On April 28, 2025, the Financial Conduct Authority (FCA) released Feedback Statement FS25/3 and Finalised Guidance FG25/2, aimed primarily at insolvency practitioners (IPs) but carrying significant implications for payment and electronic money institutions (EMIs). Although intended to guide IPs handling regulated firm insolvencies, FS25/3 offers insights and clear expectations for payment and e-money firms.
Key Implications for Payments and E-money Firms:
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Lessons from the Ipagoo Judgement
Central to FS25/3 is the emphasis on robust safeguarding practices, particularly following the landmark Ipagoo judgment. The Court of Appeal ruled that if there’s a shortfall in safeguarded funds, the firm is obligated to top-up the asset pool immediately. Critically, these topped-up customer funds must be prioritised before repaying other creditors, ensuring customers' money remains secure, even during insolvency.
Additionally, the guidance highlights FSCS protections for safeguarded funds held in bank accounts. If a safeguarding bank fails, depositor protection from FSCS might apply, adding another layer of security for customer funds. -
Consumer Duty Remains Paramount
Despite insolvency proceedings, firms must continue adhering to the FCA’s Consumer Duty, maintaining fair treatment and transparency with customers. The FCA underscores no inherent conflict between this duty and the responsibilities to creditors. In fact, effective customer communication during distress can ease operational burdens by reducing uncertainty and queries.
FS25/3 clarifies that the Consumer Duty, while interpreted reasonably given the circumstances of insolvency, still requires firms to consider customer vulnerability proactively. Firms are advised to handle hardship cases—financial and non-financial—promptly, mitigating potential consumer harm. -
Importance of Early Regulatory Engagement
One clear message from the FCA is the critical importance of early and transparent engagement. Payment and e-money institutions facing potential insolvency must inform the regulator promptly. FCA guidance, such as SUP 15,explicitly outlines the necessity to communicate upstream warning signals, such as potential breaches of capital requirements, and encourages firms to share documentation like winding-up notices promptly—even where not legally mandated.
Why Does This Matter to Your Firm?
For payment and e-money firms, these releases reinforce regulatory expectations around safeguarding of funds, maintaining consumer duty, and engaging proactively with the regulator. Adhering to these expectations not only helps navigate regulatory scrutiny during challenging periods but also significantly mitigates reputational and operational risks associated with insolvency scenarios.
Meet the expert
Alejandro Bondjale Hinestrosa, Senior Consultant 
Alejandro is a Senior Consultant in the Payment Services team at Thistle Initiatives. With a strong background in regulatory compliance, Alejandro brings valuable experience from his previous role as a Regulatory Analyst at a leading RegTech company. There, he provided expert insights and guidance on payments regulation, helping clients navigate the complexities of the regulatory landscape and achieve their business objectives. His deep understanding of compliance frameworks and industry best practices enables him to support firms in meeting regulatory requirements and driving sustainable success.