UK Payment Services Regulation: A Guide for HNW Individuals and Businesses

The UK's payment services landscape is far more complex than a simple choice between a bank and a fintech app. Behind every instant bank transfer, digital wallet, and cross-border payment sits a regulatory framework that determines precisely how your money is protected — and by whom. For internationally mobile individuals and businesses, understanding this architecture is not optional: it is the foundation of sensible financial planning.

The Regulatory Framework: FCA and the PSR 2017

The Payment Services Regulations 2017 (PSR 2017) transposed the EU's Second Payment Services Directive (PSD2) into UK law and remain in force post-Brexit. They are administered by the Financial Conduct Authority (FCA) and govern any firm that provides payment services in the UK.

The PSR 2017 establishes a tiered authorisation regime based on the nature of payment activities and the volumes involved.

Authorised Payment Institutions (APIs)

An Authorised Payment Institution processes payments on behalf of clients but does not hold client funds. Money flows through the API — it is not stored. Examples include many payroll processors and some payment gateways. Because no client money is held overnight, the systemic risk is lower, though APIs must still meet capital adequacy requirements (minimum own funds between €20,000 and €125,000 depending on service type).

Electronic Money Institutions (EMIs)

An Electronic Money Institution goes a step further: it issues electronic money and can hold a balance on behalf of a customer — what you see in a Wise, Revolut (pre-banking licence), or PaySafe wallet. EMIs are regulated by the FCA and are subject to strict safeguarding requirements. The minimum initial capital is €350,000.

Crucially, an EMI balance is not a bank deposit. It is e-money, a distinct legal instrument.

Small Payment Institutions (SPIs)

SPIs operate under a simplified registration regime for lower-volume payment businesses. They are not required to safeguard client funds in the same way, and they face average monthly payment transaction volumes of no more than €3 million. SPIs are suitable for very small payment processors; they are unlikely to be relevant to HNW clients directly, but many small fintech products use this structure.

E-Money vs Bank Deposit: A Critical Distinction

This is the distinction that most clients miss, and it carries material consequences.

Bank deposits held with FCA-authorised banks and building societies are protected by the Financial Services Compensation Scheme (FSCS) up to £120,000 per depositor per institution (£240,000 for joint accounts) following the increase from £85,000 on 1 December 2025. If the bank fails, FSCS pays out within seven working days. The protection is automatic and requires no action from the depositor.

E-money balances are not covered by FSCS. Instead, EMIs must comply with safeguarding obligations under the PSR 2017 and the FCA's Payment Services and Electronic Money — Our Approach document. Safeguarding means the EMI must either:

1. Ring-fence client funds in a dedicated account held at an authorised credit institution (a bank), segregated from the EMI's own funds; or
2. Cover the funds with an insurance policy or bank guarantee from an authorised insurer or credit institution.

In the event of EMI insolvency, safeguarded funds are ring-fenced from general creditors. However, this is not the same as FSCS: the process of recovering funds from a failed EMI is slower, less certain, and can involve insolvency proceedings. The FCA's own guidance acknowledges that safeguarding is a weaker protection than FSCS deposit insurance.

Practical implication: do not hold material balances in EMI accounts as a substitute for a bank account. Use EMIs for transactional convenience — foreign exchange, international transfers, day-to-day spending — not as a savings vehicle or a repository for large cash positions.

Revolut received its UK full banking licence in 2024, converting its UK e-money business to a deposit-taking bank regulated by the PRA as well as the FCA. Revolut Bank UK customer deposits now benefit from FSCS deposit protection (up to £120,000 per depositor since 1 December 2025). This is a significant change and distinguishes Revolut's UK banking product from its earlier e-money model.

Safeguarding Requirements in Practice

Under the PSR 2017, EMIs must maintain safeguarding arrangements at all times. The FCA publishes supervisory expectations that go beyond the bare legislative minimum:

• Safeguarding accounts must be held with a major authorised credit institution — not a sub-custodian or a bank with uncertain creditworthiness.
• The EMI must conduct daily reconciliations of the safeguarding account against client balances.
• If the safeguarding account earns interest, the interest belongs to the EMI, not the client — unless the EMI's terms state otherwise.
• The FCA has taken enforcement action against EMIs that failed to maintain adequate safeguarding. Clients should check published FCA supervisory notices before placing significant balances with an EMI.

For clients using platforms such as Wise (which holds an EMI licence), the safeguarding regime provides a degree of structural protection — but not the immediacy or certainty of FSCS.

The UK Payment Systems Regulator

Alongside the FCA, the Payment Systems Regulator (PSR) — established by the Financial Services (Banking Reform) Act 2013 — is the economic regulator for UK payment systems. The PSR is separate from the FCA and focuses on the infrastructure level: the schemes and networks through which payments flow, rather than individual firms.

