Payment Institution FCA Senior Hiring

Payment Institution Senior Hiring: FCA Authorisation and SMCR

Payment institutions and e-money institutions represent one of the fastest-growing segments of the FCA-regulated landscape. The expansion of open banking, embedded finance, digital wallets and cross-border payment infrastructure has produced a new generation of regulated businesses that require senior leadership with a combination of regulatory expertise, technology fluency, and commercial capability that is genuinely scarce in the current market. Exec Capital works with payment institutions, e-money institutions, and fintech businesses operating under FCA payment services or electronic money authorisation to place executives and senior leaders who can meet the demands of this environment.

The Regulatory Framework for Payment Institutions

Payment institutions and e-money institutions are authorised or registered under the Payment Services Regulations 2017 and the Electronic Money Regulations 2011 respectively. They are regulated by the FCA for conduct purposes but are not PRA-regulated, which simplifies the approval process compared to banks and insurers — FCA approval only is required rather than dual PRA/FCA approval.

Under SMCR, the Senior Managers Regime applies to payment institutions and e-money institutions in the same way as to other FCA-regulated firms. The designated SMF functions depend on the firm’s structure, but typically include SMF1 (CEO), SMF2 (CFO at larger firms), SMF3 (Executive Directors), SMF16 (Compliance Oversight) and SMF17 (Money Laundering Reporting Officer) as core appointments. The MLRO function is particularly important for payment institutions given the FCA’s focus on financial crime risk in the payments sector.

What Makes Payment Institution Senior Hiring Different

The most distinctive feature of senior hiring at payment institutions is the combination of regulatory requirements and technology demands. The CEO and COO at a payment institution need to understand not just the conduct regulatory framework but also the operational infrastructure on which the firm’s authorisation depends — the safeguarding arrangements, the settlement systems, the customer due diligence and transaction monitoring architecture. A CEO who understands regulatory compliance but not the technology stack that delivers it is poorly positioned for the FCA’s supervisory scrutiny of operational resilience and financial crime prevention.

Conversely, a CEO with deep technology credentials but limited experience of FCA-regulated firm governance will struggle with the accountability framework the SMF1 designation imposes. The intersection of regulatory expertise, technology understanding and commercial leadership is the defining profile requirement for senior appointments at payment institutions — and it significantly narrows the candidate pool compared to equivalent roles in less technically complex regulated environments.

FCA Priorities in the Payments Sector

The FCA’s supervisory priorities for payment institutions and e-money firms reflect its concerns about financial crime, safeguarding of customer funds, and operational resilience. The regulator has taken an increasingly active approach to payments sector supervision since 2021, including through its Payment Services Authorisation and Registration programme, which has scrutinised the governance quality of a significant number of payment institutions and resulted in the revocation of authorisation for firms whose governance did not meet the required standard.

For senior appointments at payment institutions, the FCA pays particular attention to whether the proposed SMF holders have direct experience of the financial crime and safeguarding requirements that apply to payment services firms. An MLRO who has operated at a bank but has not previously worked in the payment services environment may need specific development in the safeguarding and customer due diligence requirements that apply under the Payment Services Regulations — requirements that differ in important ways from the banking framework they may be familiar with.

The MLRO at a Payment Institution

The MLRO at a payment institution occupies a particularly prominent role given the FCA’s focus on financial crime in the payments sector. Payment institutions handle high volumes of transactions, often across multiple currencies and jurisdictions, and the financial crime risk profile of a payments business is qualitatively different from a traditional retail bank or insurer. The MLRO must have a strong understanding of the specific typologies relevant to payment services — including account takeover, money muling, crypto-asset conversion, and cross-border sanctions evasion — as well as the technical AML systems architecture that the firm uses to monitor and report suspicious activity.

Exec Capital places MLROs and compliance officers at payment institutions and e-money firms and maintains relationships with experienced financial crime professionals who have specific payments sector expertise. For the FCA’s purposes, the quality of the MLRO appointment is a direct proxy for the firm’s seriousness about financial crime risk management, and boards should treat the MLRO search with the same rigour they apply to executive appointments.

Safeguarding and the CFO’s Role

The safeguarding of customer funds is one of the most distinctive obligations of payment institutions and e-money firms. FCA safeguarding requirements mandate that firms hold customer funds in designated safeguarding accounts, separate from the firm’s own funds, and that the safeguarding arrangement is properly structured, documented and audited. The CFO at a payment institution carries specific accountability for the firm’s safeguarding compliance, and candidates for CFO roles at payment institutions should have direct experience of safeguarding requirements and the audit and reporting obligations associated with them.

