payment service providers (PSPs). The solution will assist PSPs in the Single Euro Payments Area (SEPA) to comply with  their obligations on credit transfers in euro under the Instant Payments Regulation (IPR). Under the IPR, a payer must be informed of any discrepancies between the payment account number and the intended payee's name, based on which the payer can make the decision to initiate the payment or not.

The service will be available for instant payments (including those settled in TARGET Instant Payment Settlement), as well as for SEPA credit transfers.

Consumer finance

Consumer duty updates

FCA speech on supporting economic growth

Nikhil Rathi, FCA chief executive, has delivered a speech on growth, in which he addressed some of the regulator's updates on consumer duty, including:

• Consumer duty board champion: from 27 February 2025, the FCA removed the expectation for firms to have a Consumer Duty Board champion, although boards remain free to have one. Firms must keep retail customer outcomes at the heart of their risk control arrangements and internal audit function.
• Risk of consumer harm: the FCA called for the government to think boldly when setting out its risk appetite, especially in relation to consumer harm.
• Consumer duty call for input: the speech addressed the FCA's call for input on its review of retail conduct requirements published in July 2024. The FCA is currently working through feedback.

FCA review of firms' approaches to consumer support under consumer duty

On 7 March 2025, the FCA published its findings following a multi-firm review into firms' approaches to the consumer support outcome – one of four outcomes of the consumer duty.

Following an initial quantitative survey of 407 retail firms in May 2024, across the banking, insurance, payments, consumer finance and investment sectors, the FCA found that the majority were already considering how the support they provide meets customers' needs. The FCA provides both examples of good practice and areas for improvement, intended to help firms understand its expectations. Areas for improvement include:

• Aligning support processes to target market (for example, including those with characteristics of vulnerability).
• Making post-sale support as accessible and effective as pre-sale support.
• Embedding a culture that is in step with the duty.
• Monitoring a broader range of outcomes about effective customer support.

FCA review of firms' treatment of customers in vulnerable circumstances

On 7 March 2025, the FCA published its findings following a multi-firm review into firms' treatment of customers in vulnerable circumstances.

The FCA notes that although the consumer duty has driven a renewed focus among firms on delivering good outcomes for customers in vulnerable circumstances, areas for improvement remain – including:

• Ineffective outcomes monitoring.
• Failing to provide appropriate support.
• Failing to provide clear communications.
• Lack of tailored training and embedding consumers' needs into product and service design.

As a result of the review, the FCA has decided there is no need to update its guidance for firms on the fair treatment of vulnerable customers, which it considers remains appropriate and helpful alongside the consumer duty. Instead, case study examples of good practice and areas for improvement have been published.

House of Commons Treasury Committee assesses level of banks' IT failures

On 6 March 2025, the House of Commons Treasury Committee published responses received from CEOs of eight banks and one building society relating to the impact of IT failures.

The committee discovered that at least 158 banking IT failure incidents affected millions of customers' ability to access and use services between January 2023 and February 2025, amounting to more than 33 days of unplanned technology and systems outages. The most common reasons given for IT failures include third-party suppliers, disruption caused by a change in systems and internal software malfunctions.

The UK's new operational resilience regime must be fully complied with by 31 March 2025, as described further in our Insight.

FCA statement on next steps in motor finance review

The FCA has published a statement on the next steps in its review of motor finance discretionary commission arrangements. In early April, the Supreme Court will hear an appeal against the judgment in Johnson v FirstRand Bank Ltd (London Branch) (t/a Motonovo Finance) [2024] EWCA Civ 1282 (see this Regulatory Outlook), in which the FCA has been granted permission to intervene.

If, taking into account the Supreme Court's decision, the FCA concludes motor finance customers have suffered as a result of widespread failings, it is likely to consult on an industry-wide redress scheme.

The FCA will no longer make a further announcement on its motor finance review in May 2025, and will instead confirm within six weeks of the Supreme Court's decision whether, and how, it will proceed with a redress scheme.