The PSR oversees:

• Faster Payments (operated by Pay.UK)
• BACS (Direct Debit and Direct Credit, operated by Pay.UK)
• CHAPS (operated by the Bank of England)
• Card schemes (Visa, Mastercard — to the extent they operate in the UK)

The PSR's mandate is to promote competition, innovation, and the interests of service users. It has the power to direct operators and participants in regulated payment systems.

Faster Payments

Faster Payments is the UK's real-time payment infrastructure, operating 24 hours a day, 365 days a year. It was launched in 2008 and has become the backbone of UK retail and SME payments.

Key features:

• Near-instant settlement — payments typically reach the recipient within seconds.
• Single transaction limit of up to £1 million for most sending banks since the limit was raised in 2023 (individual bank limits may be lower — check with your provider).
• No upper value limit at the scheme level since 2023, though banks set their own per-transaction caps.
• Widely used for: salary payments, rent, supplier invoices, personal transfers, tax payments to HMRC.

CHAPS

CHAPS (Clearing House Automated Payment System) is the UK's same-day high-value payment system. It is operated directly by the Bank of England and settles in central bank money — meaning there is no settlement risk between banks.

Key features:

• No upper transaction limit — used for property completions (where six or seven-figure transfers are routine), corporate treasury payments, and large capital flows.
• Same-day settlement during CHAPS operating hours (typically 6am–6pm on business days, with some extension to 8pm).
• Higher fees than Faster Payments — typically £20–£40 per transaction at high-street banks, though private banks and treasury accounts may price differently.
• Legally required for UK residential conveyancing completions above a certain threshold at most firms.

For HNW property buyers, CHAPS is the standard mechanism for sending completion funds to a solicitor's client account. Ensure your bank has CHAPS enabled and that daily limits accommodate the transfer amount; arranging this in advance prevents last-minute delays.

BACS

BACS (Bankers' Automated Clearing Services) processes Direct Debits and Direct Credits on a three-working-day cycle. It is the scheme used for most regular salary payments to employees and for the majority of utility direct debits. BACS is not real-time: a payment submitted on Monday settles on Wednesday. It remains important for business payroll and standing billing arrangements.

The New Payments Architecture

The New Payments Architecture (NPA) is a long-term reform programme to replace Faster Payments with a more modern, flexible, and resilient infrastructure. Pay.UK and the PSR are leading the transition.

Key features of NPA:

• ISO 20022 messaging standard (richer data, better reconciliation, supports request-to-pay functionality).
• Layered architecture separating the clearing infrastructure from access and overlay services.
• Greater scope for innovation by third-party providers.
• Projected phased rollout from 2026 onwards, with full migration taking several years.

For HNW clients and businesses, NPA will bring practical benefits: richer payment data (reducing reconciliation errors), potential for request-to-pay (replacing invoice chasing with a standardised digital request), and improved resilience. However, transition will require updates to treasury systems and banking integrations; businesses should engage their bank's transaction banking teams as the rollout progresses.

Practical Guidance for HNW Clients

Before opening an account with a fintech or payment provider, check:

1. Is the firm FCA-authorised as a bank (deposit-taker) or as an EMI/API?
2. If an EMI: how are client funds safeguarded, and at which bank?
3. Does the firm participate in FSCS?
4. What are the transaction limits for Faster Payments and CHAPS?

For large cash positions, use FSCS-protected bank accounts. Do not leave six- or seven-figure balances in EMI wallets, regardless of how convenient the platform is.

For property transactions, confirm with your solicitor whether CHAPS is required and verify that your bank can process the required amount within a single business day. Build in at least two business days' buffer before completion.

For businesses, understand which payment rails your bank uses for each transaction type: payroll (BACS or Faster Payments), supplier payments (Faster Payments or CHAPS for large invoices), international (SWIFT or internal bank transfer).

Note: payment services regulation is subject to ongoing review by the FCA and PSR. The rules described in this guide reflect the position as of mid-2026; businesses and individuals should seek current professional advice before making material decisions based on regulatory status.

How Global Investments Can Help

Navigating the UK's payment services landscape — particularly when funds are moving across borders for property transactions, business expansion, or investment activity — requires careful attention to the regulatory and practical details. Global Investments works with internationally mobile HNW individuals and businesses to structure their banking and payment arrangements appropriately.

Our team can assist with identifying suitable regulated banking and payment providers for your specific situation, advising on CHAPS and Faster Payments logistics for UK property completions, and connecting you with specialist advisers for payment services compliance. Contact us to discuss your requirements.