The UK’s Financial Conduct Authority (FCA) is introducing new payment safeguarding rules on May 7, 2026, and they’re about to shake up the fintech world. The goal? Stronger consumer protection. The challenge? Higher compliance costs that could put pressure on smaller startups.

What’s Changing?

The FCA wants to make sure that customer money in e-money and payment institutions is properly protected. These rules come after several firms went under between 2018 and 2023, leaving customers stranded with up to 65% of their funds lost.

The new framework requires:

Stronger governance and reporting

Clear auditing standards

Stricter fund safeguarding practices

In short, the FCA is tightening the safety net to restore consumer trust.

The Cost of Compliance

But there’s a catch: compliance doesn’t come cheap. Firms will face expenses for tech upgrades, staff training, audits, and legal support. For context, global anti-money laundering compliance costs hit $274 billion in 2022—a sign of how heavy these requirements can get.

For fintech startups, which thrive on speed and innovation, these added costs could slow things down. Smaller firms especially may find it harder to compete with larger players who have deeper pockets.

Balancing Protection and Innovation

This raises the big question: how do you keep consumers safe without killing innovation?

Startups often pride themselves on being agile and creative, but the regulatory focus may now shift attention to compliance instead of new products. Still, there’s a silver lining—firms that adapt early could turn compliance into a competitive advantage.

Tools like RegTech solutions can help companies automate compliance, cut costs, and build consumer trust. Those that figure this out quickly may emerge stronger and more resilient.

Winners and Strugglers

We’re already seeing two sides of the story:

Success stories: Some fintechs are embracing smart tech solutions to make compliance easier, leaving room to keep innovating.

Struggling startups: Others find the rules overwhelming, especially given the fragmented landscape between UK and EU regulations.

The FCA has tried to soften the blow—for example, firms with under £100,000 in customer funds won’t face full audit requirements. Still, the road ahead looks demanding.