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FCA says poor-quality applications are creating log jams


The FCA has said that poor-quality applications and ‘radical innovation' are sustaining a log jam in authorisations for payments and e-money firms seeking to operate in the UK.

The FCA’s performance in authorising innovative fintech firms has continued to lag, according to its latest data release.

Industry body TheCityUK warned in January that this would harm UK competitiveness, deterring innovative firms from setting up in the UK, and discouraging those at home.

Applications for FCA authorisation jumped 70% in 2021, as the FCA has adopted a more stringent approach to protect consumers by weeding out bad or ill-prepared firms. The regulator hired 159 more staff to handle this work and claimed in July to have cut the log jam by 60%.

But the latest data shows that FCA authorisations of payments and e-money (P&E) firms still lag so much that they are rated red by their own traffic-light assessment. The FCA’s performance against authorisation deadlines for such firms has been mostly in the red since 2019.

The FCA has done much better at fixing delays in other types of authorisation. It brought decisions on Appointed Representatives out of the red, getting almost 98% done within the statutory deadline in Q4 2023/24. The statutory target is 100%.

The regulator brought senior manager approvals out of the red over the last five quarters by completing another 15% of them on time. But its checks on money laundering controls, which it nudged to 100% after numerous improvements since 2019, declined 10% in the last two quarters. A fifth of e-money authorisations were also late.

The data highlights the regulator’s unique failure to fix payments authorisations, in contrast to the simpler requests its department receives. It consistently has finalised close to 100% of simple requests on time since 2021.

The FCA’s director of P&E authorisations said that too many P&E applications were incomplete or poorly completed. That said, he noted that his department has still finalised most of them on time. He added that his department receives so few such applications that it takes only a ‘very few’ late decisions to knock its average into the red.