Welcome to the inaugural edition of Dentons' Payments and Retail Lending Insights where the team pulls together key updates from across the range of payment and retail lending developments in the UK to inform your horizon scanning and current workstreams. The contents below represent the views of the Payments and Retail Lending team and are designed to assist you. Should you wish to discuss any of the developments outlined below and how they might impact your business, then please feel free to get in touch with any member of the team.

What this update covers:

General updates

• The FCA's new initiatives to support growth
• HM Treasury's action plan to ensure regulation and regulators support growth
• Vulnerable customer review: the challenge for firms

Retail lending

• Financial promotions: FCA highlights key risks and breaches
• Mortgages: FCA sets out steps to widen access to mortgages

Payments

• Contactless payment limits
• Big tech and digital wallets

General updates

The FCA's new initiatives to support growth

The Financial Conduct Authority (FCA) has responded to the government's letter asking regulators to take action to support economic growth by announcing a number of new initiatives to support growth across a range of areas. These include: capital markets and liquidity; digital innovation, especially in the payments sector; reducing regulatory burdens; supporting innovative start-ups; improving exports and inward investment; and providing certainty and predictability.

• Capital markets: With regards to capital markets, the FCA already had plans to implement a new prospectus regime, reduce conduct requirements for wholesale insurers, streamline regulatory requirements for asset managers and launch a consolidated tape. The FCA will now accelerate a review of capital requirements for specialised trading firms to improve liquidity.
• Payments: The FCA will look to develop open finance, potentially prioritising SME lending as well as introducing a new open banking payment method – variable recurring payments – increasing competition and choice. Other new initiatives include removing the £100 contactless limit (see more about this below) and setting digital service standards.
• Mortgages: The FCA will look to simplify the responsible lending rules, consult on removing outdated guidance and work with the government to remove overlapping standards, such as the mortgage charter.
• Consumer Duty: In the Consumer Duty space, as from 27 February 2025, the FCA specified that firms are no longer required to have a Consumer Duty champion (though the role can be retained if firms wish to do so). The FCA is also looking to reduce the regulatory burden by ensuring future consultations on consumer protection raise the question as to whether the Consumer Duty is sufficient rather than new rules.

For further information please see our insight.

HM Treasury's action plan to ensure regulation and regulators support growth

HM Treasury published a policy paper on 17 March 2025, setting out its action plan for ensuring that regulation and regulators support growth.

Whilst recognising the vital role of regulation in underpinning the UK economy in its policy paper, HM Treasury highlights excessive bureaucracy, overlapping regulations, risk-averse regulation and administrative burdens as key factors necessitating reform of the UK regulatory system. It emphasises that the UK has fallen behind countries such as Singapore and Australia in regulatory modernisation.

The policy paper sets out an action plan which includes: tackling the complexity and the burden of regulation; reducing uncertainty across the UK regulatory system; and challenging and shifting excessive risk aversion in the system. The action plan marks a major shift in the UK's regulatory framework, focusing on greater efficiency, economic growth and adaptability to innovation.

The government will hold consultations on its proposals throughout the coming months and it will be important for regulated firms to plan ahead for changes to the evolving regulatory picture. For further information, please see our insight.

Vulnerable customer review: the challenge for firms

In 2024, the FCA carried out a review of how firms are supporting their vulnerable customers in light of the FCA's guidance in FG21/1. The FCA's review also looked at the impact of the Consumer Duty on the outcomes that vulnerable customers receive.

On 7 March 2025, the FCA published its review of good and poor practice. It found that: guidance has had a positive impact on firms' approaches, including changes in their attitudes, culture and awareness; firms view the guidance as clear and useful in understanding how to practically apply the FCA's expectations; the definition of vulnerability was helpful; and the drivers and characteristics of vulnerability helped support firms' approaches to vulnerability.

Areas for improvement: The FCA found that there were certain areas for improvement, namely: giving appropriate customer support; communicating clearly to meet customer needs; effective monitoring of outcomes for vulnerable customers; and embedding consideration of vulnerability into product design and training of development staff.

Next steps: The FCA highlighted outcomes monitoring and product design as two key focus areas for firms in embedding the Consumer Duty and its expectations for vulnerable customers.

Action points for firms: These include: reviewing data sources and breadth of data used to monitor outcomes; reviewing product governance processes to ensure the design and review takes account of customers in vulnerable circumstances; and ensuring design and development staff are trained on vulnerability. For further information, please see our insight and our article.

Retail lending

Financial promotions: FCA highlights key risks and breaches

In February 2025, the FCA published its latest insights on financial promotions breaches by authorised firms and unregulated activity from the data it had gathered between January and December 2024. 

In its analysis, the FCA expresses concerns about the risks posed by unclear and misleading financial promotions, particularly given the complexity and long-term nature of financial products. With its focus on outcomes, the FCA notes that good quality marketing information helps ensure consumers get good outcomes.

