UK Government moves to abolish Payment Systems Regulator

The move is part of a wider effort to reduce regulatory complexity and is positioned as a response to business concerns over excessive regulatory burdens, particularly for smaller firms in the financial services sector. 

Officials have stated that transferring PSR functions to the FCA will create a more streamlined system, reducing the need for payment system providers to engage with multiple regulators. The PSR, which oversees networks such as Faster Payments and Mastercard, was initially established to ensure competition and fairness in the payments industry. However, some industry participants have argued that the current framework is too fragmented, requiring engagement with several regulatory bodies and increasing compliance costs. 

The Government has framed this decision as part of its wider economic strategy, referred to as the Plan for Change. Additional regulatory reforms are expected to be detailed in the coming days. The agenda includes reviewing environmental regulations, modifying financial oversight, and assessing the role of other regulatory bodies to ensure they are facilitating growth rather than hindering it. 

Officials have suggested that a more centralised approach to regulation will help businesses expand, supporting innovation and investment. However, some industry representatives have cautioned that the effectiveness of payments regulation must be maintained, warning against a regulatory vacancy that could stall progress in areas such as Open Banking and competition.

Industry reactions and concerns

Some figures within the payments and fintech industries have expressed cautious optimism about the move, noting that a more unified regulatory body could simplify compliance.  

Kamran Hedjri, the CEO of PXP commented the following:  

‘For merchants and payment service providers, regulatory clarity is always welcome as too many overlapping rules can create unnecessary costs and slow down innovation. Moving the PSR’s responsibilities to the FCA could, in theory, make compliance more straightforward. The PSR was a strong advocate for improving payments competition, reducing card fees, and advancing Open Banking adoption.  

If the FCA does not give payments the same level of attention, we risk stalling progress in these critical areas. Merchants need fair access to diverse and cost-effective payment options, and fintech innovation depends on a regulator that actively pushes for market improvements. The UK has led the way in fintech growth, and this change will be positive if the FCA champions payments innovation with the same energy as the PSR.’ 

Laurent Descout, the CEO and co-founder of Neo also shared some insight: 

‘As responsibilities shift away from the PSR to the FCA, it is essential that fintech firms, which are improving efficiency, reducing costs, and expanding access to financial services, are given the right regulatory environment to thrive. A clear and forward-looking approach will help maintain the UK’s position as a global leader in payments and ensure a competitive, dynamic market that benefits businesses and consumers alike.’ 

Scott Dawson, the CEO of DECTA, emphasised the following: 

‘As we take a breath on this news, I believe there is a key point we must focus on: you can have effective regulation without bureaucracy and thereby, getting rid of bureaucracy shouldn’t get rid of effective regulation. The PSR/FCA news in some sense is irrelevant – we must ensure that any initiatives are effective. While regulation is rarely popular and financial companies too often try to circumvent them, we have an example from living memory of what happens when the sector is unregulated - the 2008 financial crash happened, in large part, because of a lack of effective regulation.’ 

Jonathan Frost, Director of Global Advisory for EMEA at BioCatch, commented: 

‘The closure of the PSR appears to be little more than a branding exercise. As a subsidiary of the FCA, sharing both office space and personnel, its functions are already deeply integrated. Beyond dropping a logo, it’s unclear what, if anything, will materially change. 

Good consumer outcomes in the financial services sector depend on the effective regulation of payment services. Given this, it makes sense for a single agency to ensure that financial institutions adhere to the expectations set out in the FCA’s Consumer Duty.’