On 5 December 2025, HM Treasury published its Policy Update on creating a Provisional Licences Authorisation Regime (the Regime). This update follows the Government's call to regulate for growth in December 2024, and the Regulation Action Plan in March 2025, where the Government committed to work with the Financial Conduct Authority (FCA) to consider whether the legislative framework could be adapted to enable firms to conduct limited regulated activities with streamlined conditions pending full authorisation.
This will be of particular interest to early stage FinTech businesses that are considering how best to approach the authorisation process and navigate the requirements that will impose on the business, including from a capital and infrastructure perspective.
Aim of the Regime
Currently, when seeking authorisation, firms must be ready, willing and organised to take on regulation. This means firms must demonstrate they are prepared with all relevant documents in final form and must have the necessary arrangements in place with supporting documentation so that the firm is compliant with the regulatory requirements if authorisation is granted. This is often quite challenging for early stage FinTech firms.
The Regime is intended to reduce the burden and prohibitive factors on firms by enabling them to obtain a provisional licence prior to obtaining full Part 4A authorisation with the FCA. Firms seeking to obtain a provisional licence will need to be open and honest with the FCA and willing to work cooperatively with the regulator, although the firm will not be expected to meet the same level of readiness and organisation that a firm must show when applying for Part 4A authorisation. Instead, firms will be able to use the time that they operate under the provisional licence to prepare itself for the application for full authorisation. This could be particularly useful for FinTech firms as it reduces the barrier for entry into the regulated markets and allows firms time to prepare to meet the standards required for full authorisation.
This is expected to encourage growth and innovation in the sector so that the UK remains a leading jurisdiction for FinTech firms to start-up, and scale-up through to exit by listing. It is hoped that firms that obtain a provisional licence would be able to successfully obtain further fundraising during this licence period to raise capital required for full authorisation.
How the Regime will operate
The proposal sets out that firms will be able to apply for a provisional licence with the FCA where they may carry on limited regulated business for a defined period of time (up to 18 months). Firms that are approved for a provisional licence will be subject to enhanced monitoring and close oversight, and the FCA may impose a limit to either the volume or value of its activities under the provisional licence. As such, firms should expect a significant amount of FCA contact, supervision and oversight. Whilst the standards will be proportionate to the provisional licence, they will still need to meet the FCA's expectations.
At the end of the provisional licence period, firms must be ready to comply with the FCA's threshold conditions and be granted full authorisation.
To the extent that, at the end of the provisional period, a firm is not ready for authorisation, it must work with the FCA to wind-down the regulated products and activities. However, if the firm has applied for full authorisation and is awaiting a decision from the FCA, an extension to the provisional licence will be available.
The scope of the Regime
The Regime will be available for firms that are seeking authorisation for activities that are within the FCA's regulatory perimeter. The provisional licence will not be suitable for firms that:
- are already authorised and seeking a variation of permission;
- are seeking to carry on activities being brought into scope of the regulatory perimeter for the first time;
- would be dual regulated by the PRA and FCA (firms that would be dual-regulated should consider the optional mobilisation route); or
- will provide long-term products with the potential for consumer harm that would emerge after the expiration of the provisional licence, for example, pension advice.
The FCA will determine the eligibility criteria for the Regime and may choose to focus on specific areas and activities to help facilitate a successful launch of the Regime. Under the eligibility criteria, firms will not be expected to demonstrate the same readiness that firms must demonstrate for applications for full Part 4A authorisation. As part of the application, firms will be required to provide information that is relevant to the provisional licence and may defer information required for the subsequent application for full authorisation.
The FCA will set proportionate expectations such as ensuring that firms can meet the threshold conditions only for the duration of the provisional licence, and the FCA's judgement will be tailored to specific factors such as the firm's stage of development and risk, compliance and audit provisions.
Next-steps
The introduction of the Regime will require primary legislation, which the Government will put forward when parliamentary time allows, and the FCA will launch a consultation on the design of the Regime in due course.
Our comments
The Regime is a positive proposal with the aim of reducing burden and providing more opportunity for FinTech firms to establish themselves in the UK market and accelerate innovation. However, the success of the Regime will largely be determined by what the FCA considers to be a proportionate approach in deciding whether to grant a provisional licence.