Financial Firms Unprepared for Upcoming UK Payment Safeguarding Rules, Survey Reveals

A survey by Clear Junction and Howden reveals that 78% of financial firms are unprepared for the UK's new payment safeguarding rules, which take effect in May 2026. The regulations require firms to separate customer funds, complete daily reconciliations, maintain clear documentation, and undergo audits. Firms face challenges with reconciliations, regulatory changes, and insurance compliance.

As the deadline for the UK’s updated payment safeguarding regulations looms, new findings reveal that a significant majority of financial firms are not prepared to meet the upcoming requirements. 

A recent poll conducted at a safeguarding event by Clear Junction, a global payments solutions provider, and Howden, an international insurance broker, paints a concerning picture. 

The regulations, enforced by the Financial Conduct Authority (FCA), come into effect on 8th May 2026, but as of now, over 78% of financial firms have either just started preparing or have not begun at all.

The key challenges facing the industry

The new rules mandate a range of operational standards for payment and e-money institutions, including the need to maintain strict separation of customer funds, complete daily reconciliations, and undergo formal audits that will be directly submitted to the FCA.

The live poll, conducted at an event in Howden’s London headquarters, surveyed 68 payments industry professionals and revealed some alarming statistics:

• Only 7% of firms claim to be fully prepared for the changes.
• Less than 22% are in the advanced stages of preparation.
• The majority (78%) are still either in the early stages (59%) or have yet to start (19%).

Key obstacles in compliance

The new rules, which mark a shift from guidance to enforceable regulation, present several operational challenges for firms. The most significant of these is the next-day (D+1) reconciliation process. In this system, firms must match and account for client funds by the following business day. This requirement was flagged as the most significant operational friction by 58% of respondents.

In addition to D+1 reconciliation, other key challenges identified include:

• Managing UK and EU regulatory changes without creating duplication (19%).
• Ensuring insurance policies meet FCA requirements (13%).
• Maintaining the quality of monthly management information (10%).

Industry leaders discuss solutions

Several prominent speakers at the event, including Clear Junction’s Group CEO Teresa Cameron, Howden’s Head of Fintech Hugo Thorp, and Alison Donnelly, Director at regulatory consultancy fscom, discussed the hurdles firms face and suggested potential solutions.

Teresa Cameron, Group CEO of Clear Junction, commented: “Reconciliations are always at the top of the leaderboard, but they are only one part of the challenge. Firms also face the short supply of safeguarding banks, the issue of liquidity, and the requirement to keep resolution packs as living, breathing documents. 

“The practical way forward is to diversify approaches: using a hybrid method of segregation where possible and insurance where banks are scarce, ensuring liquidity across 24/7 payment schemes, automating reconciliations to meet next‑day requirements, and keeping resolution packs updated so they can be relied upon in an insolvency.”

She recommended a hybrid approach, combining segregation methods with insurance where banks are scarce, ensuring liquidity for 24/7 payment schemes, automating reconciliations to meet D+1 requirements, and keeping resolution packs updated to ensure their relevance in insolvency situations.

A critical deadline approaches

The FCA’s new regulations are clear: every authorised payment institution and e-money institution will face a qualified audit of its safeguarding arrangements. The upcoming May 2026 deadline will be a crucial test for firms. The poll results indicate that firms must act swiftly to ensure they are operationally ready to meet these regulatory demands.

Hugo Thorp, Head of Fintech at Howden, said: “Safeguarding needs to be right; there can’t be any gaps that leave customers unprotected. We’ve added an intent‑to‑renew clause to give firms certainty that there will be no cliff‑edge scenarios. Insurance can sit alongside segregation, adding a layer of coverage and helping firms diversify their approach while maintaining liquidity.”

Sam Robinson, Partner at CMS, added: “Before it was guidance, and now it’s rules. That makes expectations stricter and more specific, including for insurance policy wording: funds should be paid promptly into safeguarding accounts with no impediments beyond proof of insolvency, with clear clauses on timing, non-cancellation and notice.”

What firms must do before may 2026

With the May 2026 deadline fast approaching, firms must take immediate steps to ensure compliance with the FCA’s updated safeguarding rules. These include:

• Automating reconciliations to meet D+1 requirements across weekends and time zones.
• Maintaining liquidity across 24/7 payment schemes.
• Keeping resolution packs live and updated, so they are ready for use in insolvency situations.
• Preparing for audits by mapping internal controls against the FCA rules and arranging for qualified safeguarding audits.
• Reviewing insurance policies to ensure they contain the necessary clauses regarding timing, non-cancellation, notice periods, and prompt payouts in the event of insolvency.

About Clear Junction

Clear Junction, established in 2016, is a global payments solutions provider focused on enabling regulated financial institutions to quickly and securely access essential payment networks. The company offers a variety of services, including payment accounts, virtual IBANs, foreign exchange (FX) services, digital asset infrastructure, and e-wallet solutions, all designed to meet regulatory compliance requirements.

Clear Junction’s commitment to regulatory excellence and security has allowed it to expand its services across multiple jurisdictions, including the UK and Canada. As a Financial Conduct Authority (FCA)-regulated Electronic Money Institution (EMI), Clear Junction provides a comprehensive suite of solutions to its clients, ensuring compliance while enabling efficient, cross-border payment services. The company’s services are built to bridge the gap between traditional finance and digital assets, allowing institutions to diversify their payment options while adhering to the latest regulatory standards.

About Howden

Founded in 1994, Howden is a leading global insurance intermediary with a strong commitment to employee ownership. Headquartered in London, Howden operates in over 50 countries across Europe, Africa, Asia, the Middle East, Latin America, the USA, Australia, and New Zealand. The company is known for providing insurance, reinsurance, and underwriting solutions to a diverse client base, including individuals, SMEs, and large multinational corporations.

Howden’s innovative approach to insurance includes a focus on delivering tailored, flexible solutions that meet the specific needs of clients across a wide range of industries. The company’s ability to offer highly customised services is backed by its extensive network and deep expertise across multiple sectors. Howden’s team of 23,000 professionals is dedicated to providing clients with the best possible solutions and value, managing premiums totalling USD 50 billion on behalf of its clients.