On 18 May 2021, the FCA published a Dear CEO letter to e-money firms entitled Please act: ensure your customers understand how their money is protected.

In the Dear CEO letter the FCA states that it is still concerned that many e-money firms are not adequately disclosing the differences in protections between their services and traditional banking, in particular, that protection under the Financial Services Compensation Scheme (FSCS) does not apply. The FCA also reminds e-money firms of the portfolio strategy letter and finalised guidance regarding safeguarding for payment services and e-money firms that the regulator published in July 2020. In the portfolio strategy letter the FCA set out its views on the key risks within the payments and e-money sector which had the potential to harm consumers. The finalised guidance warned about giving consumers misleading impressions about the level of protection for their money which the sector was safeguarding for them.

In the Dear CEO letter the FCA asks e-money firms to write to their customers within six weeks of the date of the letter to remind them of how their money is protected through safeguarding and that FSCS protection does not apply. The FCA adds that firms may wish to include a link to its website to help customers decide whether that level of protection is appropriate for their circumstances. The FCA also states that the communication must be separate from any other messaging or promotional activity. It expects e-money firms to consider the appropriate method(s) of communication based on their business model and customer base, including any vulnerable customers.

The FCA also asks e-money firms to review their financial promotions in light of BCOBS 2.3.1AR and BCOBS 2.3.4G. In particular firms should ensure that their financial promotions give customers enough information and that where any promotion does name the FCA as regulator and refers to matters that the FCA does not regulate, it must make it clear that those matters are not regulated by the FCA. Finally, e-money firms are also asked to draw the Dear CEO letter to the attention of their board. The FCA expects the board to have considered the issues raised in the Dear CEO letter and to have approved the action taken in response.

The FCA intends to follow up with a sample of e-money firms to assess what action has been taken.