/regulation & compliance

News and resources on regulation, compliance, legal and governance issues for banks and fintechs.
FCA and Modulr agree customer onboarding restrictions

FCA and Modulr agree customer onboarding restrictions

The UK's Financial Conduct Authority has placed customer onboarding restrictions on Payments-as-a-Service provider Modulr until its comes up to scratch with new regulations.

At the beginning of October 2023, FCA issued a restriction for the company, preventing it from bringing new partner clients, such as agents and distributors who use its payments infrastructure for cards or accounts.

Modulr delivers payments infrastructure for over 200 top-tier customers, including Revolut, Wagestream, Sage and BrightPay, and currently processes an annualised transaction value of more than £100bn.

According to Modulr’s statement for Sifted, the company agreed to temporarily pause onboarding certain new customer segments in the UK, due to the many new and revised UK regulations coming into force in 2023 and 2024. These include regulatory changes such as the new UK consumer duty, adjustments to push payment fraud reimbursement, and a ban on incentive marketing for high-risk assets like crypto.

Modulr began to notify its new partners that they may not be able to onboard until the first quarter of 2024, however, the firm declined to comment on the deadline.

Update 03/11/2023:

In a statement, Modular adds: 

"One area of concentrated growth in the business has been through Agent & Distributor (A&D) Partnerships which brings particular risks and challenges to oversee and manage. As a result of the scale and speed of growth we have agreed with the FCA to pause the onboarding of new A&D partners to ensure our governance, systems and controls reflect the scale of the business and regulatory requirements.

"We will also take the opportunity to future proof in light of changes in regulations such as the Consumer Duty, APP Fraud Reimbursement and Financial Promotions Requirements.

"This doesn’t impact any of our existing Partners, the onboarding of new Direct customers, or growth of our European business."

Comments: (2)

A Finextra member
A Finextra member 21 October, 2023, 23:12Be the first to give this comment the thumbs up 0 likes

It's surprising that this is open in the public domain. Keeping it discreet would have allowed Modulr to work through ist issues with the FCA and customers, but making it public must make life for them ten times as difficult.

John Higgins
John Higgins - Pathlight Associates Limited - London 22 October, 2023, 14:32Be the first to give this comment the thumbs up 0 likes

Restrictions are generally published on the FCA Register - just like all firm permissions. This is necessary, as if it wasn't public, counterparties would have no way to check whether firms are operating within their permissions.

Trending