There has been a sharp rise in the number of e-money providers registered with the Financial Conduct Authority (FCA) over the last two years, with 79 now authorised in total, more than double the 38 authorised in 2013, according to Bovill, the specialist financial services regulatory consultancy.
Bovill explains that E- money providers are part of a wave of new FinTech companies, challenging traditional methods of payment. ‘E-money’ refers to money that is stored electronically or magnetically, and includes pre-paid cards, online payment accounts and mobile payment systems.
Bovill says that the rise in authorised e-money providers is being driven by the increased acceptance amongst consumers of these new methods of payment, and by increased demand from other FinTech companies- including crowdfunding platforms- for which e-money providers can help manage payments and flow of funds.
Gillian Roche-Saunders, Head of Venture Finance at Bovill, comments: “This is a fast-moving and innovative sector- we expect the number of authorised firms to continue to grow at a rapid pace.”
“UK consumers and businesses are increasingly comfortable with the idea of a ‘cashless economy’- in which they might not be able to physically see or access money. More are now embracing pre-paid cards, contactless and mobile payment systems- for ease of use, efficiency and enhanced security.”
“Pre-paid cards are an increasingly attractive option for consumers who may not feel secure using a traditional credit or debit card online, for instance. They also work well where a consumer may not be able to obtain a conventional credit card- or might not want to risk running up substantial debts on one.”
“The growth of the FinTech sector is also behind the increase- with many online businesses and platforms now enlisting e-money providers to handle their payment systems and flow of funds.”
“Crowdfunding platforms can now create individual online ‘e-wallets’ for clients, for instance- improving their ease of access to and control over amounts invested.”
Bovill highlights that many established retail and technology companies, such as Google, are now building a foothold in the e-money market and are reported to have ambitions to offer a broad range of payment services.
All e-money providers must be authorised with the FCA under the Electronic Money Regulations 2011 and meet stringent consumer protection criteria, including adequate capital, the separation of customer’s money from the company’s funds and suitability checks on the company’s senior management.
Gillian Roche-Saunders comments: “The regulatory background is complex and e-money providers need to ensure that systems, processes and controls are tight- in order to ensure a high level of consumer protection. The FCA is not afraid to place these businesses under a microscope.”