Why 1 in 3 FCA Payment Firm Applications Fail – Lessons Learned (2025 update).
- Adempi
- 1 day ago
- 4 min read
What’s changed, and how to get authorised first time.
The payment services sector continues to grow, supported by the government’s broader economic growth and innovation strategy. Ministers have been clear: payments, fintech and digital finance are central to the UK’s competitiveness — and reducing unnecessary regulatory burden is a strategic priority.
But that doesn’t mean authorisation has become easier.
Today, around 1 in 3 applications for Payment Institution or E-money permissions are rejected or withdrawn. That's not because the FCA is blocking growth, but because too many firms are still treating authorisation as a tick-box exercise rather than a test of operational readiness and regulatory credibility.
The FCA has been clear: it wants to see firms that are not just compliant on paper, but genuinely ready to operate. That means robust governance, realistic financials, credible risk management — and policies that actually reflect how your business will run. Applications come with a clear expectation:
Firms must be well-run, well-capitalised, and able to operate safely. Innovation is welcome. Weak controls are not.
Why Applications Are Failing: The FCA's Key Concerns
Based on feedback from the FCA and our work with firms navigating the authorisation process, here are the main reasons applications are falling short, ranked in order of importance.
1. Governance: The Most Critical Factor
The FCA is assessing whether leadership is genuinely capable of running a regulated business from day one.
Common issues:
Senior Managers without relevant payments or regulatory experience.
“Mind and management” effectively located offshore.
Complex or opaque ownership structures.
Over-reliance on one individual (triple-hatting) without capacity justification.
Senior Managers unable to clearly articulate their regulatory responsibilities during interview.
What the FCA Wants to See:
Clear accountability, experience aligned to the business model, and leadership with the capacity and understanding to govern effectively.
2. Financials: Assumptions Must be Realistic and Defensible
The government wants growth, but the FCA wants resilience, and the two must align.
Applications fall down when:
Revenue projections lack evidence.
Capital levels are insufficient for the scale or risk profile.
Growth assumptions are based on optimism rather than pipeline or market validation.
What works: Transparent assumptions, stress-tested scenarios, clear funding strategy, and capital buffers matched to planned scale.
3. Risk Management: Customer Harm Not Fully Considered
The FCA's core objective remains consumer protection and maintaining market integrity. Common issues:
Risk assessments focused on the firm, not end-users.
Operational controls described at high-level, not in actionable detail.
Insufficient monitoring, MI, and escalation pathways.
Action:
Map out customer harm scenarios and show how your controls mitigate them. Think beyond operational risk, consider conduct risk, data risk, and financial crime risk too.
Build a credible compliance monitoring framework with clear metrics, review cycles, and escalation paths. Show the FCA you'll spot problems early and act on them.
4. Generic Policy Documents: A Major Red Flag
The FCA is quick to identify templated documents. Too many firms submit off-the-shelf policies that regurgitate regulatory requirements without explaining how they'll apply them in practice.
Warning signs include:
Policies repeating FCA rules without describing how the firm applies them.
Misalignment across business plan, risk assessment, and monitoring frameworks.
Documents that describe a business model different from the one actually proposed.
Action:
Write policies that describe your business, not a generic template. Use real examples, refer to your specific risks, systems, workflows, controls and governance arrangements. Cross-check documents for consistency. Does your risk appetite statement align with your business plan? Does your compliance monitoring plan match the risks you've identified?
How to Strengthen Your Application.
Whether you’re preparing to apply or responding to FCA feedback:
1. Invest in governance early. Don't wait until the FCA asks questions about your Senior Managers. Appoint individuals with credible experience, ensure they understand the firm's obligations, and give them the resource to do their jobs properly.
2. Build realistic, defensible financials. Show your workings. Stress-test your assumptions. Make sure your capital and resource projections are proportionate to your growth plans.
3. Put customers at the centre of your risk framework. Map out harm scenarios and show how your controls prevent or mitigate them. Build a credible compliance monitoring regime that demonstrates oversight.
4. Tailor your policies to your business. Avoid template overkill. Write documents that reflect how your firm will actually operate, and make sure they're consistent with each other.
5. Rehearse your interviews. The FCA will interview your Senior Managers. Make sure they can confidently explain your business model, compliance obligations, and risk framework. If they can't, that's a problem.
The Bigger Picture: Authorisation as a Strategic Advantage
Government strategy is focused on unlocking growth and maintaining the UK’s position as a global fintech leader.
The FCA is focus is on ensuring firms are safe, resilient, and well-run.
Firms that invest properly in authorisation:
Build stronger commercial credibility.
Attract investors and banking partners more easily.
Scale more smoothly and sustainably.
The 1 in 3 failure rate is avoidable but only with the right preparation, governance structure, and operational evidence.
Planning your FCA authorisation application?
Adempi's compliance consultants specialise in helping payment and e-money firms navigate the authorisation process — from building credible governance frameworks to drafting tailored policies that pass FCA scrutiny.
Get in touch at contact@adempi.co.uk or on 0203 925 4761
Or to find out more about our services you can head to our webpage: Adempi - FCA Compliance Consultants.
