UK payments firms face rising compliance cost pressure

Research published by Kani Payments shows that 49% of UK payments firms say regulation is moving faster than their systems can adapt, while 45% report that compliance costs are rising faster than revenue.

The findings point to mounting strain in the UK payments sector as firms try to keep up with tighter regulatory demands while managing the operational burden that follows. Senior leaders surveyed said the challenge is shifting from understanding the rules to building systems and processes that can demonstrate compliance consistently.

The data emerged shortly after updated safeguarding rules from the Financial Conduct Authority took effect, raising expectations around reconciliation, reporting, and operational controls. That has added pressure on payments businesses to show that their internal systems can support more detailed compliance requirements.

Operational strain

The results suggest that compliance is increasingly being treated as an operational cost as well as a governance issue. Firms are facing a combination of rising spending on specialist compliance staff, technology investment, and stronger reporting processes.

For many businesses, those demands are arriving alongside broader efforts to modernise internal systems. Respondents identified strengthening the systems and processes behind compliance as their main operational priority for the coming year. That includes automating reconciliation, improving safeguarding controls, creating live resolution processes, and reducing dependence on manual work and individual expertise.

The picture suggests that regulation is exposing weaknesses in legacy infrastructure across the sector. Payments companies have spent years expanding product lines and customer volumes, but the latest findings indicate that the compliance architecture underneath is now under heavier scrutiny.

A previous study cited by Kani Payments found that almost one-third of firms described themselves as already fully compliant with the updated safeguarding regime. The newer findings suggest that even where firms believe they meet the rules, many are still working to build the operational depth needed to evidence compliance at scale.

Aaron Holmes, Chief Executive Officer at Kani Payments, said firms are under growing pressure.

"Most firms understand what regulators expect of them. What many are finding is that their systems and processes weren't built to evidence it at the pace regulation now demands.

"Every new regulation creates a hiring need as much as a technology one. Firms are bringing in compliance specialists to interpret and implement the volume of change, while also investing in the systems to support it. When compliance headcount and infrastructure costs both grow faster than the business itself, that is an operational challenge, not only a compliance one."

Cost pressure

The survey indicates that payments firms are dealing not only with new rules but also with the commercial impact of meeting them. With 45% saying compliance costs are rising faster than revenue, the results suggest some businesses are under pressure to absorb regulatory spending without matching income growth.

That matters in a sector that includes fintechs, processors, and other payments providers, many of which operate on tight margins while handling expanding volumes and more complex reporting obligations. Increased regulatory intensity can force investment decisions that extend beyond compliance teams into core operations, finance, and technology functions.

The research also points to a change in how firms define readiness. Rather than focusing only on policy interpretation, companies appear to be placing greater emphasis on whether systems can produce timely reconciliations, support safeguarding controls, and reduce the risk attached to manual intervention.

Holmes said the figures point to a deeper structural issue in the market.

"When systems are already struggling to adapt and compliance costs are outpacing revenue, that points to a structural issue. The firms that come through the next few years well will be those that build compliance into how they operate, rather than bolting it on after the fact."