This week, the
UK Government has confirmed its plans to scrap the Payment Systems Regulator (PSR) in a bid to slash red tape and boost economic growth. The PSR’s operations will be merged with the Financial Conduct Authority (FCA) once the government has passed primary
legislation to enact the change.
Opinions on the axing of the PSR are divided. On the one hand, reducing overlap and complexities between the entities will – on paper – streamline innovation. On the other hand, the PSR, while an independent subsidiary of the FCA, already shares some operational
services and office space. “Some officials doubt whether the disruptive and time-consuming process of formally scrapping the PSR will be worth it when it is already in effect a subsidiary of the FCA,” the
Financial Times wrote.
“Payments don’t exist in a vacuum; they rely on the underlying network infrastructure that keeps transactions secure, seamless, and compliant. The PSR played a crucial role in ensuring that payment networks evolved in a way that prioritised resilience, competition,
and innovation. With its abolition, we need to be certain that the FCA will maintain that same level of oversight, especially as real-time payments and open banking adoption increase demand on network infrastructure,” commented Alan Stephenson-Brown, CEO of
Evolve.
“Streamlining regulation is a good move if it reduces unnecessary complexity, but if this shift deprioritises payments-specific challenges, businesses could face unintended consequences. The process of merging regulatory bodies can create temporary uncertainty
and operational challenges, potentially disrupting the fintech ecosystem during the transition period. The UK has built a reputation as a leader in fintech and payments innovation – this change needs to reinforce that leadership, not hinder it.”
Reinforcing the UK as a fintech leader
Many industry professionals and government officials alike welcome the move to fold the PSR into the FCA, stating the reinforced commitment to positioning the UK as a fintech leader. Luke Charters, MP, commented: “This is welcome news and a clear signal
of intent to industry that the Government wants to restrike the balance when it comes to payments regulation. This is another step to freeing innovative firms so that they can get on with what they do best, which is delivering economic growth and creating
opportunities for our world leading financial services sector.”
Others praised the active implementation of what has been outlined in the UK’s
National Payments Vision (NPV) in November 2024. “This is a positive step forward, showing that the UK government is not just setting out a vision for payments but actively implementing it,” stated Dima Kats, CEO and founder of Clear Junction. “Regulatory
red tape has increased dramatically in recent years, making it harder for businesses like ours to navigate. We welcome this move to streamline oversight, as it will help reduce complexity and create a more efficient regulatory environment.”
The Payments Association similarly hailed the move. “If regulators adhered to the rules of the market, the PSR and FCA would have merged years ago,” commented director general Tony Craddock. “The PSR was beyond its ‘use by’ date, with its structure and governance
designed for a different world. Today’s world demands resourceful, agile, responsive regulators that are in tune with the market. A world in which regulators let entrepreneurs get on with what they do best: investing in new products and improved services that
better serve the interests of consumers and companies everywhere. If they can do this – without carrying an unnecessary burden of compliance, reporting and consumer protection to the Nth degree – then they will grow, reinvest and grow more.”
De-regulation at the expense of the consumer?
While some experts approved the approach of removing regulatory red tape, others were concerned that it would be the consumer that could potentially suffer the consequences of abolishing the PSR – especially in light of recent spikes in fraud rates.
“The integration of the Payment Systems Regulator (PSR) into the Financial Conduct Authority (FCA) must be carefully evaluated to maintain, if not enhance, the anti-fraud protections currently in place,” stated Stewart Hey, partner at Charles Russel Speechlys.
“Given the prevalence of APP fraud and its significant impact on the public, it is essential that there is proper recourse to victims often faced with the daunting task of taking on large financial institutions to obtain lawful redress. Whilst the Government
may be concerned with achieving value for the taxpayer, due care needs to be taken to ensure any rationalisation does not make the task even harder for victims to obtain such redress.”
Others emphasised the need for assurance that security and innovation will continue to go hand in hand. “The PSR played a critical role in ensuring fairness and security in the payment’s ecosystem, particularly in tackling fraud, enforcing strong payment
authentication standards, and promoting competition,” emphasised Ryta Zasiekina, founder of CONCRYT.
“While consolidating oversight under the FCA might reduce complexity for businesses, there is a real risk that payment security and fraud prevention may receive less dedicated focus. With the rise of APP fraud, money laundering threats, and evolving cyber
risks, payment security cannot become an afterthought in the push for economic growth. The PSR had a strong track record in holding firms accountable for fraud prevention, especially in pushing for liability frameworks that protected consumers and businesses.
The fintech sector needs assurance that the security and innovation will continue going hand in hand.”
The future of UK payments regulation
While the effectiveness of the UK Government’s approach to de-regulation and the PSR’s abolishment will only become evident once primary legislation has passed to enact the change, the potential of hitting the sweet spot between effective regulation and
innovation is the beacon of hope for the UK financial services industry.
“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,” concluded Scott Dawson, CEO of DECTA.
“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.”