The Form A Process for Payment Institution Senior Appointments

Senior appointments at payment institutions follow the same FCA Form A process as other regulated firms, with the approval timeline typically running four to eight weeks for straightforward appointments at established, well-supervised firms. Payment institutions that are newer to FCA authorisation, or that have had supervisory concerns raised during the authorisation or post-authorisation review process, should plan for a longer approval timeline and should invest additional preparation time before the Form A is submitted.

The FCA’s assessment of fitness and propriety for senior appointments at payment institutions places specific weight on the candidate’s understanding of the financial crime and safeguarding requirements that are central to the FCA’s payments sector supervisory agenda. A candidate who has held senior roles at a non-regulated technology firm and is moving into a regulated payment institution for the first time may have relevant commercial experience but will need to demonstrate regulatory awareness of the specific obligations that come with FCA authorisation. The regulatory interview, where it occurs, is likely to focus specifically on financial crime risk management and safeguarding compliance alongside broader governance and business model questions.

Regulatory references for payment institution senior appointments can be complex where the candidate’s previous regulated experience has been at a firm in a different part of the financial services sector. The FCA is aware that the payment services sector draws talent from banking, e-commerce, technology and consulting backgrounds, and its assessment of regulatory references takes account of the different regulatory contexts in which previous experience was gained. Boards should nonetheless ensure that the regulatory reference process is managed carefully and that any disclosures are discussed with legal and compliance advisers before the Form A is submitted.

Building the Leadership Team at a Newly Authorised Payment Firm

The period immediately following FCA authorisation as a payment institution or e-money institution is one of the most demanding for a firm’s leadership team. The business transitions from operating under exemptions or provisional arrangements to full regulatory accountability, and the governance and compliance infrastructure must be fully operational from the point authorisation is granted. Many payment institutions find that the leadership profile that was appropriate to take the firm through the authorisation process is not identical to the profile needed to operate and grow as a fully authorised regulated firm.

The CEO who led the authorisation application may have the regulatory knowledge and entrepreneurial drive the process required, but may lack the operational discipline and governance experience that running a regulated payment institution demands. The MLRO who was appointed to satisfy the authorisation requirements may not have the capacity to build and manage a compliance function proportionate to the firm’s growing transaction volumes and expanding product set. Recognising the moment at which the founding leadership team needs to be supplemented with experienced regulatory operators is itself a governance challenge that boards at newly authorised payment firms frequently underestimate.

Exec Capital works with newly authorised payment institutions to assess their leadership needs at the point of authorisation and in the first growth phase that follows. We advise on which roles should be filled with experienced regulatory professionals immediately and which can be developed from within, and we conduct the search process for the specific appointments that will determine whether the firm’s post-authorisation period is commercially successful and regulatorily compliant.

Open Banking, Embedded Finance and the Evolving Senior Leadership Profile

The payments sector is undergoing a structural transformation driven by open banking, embedded finance and the proliferation of payment initiation and account information services. The senior leadership profile required at a payment institution operating in this environment is materially different from the profile that was relevant five years ago. CEOs and COOs at growth-stage payment institutions now need to understand API architecture and data infrastructure alongside regulatory compliance and commercial strategy — a combination that narrows the candidate pool significantly and requires a search approach that looks across both the regulated financial services sector and the technology industry.

The FCA is actively engaged in the open banking and embedded finance space, and its supervisory approach to payment initiation service providers and account information service providers continues to evolve. Senior leaders at firms operating under PIS or AIS authorisation need to remain current with the FCA’s expectations as they develop — which requires both regulatory fluency and a willingness to invest in the compliance infrastructure the evolving framework demands. Finding executives who combine genuine payment technology expertise with the regulatory seriousness the FCA expects is the central talent challenge for the sector’s most ambitious firms.

SMCR and the Compliance Function at Payment Institutions

The Compliance Oversight function (SMF16) at a payment institution is a demanding role that sits at the intersection of regulatory compliance, financial crime prevention and operational governance. The individual holding SMF16 must have sufficient authority within the organisation to raise compliance concerns at board level, sufficient independence from the business lines they oversee to provide objective assessment, and sufficient expertise in the specific regulatory framework that applies to payment services to provide credible challenge and guidance.

At smaller payment institutions, the SMF16 holder frequently combines the compliance oversight function with other responsibilities — including, in some cases, the MLRO designation. Where this combined arrangement applies, the FCA expects the individual to have genuine capacity and competence across both functions rather than carrying one as a paper designation. As the firm grows and its regulatory complexity increases, the combined arrangement will need to be restructured to provide dedicated compliance and financial crime oversight — and anticipating the point at which separation is required is itself a governance decision that the SMF16 holder and the board should be planning for actively.

Working with Exec Capital

Exec Capital places senior executives and compliance professionals at payment institutions, e-money institutions and fintech businesses operating under FCA payment services authorisation. We work on retained and contingency assignments and support the FCA approval process as part of every placement. Call Adrian Lawrence FCA on 0203 834 9616.