Many new UK financial products lack consumer protections – FCA

E-money services are not covered by financial services compensation scheme, UK regulator says

Digital travel

The UK’s Financial Conduct Authority says it is concerned with the level of consumer protection new payment firms are offering their customers.

In a statement on February 18, the FCA said a number of payment firms had been able to enter the market and “grow quickly” as a result of changes to the regulatory framework.

Some of their products do not offer protection for consumers. “For example e-money services advertised as ‘current accounts’ aren’t covered by the Financial Services Compensation Scheme,” the FCA said. 

The FCA introduced new rules in 2017 to make it easier for new payment services providers to enter the UK market. However, there are areas of current consumer protection frameworks that do not cover a number of new products, including e-wallets.

“This can be particularly problematic if safeguarding failures are combined with prudential weakness, or if firms act outside the scope of regulation,” the FCA said. “These concerns have resulted in our taking a pre-emptive approach in our supervision of these firms.”

The FCA also raised concerns regarding the credit market, insurance pricing and high-risk investment products, in its annual sector analysis of current challenges.

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