CASS 15: The impacts for payments and e-money institutions

The introduction of the CASS 15 regime is set to transform the operating model of payments and e-money firms. Experts from Pangea Consulting explain the regulation’s most significant impacts and the practical steps organisations can take to achieve compliance while strengthening governance and customer asset protection.

Payments and e-money institutions in the UK are entering a new era of client fund protection under the Financial Conduct Authority’s (FCA) CASS 15 regime. Effective from 7 May 2026, CASS 15 introduces a much more robust framework for safeguarding customer funds, aligning these firms with standards long applied to investment firms.

While CASS 15 introduces new cost and delivery pressures, it also creates a clearer benchmark for safeguarding practice and, over time, should raise confidence in the sector. The net impact is likely to be a more mature industry characterised by stronger governance, more consistent safeguarding outcomes, and higher expectations from banks, auditors, partners, and customers.

For payments and e-money firms, CASS 15 comes with a range of organisational, financial and operational impacts:

Compliance cost and resource burden

The new requirements will drive ongoing cost, from audit fees, to potential additional headcount, to investing in systems capable of daily calculations and monthly filings. Smaller firms worry these expenses could squeeze their margins hard.

In a recent survey, 72% put reducing complexity and duplication in the rulebook in their top three cost-reduction interventions and tailoring regulation by firm size/complexity was ranked #1 by 44%, and top three by 72%.

The UK is seen as more expensive than other markets; among firms operating internationally, 53% said UK compliance costs are somewhat or considerably higher than other jurisdictions. The FCA’s own cost-benefit analysis acknowledged an expected £3.9 million to £8.8 million annual aggregate cost to the industry for the new regime, or about £53 million present value over 10 years. This covers things like audit costs and the time spent on reconciliations and reporting.

While not massive in the context of the entire sector’s revenues, these costs will not be evenly distributed, they may hit certain business models disproportionately. A few firms have even intimated that they might rethink offering certain products or might consolidate operations to reduce complexity.

The FCA did openly acknowledge that added costs could prompt some smaller or less resourced firms to exit the market, though it concluded that the benefits to consumers outweigh that risk.

Competitive dynamics will be interesting to watch: larger firms may absorb the changes more easily, whereas smaller fintechs might seek mergers or acquisitions if they find the compliance lift too great.

Auditor availability and fees

A major practical concern is whether there are enough auditors with relevant safeguarding expertise to serve all newly in-scope firms. Industry feedback during consultation suggested this could increase fees and create capacity pressure in the short term. The FCA responded by coordinating with audit firms and introducing a 6-month grace period for the first audit cycle, meaning first audit reports will not be due until late 2027.

Even so, firms are expected to prepare early. FCA estimates suggest a small or medium firm’s audit could cost around £10k to £30k with a smaller provider, compared with £30k+ for a large-firm audit. For complex or large institutions, annual audit fees could reach the six figures if a Big Four auditor is used.

Beyond fees, payments and e-money institutions will also need internal resources to become fully “audit-ready” , with clear policies, organised records, and evidence trails.

Systems Upgrades and Automation

CASS 15 is also likely to accelerate investment in systems and automation. Processes that rely heavily on spreadsheets or manual work may not be sustainable where firms are expected to perform daily reconciliations and maintain reliable, auditable records. Many firms are therefore expected to invest in reconciliation technology, exception monitoring, stronger ledger controls, and reporting tools.

A survey conducted by Pangea Consulting also points in this direction: 59% identified process simplification, 54% technology adoption, and 48% better data quality as reinforcing drivers of efficiency. While implementation may be costly in the short term, stronger systems should improve operational resilience, reduce manual error, and support more effective safeguarding over time.

Skilled Personnel and Training

The new regime will also increase demand for safeguarding expertise. Firms will need people who understand reconciliation, governance, reporting, and audit expectations, while boards and senior management will need clearer oversight of safeguarding risks. This is likely to increase demand for specialist hires, advisory support, and targeted internal training. Operational teams, finance teams, and boards will each need to understand their responsibilities more clearly.

The FCA’s governance emphasis also means boards will expect regular management information on safeguarding outcomes, exceptions, and near-misses, making internal accountability frameworks a core part.

Impact on Business Models and Competition

CASS 15 may also influence business models and market structure. Higher fixed compliance costs could create a greater barrier to entry for smaller or newer firms, particularly those holding customer funds directly. Some firms may prefer agency or partnership structures rather than taking on full safeguarding obligations themselves.

Larger firms may be better placed to absorb the added burden through economies of scale, while smaller firms may streamline offerings, partner with others, or consider consolidation. There may also be indirect effects in banking relationships if safeguarding banks become more selective or increase fees. From a policy perspective, however, the intended result is a more resilient sector with stronger standards and greater long-term confidence.

Looking Ahead

Looking ahead 5 to 10 years, we anticipate a matured regime where CASS becomes the standardised benchmark for all non-bank financial intermediaries managing client funds.

Clearer and more enforceable safeguarding standards will strengthen of consumer trust. By requiring routine reconciliations, structured reporting, and enhanced governance evidence, firms are pushed to demonstrate that safeguarding is not only performed but controlled, monitored, and auditable. This improves confidence not only for end users, but also for counterparties such as distributors, programme partners, and banks who often carry reputational or operational risk when working with non-bank institutions.

The coming two years will be critical for the payments and e-money industry to demonstrate the effectiveness of CASS 15.