UK Payments Crisis: Compliance Costs Outpace Revenue for 45% of Firms

Quick Summary

New research from Kani Payments reveals a UK payments crisis where 45% of firms report compliance costs are outpacing revenue growth. With 49% of executives struggling to adapt legacy systems to rapid regulatory change, the industry faces a critical shift from governance understanding to operational execution.

How is Regulatory Change Impacting UK Payments Firms?

The UK payments industry has reached a tipping point where the sheer velocity of regulatory change is overwhelming existing infrastructure. According to the latest data, 49% of executives admit their current systems cannot keep pace with evolving mandates. This isn't just a matter of understanding the rules; it is an operational scaling issue that requires a fundamental rethink of how data is processed and reported.

• 49% of firms report systems are too slow to adapt.
• 45% of businesses see compliance costs exceeding revenue growth.
• 32% of firms currently claim full compliance with new FCA safeguarding rules.

"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." said Aaron Holmes, CEO of Kani Payments. This gap between regulatory intent and technical capability is forcing firms to choose between massive hiring sprees or total system overhauls.

Why Are Compliance Costs Outpacing Revenue?

The financial burden of compliance costs is no longer a line item - it is a structural threat. As the FCA tightens safeguarding regime (PS25/12) requirements, firms are hit with a "triple threat" of expenses: hiring specialist compliance talent, investing in automated reconciliation technology, and maintaining manual oversight for legacy gaps. When these costs rise faster than the top line, the fintech business model faces significant sustainability pressure.

"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." said Aaron Holmes, CEO of Kani Payments. To combat this, leaders are prioritizing live resolution capabilities and automated reporting to reduce the reliance on expensive manual intervention.

What Are the Priorities for Operational Readiness?

To survive this shift, firms are pivoting toward embedded compliance. Rather than treating regulatory reporting as a post-hoc task, successful players are integrating automated reconciliation directly into their core stacks. The goal is to move away from manual processes that cannot scale, focusing instead on safeguarding controls that provide real-time evidence of compliance to regulators like the FCA.

"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." said Aaron Holmes, CEO of Kani Payments. By focusing on operational infrastructure, firms can transform compliance from a cost center into a competitive advantage.

FF NEWS TAKE:

This report from Kani Payments is a wake-up call for the sector. For years, fintechs focused on growth at all costs, treating compliance costs as a secondary concern. Now, the regulatory change landscape has become so complex that it is literally eating the margins of nearly half the industry. This moves the needle by signaling the end of the "manual workaround" era. Firms that don't automate their safeguarding and reconciliation now won't just face fines - they'll face insolvency as their operational overhead explodes.