Financial promotions remain an area in relation to which the FCA is keen to drive higher standards and to see firms putting customer outcomes at the heart of their businesses. Firms should anticipate that the proactive stance of the FCA in 2024 will continue, especially in those areas of concern such as social media promotions, cryptoassets and the approver regime. With the anticipated regulation of buy now, pay later (BNPL) this year, firms that offer BNPL products can also look forward to further rules on the promotion of such products and FCA oversight of their promotions.

The FCA expects firms to read the analysis it has published and to take action to ensure they deliver good consumer outcomes. For further information, please see our insight.

Mortgages: FCA sets out steps to widen access to mortgages

As set out in our update above, the mortgage sector was a key focus for the FCA in its proposals to support growth and reduce the regulatory burden. The FCA has now published its letter to the Economic Secretary to the Treasury highlighting its next steps and setting out plans for future publications affecting the sector.

What has the FCA done?

On 7 March 2025, the FCA launched a new website page highlighting the flexibility available to firms in its interest rate "stress test" rule. It noted that, as interest rates fall, the present market approach to stress testing interest rates may be "unduly restricting access to otherwise affordable mortgages".

What will the FCA do?

The FCA is carrying out a review of its mortgage rules that will include an evaluation of MCOB 11.6.18R, which requires lenders to consider the effect of potential future interest rate increases on affordability over a minimum period of five years (a call for evidence on the impact of MCOB 11.6.18R was issued on 17 March 2025). The FCA will also work with experts on the use of AI, such as smart data sharing, and look to adapt regulation to improve digital journeys.

Key dates

May 2025: The FCA will launch a consultation on simplifying its rules to make it easier to: remortgage with a new lender; reduce the cost of borrowing through term reductions; and discuss options outside a regulated advice process.

June 2025: Public discussion to be launched covering: risk appetite and responsible risk-taking; alternative affordability testing and product innovation; lending into later life; and consumer information needs.

For further information, please see our insight.

Payments

Contactless payment limits

Contactless payments can be made with any card or device with a contactless payment feature. Payment service providers (PSPs) can facilitate contactless payments using an exemption from the strong customer authentication requirements that otherwise apply to all payments. The current exemption allows payments of up to £100 in a single transaction or up to £300 across several contactless transactions before authentication is required.

The FCA is reviewing the contactless payment limits as part of its proposals to support growth in the UK and is looking at three options:

• A risk-based exemption giving PSPs the freedom to set their own contactless limits for in-person transactions, provided that they achieve specified low rates of fraud.
• Amending the contactless limits exemption – this could be by removing the limits entirely, amending the single limit (for example, to £200) and/or amending the consecutive/cumulate limit.
• Relying on the Consumer Duty – relying on the outcomes-based rules of the duty and the emphasis on vulnerable customers could give firms greater flexibility whilst still protecting customers.

Big tech and digital wallets

In July 2024, the FCA and the Payment Systems Regulator (PSR) published a joint Call for Information on big tech and digital wallets to better understand the opportunities and risks that digital wallets create. In February 2025, the FCA and PSR published FS25/1 to set out their findings so they could be considered by the Competition and Markets Authority (CMA) under the Digital Markets, Competition and Consumers Act. Their statement indicates the feedback from stakeholders is that digital wallets present a significant opportunity for innovation and growth, and for non-card forms of payment. However, stakeholder responses also raised potential competition, consumer protection and operational resilience issues.

Potential opportunities: Some of the potential opportunities identified include:

• Innovation and growth: Consumers benefit from a more seamless and efficient payments journey, and responses highlighted considerable scope for further innovation extending beyond payments.
• Introduction of alternative payment methods: Responses suggest that increased consumer choice of payment methods benefits consumers and increases payment system competition.
• Opportunities to streamline identification and verification: For example: integration with GOV.UK Wallet which is a government initiative launching in 2025 to store government-issued documents.
• Expansion of financial access: Improving banking inclusion for underserved populations.

Key issues identified

• Competition between digital wallets: The CMA is already investigating Apple and Google's mobile ecosystems and their ability to steer customers to their wallets, as well as Apple's restriction of access to its NFC technology.
• Competition between payment systems within digital wallets: Currently, digital wallets support card payments, but reliance on this could entrench card schemes' position in the UK and be a barrier to the adoption and use of other forms of payment coming to the market.
• Operational resilience, and consumer rights and protection: Operational failures of digital wallets may temporarily restrict users from making payments. The risks of fraud are not fully understood and responses indicated a desire for wallet providers to share responsibility.
• Legal powers and the regulatory perimeter: Most stakeholders considered the regulatory framework and perimeter require improvement, especially to deal with pass-through wallets.

Next steps: Both the FCA and the PSR will continue to monitor developments and consider issues that emerge.

For further information, please see our insight and our article.