Your EMI’s banking relationship might be more fragile than you think, and the FCA’s latest findings reveal just how exposed small payment firms really are.
Picture this: you’re running a growing EMI with 25 employees, processing millions in cross-border payments monthly. Everything’s humming along nicely until one Tuesday morning when your bank sends a brief email stating they’re “reviewing their risk appetite” and terminating your safeguarding account in 30 days. No detailed explanation. No appeal process. Just a polite corporate goodbye.
Sound far-fetched? It’s happening more often than you’d think across the UK’s payment sector, and the FCA has taken notice.
What’s Actually Happening Out There
According to recent industry reports covered by City A.M., the FCA has begun examining reports that several UK banks are quietly cutting off services to registered EMIs and Payment Institutions. The regulator is conducting multi-firm reviews after complaints that some banks are offboarding payment firms under the banner of “risk reduction” or “enhanced KYC reviews” without proper justification.
While the FCA hasn’t launched formal enforcement action yet, the fact they’re investigating tells us this isn’t just isolated incidents. It’s a pattern worth your attention.
The industry has dubbed this practice “silent deregistration,” though technically these aren’t formal deregistrations. Banks are simply choosing to end commercial relationships, often with minimal explanation. The distinction matters little when your business operations screech to a halt.
Why This Matters More Than You Think
Here’s the uncomfortable truth: if you’re running an EMI or PI in the UK, you’re probably more vulnerable than you realise.
FCA data from their recent sector survey reveals a shocking statistic: around 90% of UK-authorised EMIs and PIs rely on just two or fewer banking partners for safeguarding. Even worse, 54% of small and medium-sized payment firms admit to having only a single banking provider.
Let that sink in. More than half of payment firms in your position are one relationship away from operational paralysis.
This isn’t just about inconvenience. Without access to safeguarding accounts, you can’t legally hold client funds. Your payment processing stops. Your business model collapses overnight. For a 20-person EMI processing £10 million monthly, losing banking access doesn’t mean finding a workaround. It means explaining to clients why their money is stuck and their payments aren’t processing.
“Over-reliance on a single provider is a major risk factor,” states the FCA directly in their guidance, yet the majority of small payment firms continue operating with exactly this vulnerability.
What You Can Do Right Now
The good news? This isn’t a problem you have to accept. Here’s your action plan:
Diversify Your Banking Partners Immediately
Global regulatory best practice suggests maintaining accounts with at least 2-3 independent banking partners. If you’re currently relying on one bank, start building relationships with others this month. Don’t wait for problems to emerge.
Yes, multiple banking relationships mean more compliance work, higher costs, and additional operational complexity. But compare those manageable headaches to explaining to investors why your entire business stopped operating because your bank provider decided you didn’t fit their risk appetite anymore.
Document Everything
Start treating your banking relationships like the critical infrastructure they are. Keep detailed records of all communications, maintain evidence of your compliance programs, and document any changes in your risk profile.
If a bank does attempt to terminate your relationship, the FCA’s guidance is clear: request written justifications under Payment Services Regulations, and don’t accept vague explanations about “risk appetite changes.”
Know Your Recourse Options
When banks make unjustified decisions, you’re not powerless. The FCA recommends firms seek recourse through the Financial Ombudsman Service for unclear account closures. In extreme cases, judicial review through the Administrative Court remains an option.
These aren’t theoretical possibilities. They’re established processes that exist precisely because regulators recognise the potential for unfair treatment.
What’s Coming Next
The FCA isn’t just investigating. They’re consulting on new guidance specifically addressing banking access for EMIs and PIs. Their consultation paper CP25/16 is currently under review, with potential new protections being considered following increased parliamentary and industry scrutiny.
While we can’t predict exactly what new rules will emerge, the fact that the regulator is taking action suggests they recognise the current situation isn’t sustainable. Small payment firms shouldn’t face existential threats from arbitrary banking decisions.
The Bottom Line
Your EMI’s biggest operational risk might not be regulatory changes, market competition, or technology challenges. It might be the single banking relationship you’ve taken for granted.
The companies that will thrive in this environment are those that build resilient operational foundations now, before problems emerge. Multiple banking partnerships aren’t a luxury for larger firms. They’re essential infrastructure for any serious payment business.
Don’t wait for your bank to send that Tuesday morning email. Start building redundancy into your banking relationships today. Your future self will thank you when competitors are scrambling to explain to clients why their payments aren’t processing.
The FCA’s investigation confirms what many in the sector already suspected: banking access for payment firms is more precarious than it should be. But forewarned is forearmed. Take action now, while you have the luxury of planning rather than reacting.
