In December 2025, HM Treasury published the final report of its independent review of the payment and electronic money special administration regime (PESAR). Introduced in 2021 after several complex e-money and payment institution failures, the PESAR was designed to ensure customer funds are protected and returned as quickly as possible.
However, there have been persistent challenges with the PESAR. Concerns include the high legal and administrative costs, procedural delays and insufficient flexibility associated with the regime. The review assessed whether the regime meets its statutory objectives and draws on industry feedback, including from our financial services restructuring team.
Why the review matters
Consumers are increasingly embracing digital solutions for their payments, with debit cards, contactless and mobile wallets dominating everyday transactions. With the industry poised for continued growth, the focus on safeguarding customer funds and prioritising their return in the event of a firm failure has become both more crucial and more complex.
The number of e-money and payment institutions that failed and entered special administration in 2025 alone highlights the need for change: JNFX Ltd (Nov), Argentex LLP (July), Ziglu Limited (July), Blackthorn Finance (April), Nvayo Limited (Feb), Contis Financial Services Ltd (Jan).
The review looked at the recurring legal and operational challenges faced by administrators following the introduction of the PESAR.
Core findings of the PESAR review
The review found that while the PESAR represents a significant step forward compared with the general insolvency framework, it does not fully deliver on its intended goals in practice:
- PESAR objectives lack a clear hierarchy: The PESAR sets out three statutory objectives: (i) return customer funds as soon as practicable; (ii) ensure timely engagement with payment system operators, the Payment Systems Regulator and the Bank of England, the Treasury and the FCA, as appropriate; and (iii) to either rescue the company as a going concern, or to wind it up in the best interests of creditors. The absence of a clear hierarchy or prioritisation among these objectives creates uncertainty for administrators and can lead to inconsistent outcomes for customers, particularly in complex cases.
- Disproportionate court and cost burden: The PESAR still relies heavily on court processes for entry to the regime and approval of distribution plans. The procedural complexity and associated legal costs can delay distributions and negatively impact customer outcomes, particularly for vulnerable customers or where account balances are low.
- Practical challenges in returning customer funds: The review found insufficient guidance on how administrators can deliver interim distributions. The absence of FSCS protection for customers was also noted.
- Scalability and contingency planning: Contingency planning is recommended to understand the efficacy of the PESAR with large-firm failures, including an assessment of cross-border recognition of special administration orders and access to critical payment system infrastructure. More focus is needed to secure orderly transfers to a new provider or continuity arrangements so merchants and other users can continue processing payments while a replacement is found.
- Market and legal efficiency: Changes are required to provide clearer comfort mechanisms to insolvency practitioners, improve creditors’ committee functionality, as well as other legislative refinements to reduce friction.
Key recommendations for reform
The review sets out the following targeted recommendations for HM Treasury to consider:
- Clarify and prioritise statutory objectives: Establish a clear hierarchy of the PESAR objectives to give administrators flexibility to prioritise business rescue or transfer customers to a new provider when it would deliver better overall customer outcomes. Third-party providers should be incentivised to onboard customers from failed institutions, particularly where customers are unbanked or have low-value balances.
- Reduce court dependency and improve the effectiveness of creditors’ committees: Introduce an out-of-court route into special administration and streamline court processes, especially around applications for approval of dates for distribution and for the administrators’ discharge from liability. Provide clearer guidance on roles and responsibilities to creditors’ committees to improve effectiveness.
- Return of customer funds: Introduce mechanisms that encourage the use of interim distributions without needing court approval to accelerate the return of customer funds. The introduction of FSCS style protection should be considered, as well as de-minimis thresholds to avoid disproportionate administrative costs on small balances and dormant accounts.
- Scalability, contingency planning and cross-border recognition: Improve preparedness for larger failures by developing contingency strategies and collaborating with other jurisdictions to ensure recognition of the PESAR and interaction with international insolvency regimes.
- Monitor sector evolution: Continuously assess the PESAR’s suitability in light of emerging technologies, digital payment trends and international best practices.
In summary, the review proposes targeted, practical reforms aimed at faster return of customer funds, less court involvement, better protection for consumers, greater resilience in large or cross-border institutions, more pragmatic and proportionate processes, and improved continuity of service for merchants and other users.
Next steps
HMT will now consider the review’s conclusions. The recommendations provide a constructive roadmap for making the PESAR more adaptable and efficient, to offer greater protection for customers and support financial stability in the UK’s dynamic payments sector.
For more information or advice, contact Chris Laverty or Jarred Erceg.
