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Navigating Regulatory Compliance: The Role of Agents in the Changing Financial Landscape

What is an agent?

An agent is a person or business which acts on behalf of regulated Payment Services Providers (PSPs) and Electronic Money Institutions (EMIs) to conduct payment services and e-money activity. Under an agency agreement, the agent is not required to be directly authorised by the FCA to offer these payment services, as in doing so it is utilising the licence of the regulated PSPs and EMIs, referred to as the Principal firms. 

Before a PSP or EMD agent can offer regulated services for the Principal Firm, the principal must apply to register the agent with the FCA.

Are there differences between offering services as an agent and a directly authorised firm?

An agent is not permitted to provide or purport to provide payment services or to issue e-money in its own right. 

Throughout the customer journey, agents should inform the customer that they are acting as an agent on behalf of their principal. Ordinarily, customers should agree to the terms and conditions of the principal Firm as that is the entity authorised to undertake regulated activities.

Can a company become an agent of any regulated PSP or EMI?

No. Each PSP and EMI must determine whether to appoint an agent based on its comprehensive risk analysis. 

How long does it take for the FCA to approve agent applications?

The FCA has two months from the submission of the agent registration application to decide whether or not to approve it. 

The Principal Firm should take all reasonable precautions to ensure that all information requested in the agent registration application is provided; however, the FCA has the right to request any additional information it deems necessary to inform its application assessment.

In the current regulatory landscape, we are seeing a greater emphasis on the due diligence conducted by the FCA, particularly at the point of authorisation. It is becoming much more rigorous, and in certain circumstances, there is an increased time limit for the process to be completed. Therefore, an agent approach may benefit certain firms if they want a quicker route to market.

Since the last iteration of this article, the FCA has introduced two regulatory initiatives that are likely to impact all payment services Firms: Consumer Duty and Operational Resilience. This is part of a strategy to 'raise the bar' for regulated entities.

Information regarding both of these initiatives can be found below:

Operational Resilience

Operational resilience is intended to supplement a Firm's existing operational risk or business continuity planning to enable it to prepare for unexpected disruptions, thereby avoiding negative customer impact and reputational risk. Each Firm must identify critical business services, set impact tolerances, and identify any vulnerabilities in its operational resilience.

By March 31, 2022, each Firm should have already organised mapping and testing exercises, which must be implemented after continuous checking and analysis by March 31, 2025. After that date, a company must continue mapping and testing exercises to stay within its impact tolerance for each critical business service as soon as reasonably practicable, but no later than March 31, 2025. With such new regulatory initiatives, this may increase the potential appeal of an agent approach compared to the direct authorisation approach. 

Consumer Duty 

The FCA implemented the final guidance for Consumer Duty in July 2022, with the Duty coming into force in July 2023. This will impact all Firms, including a PSD and EMD agent. The Consumer Duty establishes a set of new rules designed to ensure that financial services firms prioritise their customers' interests.

Consumer Duty is likely to impact PSD and EMD agents significantly. Agents must ensure that they are acting in their customers' best interests and that the products and services they provide are designed to meet their needs.  This must be communicated by presenting clear and accessible information. Therefore, the higher standards expected of principal Firms by the FCA will mean they will conduct more agent reviews. 

Agents must review their processes and procedures to ensure compliance with the Consumer Duty. This could include more staff training, changes to sales processes, and better customer communications. Non-compliance with Consumer Duty may result in fines and reputational harm for a PSD and EMD agent and the principal Firm it represents.

You can sign up to our FCA Consumer Duty webinar series here

Author: Joel Bailey - Connect with Joel Bailey on LinkedIn

How can we help you?

Thistle Initiatives can assist prospective agents by preparing regulatory framework compliance documents, which will help to streamline the agent application process. This is especially important in a period of increased scrutiny for agents, as it is critical to present high-quality documentation that considers legislation when applying to become a PSD or EMD agent.

We can also provide a tailored approach enabling you to understand this high-level documentation and how it applies in an operational capacity. Specifically, we can support the composition of consumer duty and operational resilience implementation plans while firms are utilising an agent approach if or when they intend making a full application. In addition, we can support the Firm in creating its self-assessment documentation while supporting the implementation project plan guiding the mapping of Important Business Services and setting tolerance levels and realistic testing scenarios.

In addition to assisting you as-and-when, our team of specialists can serve as your right hand in meeting and complying with regulations. We understand the importance of staying up-to-date and compliant and are dedicated to providing the guidance and support needed to do so.

Contact our specialist team now to schedule a free consultation. Get in touch with us by calling 0207 436 0630 or sending an email to