Our Financial Services Lawyers set out five of the anticipated focus areas for the FCA in 2025, which will be most relevant to our clients.
1. Financial Services Growth and Competitiveness Strateg
Following the Chancellor of the Exchequer Rachel Reeves’ budget announcement in which she outlined the government’s plans to enhance the UK’s financial services sector, HM Treasury is set to unveil its Financial Growth and Competitiveness Strategy.
This is a ten-year plan that aims to achieve growth in the UK’s financial services sector and secure the UK’s competitiveness as an international financial centre.
The main drivers for the strategy include:
- Enabling and supporting increased digital adoption, including AI, to drive efficiency and new business models across key sectors;
- Ensuring a robust and transparent regulatory framework that maintains financial stability, ensures the proper functioning of markets, protects consumers, supports growth and promotes competition;
- Developing a skilled workforce to meet the evolving needs of the financial services sector; and
- Strengthening the UK’s global financial partnerships to attract foreign investment and explore emerging markets.
Priority areas for growth include:
- FinTech
- Sustainable finance
- Capital markets
- Insurance
- Asset Management
Dilemmas faced by HM Treasury and FCA include:
- Whether the UK should try to align its regulatory policy more closely with international standards and risk reducing the UK’s competitive advantage; and
- There is a need to balance risk-taking in the financial sector to promote growth with the need to ensure that consumers are adequately protected.
2. Consumer Duty
Consumer duty is a top priority for the FCA in 2025. It is essential that firms integrate policies which promote consumer duty into their processes, including product design, pricing strategies, customer communications and customer service. Firms need to be able to demonstrate that their products and services consistently deliver good outcomes for all consumers, including vulnerable consumers.
For guidance on how firms can assess their compliance with consumer duty going forward, the FCA published a report in December 2024 on its thematic review, which can be found here.
The FCA has also confirmed that it plans to focus on the following aspects of consumer duty during 2025:
- Embedding the duty and raising standards in firms by assessing across sectors how firms are implementing and complying with the Consumer Duty.
- Enhancing firms’ understanding of the price and value outcome.
- Sector-specific priorities include retail banking, consumer finance, payments and digital assets, consumer investments, and insurance (the sectors for which retail customers make up most of the clients).
- Realising the benefits of the Consumer Duty.
Further publications of FCA guidance should be expected in respect of these areas.
3. Enforcement
The FCA board is expected to take its final decision on the FCA’s proposals to achieve greater transparency in relation to its enforcement investigations during the first quarter of 2025.
The FCA has redrafted CP24/2 consulted on in 2024 and has set out a new proposed approach to publicising enforcement investigations to address some concerns raised following the consultation and clarify how it will work in practice.
The Consultation on CP24/2, Part 2 closed on 17 February 2025 with further engagement with industry and other stakeholders anticipated to inform its final approach.
4. AI
There has been little movement on the regulatory front in recent years about AI; however, 2025 has already seen the launch of AI Labs to guide regulators, innovators, and industry leaders through the complexities of using AI across the UK’s financial services sector.
Activities include AI Sprint, which will focus on the strategic, regulatory, and practical implications of AI and AI Spotlight, providing an opportunity for firms and innovators to demonstrate how AI can drive positive change across the financial services sector and promote growth.
Feedback on the AI Lab products, which was submitted to the FCA in January, is anticipated to help the FCA to prioritise further AI work. The PRA has already said that it is considering data management, governance, operational resilience, and third-party risk, so watch this space.
5. Payments
In November 2024, the government published the National Payments Vision which sets out its ambitions for the UK’s payments sector to deliver world-leading payments and support the growth mission.
Areas of focus include reviewing retail payments infrastructure, consumer protection and exploring the potential for a retail central bank digital currency, which is expected to be delivered through the Payments Vision Delivery Committee.
In addition, the government is set to introduce the regulatory framework for open banking using incoming smart data powers in the Data (Use and Access) Bill which currently making its way through Parliament.
Areas of focus for the Payment Services Regulator (PSR) include:
- evaluating and monitoring of its fraud reimbursement rules
- the collection and provision of fraud data
- improving data collection
- supervision of firms
Additionally, the FCA and the PSE are expected to publish an update on BigTech and digital wallets within the first quarter of 2025.
Contact Our Financial Services Lawyers
If you have any questions or think these legal and regulatory developments might be relevant to you or your clients, please contact one of our Financial Services Lawyers, who will be delighted to assist.
01619414000
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