Two Different Regulatory Frameworks

Most UK payment firms are authorised or registered under the Payment Services Regulations 2017, and e-money issuers under the Electronic Money Regulations 2011. Both are supervised by the FCA, but neither is part of the FSMA permissions regime that the Senior Managers and Certification Regime is built on.

As a result, an authorised payment institution or electronic money institution that holds no other permissions has no Senior Manager Functions, no Statements of Responsibilities and no Certification Regime in the SMCR sense. The titles often used in the market, such as “SMF16 compliance officer” for a payments firm, are borrowed from the regime rather than required by it.

That changes if the firm also holds permissions under Part 4A of the Financial Services and Markets Act, for example to carry on consumer credit lending or to arrange insurance. The FSMA-authorised activities then bring the firm, and its Senior Managers, within the regime. Groups that combine payments with lending, investment or insurance businesses often run both frameworks side by side, and our guide to which SMFs apply at each firm tier covers the FSMA side.

How the FCA Assesses Senior People at Payment and E-Money Firms

Directors and Persons Responsible for Management

Under the Payment Services and Electronic Money Regulations, the FCA must be satisfied that the firm’s directors and the persons responsible for managing its payment services or e-money business are of good repute and have appropriate knowledge and experience. Firms provide information about each of these individuals when they apply for authorisation, and must tell the FCA when they change.

In practice, the FCA’s assessment covers much of the same ground as the fit and proper test under the Senior Managers regime: the individual’s honesty and integrity, their relevant experience, and any past regulatory, criminal or financial issues. A candidate with a weak history won’t find it easier because the formal label is different.

The MLRO and Anti-Money Laundering

Payment and e-money firms are subject to the Money Laundering Regulations 2017, which require a nominated officer to receive internal suspicious activity reports and make reports to the National Crime Agency. Where it’s appropriate to the size and nature of the business, the Regulations also require a member of the board or senior management to be responsible for the firm’s compliance with them. The FCA must be told who the nominated officer is.

So while the MLRO at a pure payments firm isn’t an SMF17 in the regime’s terms, the role carries equivalent weight. It’s also often where supervisory attention lands first, because financial crime is one of the FCA’s most consistent concerns in the payments sector.

Safeguarding

Payment and e-money firms must protect customers’ funds by safeguarding them, either in segregated accounts or through an insurance or guarantee arrangement. The FCA strengthened its safeguarding requirements in 2026, and it expects firms to have clear senior responsibility for safeguarding, accurate daily reconciliations, and robust records that would allow customer funds to be returned quickly if the firm failed. Whoever owns safeguarding at board level, and the finance team that runs the reconciliations, are central to how the FCA judges the firm.

What This Means for Hiring

Hire for the Substance, Not the Label

The most important senior hires at a payment or e-money firm are usually a head of compliance, an MLRO (often combined with compliance at smaller firms), a finance lead who understands safeguarding and regulatory returns, and a chief executive or managing director the FCA will accept as the person running the business. Whether or not these roles are called Senior Manager Functions, the FCA will look closely at the individuals and whether the firm has given them the authority and resources to do the job.

Experience From Regulated Firms Transfers, With Care

Candidates who have held SMF16 or SMF17 at a FSMA-authorised firm often make excellent compliance officers and MLROs at payment firms. They bring an understanding of personal accountability and regulatory engagement that translates well. But the specifics differ: safeguarding, card scheme rules, agent and distributor oversight, and the payment-specific regulatory returns are all distinct from what they’ll have seen at a bank or investment firm. The best candidates can show direct payments experience, or a clear plan for filling the gap.

Fractional Arrangements Are Common

Many smaller payment and e-money firms use fractional or interim compliance officers and MLROs until transaction volumes justify a full-time appointment. That can work well, provided the individual is genuinely available to the firm, has enough time to do the job properly, and isn’t stretched across too many clients. The FCA will want to understand the arrangement and be satisfied that it’s adequate for the firm’s risks.

Build the Finance Function Early

Safeguarding reconciliations, capital calculations and regulatory returns need qualified finance people who understand payments. Firms that leave this until after authorisation often struggle. Our sister practice Accountancy Capital recruits qualified finance professionals below director level, including safeguarding and regulatory reporting specialists for payment and e-money firms.

When a Payments Firm Does Need Senior Managers

Three situations bring a payments business within the Senior Managers regime.

• Adding FSMA permissions. A payments firm that starts lending, arranging insurance or offering investment services will usually need Part 4A permissions, which bring the regime with them. Senior Manager approvals should be planned into the permissions application from the start. Our SMF authorisation support covers this.
• Becoming part of a regulated group. Where a payments business is part of a group that includes a bank, investment firm or insurer, group-level Senior Managers may have responsibilities that extend to it.
• Applying for a banking licence. Payments firms that grow into banks enter the dual-regulated regime, with the full set of FCA and PRA Senior Manager Functions and approvals.

In each case, the move from the payments framework to the Senior Managers regime is a significant step. Existing senior people may need to apply for approval for the first time, and the firm may need to add non-executive and control function roles it hasn’t needed before.

Crypto-Asset Firms: A Similar Question

Crypto-asset businesses face a similar question as the FCA’s new regime for crypto-asset activities takes shape. Firms currently registered only for anti-money laundering purposes are in a different position from those that will need full authorisation under the new rules. Where a firm moves into full FSMA authorisation, the Senior Managers regime will follow, and senior people will need approval. Firms planning that transition should build their Senior Manager team with the approval process in mind.

The Bottom Line

For most payment and e-money institutions, the Senior Managers regime doesn’t formally apply. But the FCA still assesses the people who run the business, the MLRO carries personal legal duties, and safeguarding is under closer scrutiny than ever. Firms that recruit for these roles with the same care they’d apply to a Senior Manager appointment are the ones that get through authorisation and supervision with the fewest problems.