The UK Government has announced its intention to abolish the Payment Systems Regulator (PSR) in an effort to reduce regulatory burdens and stimulate economic growth.
The PSR, which oversees payment systems such as Faster Payments and major card networks, will largely be integrated into the Financial Conduct Authority (FCA). This consolidation aims to simplify interactions for businesses by providing a single regulatory point of contact.
While the PSR operates independently as a subsidiary of the FCA and shares certain services and office space, it will retain its statutory powers until Parliament enacts the necessary legislative changes.
In its response to the Government’s announcement, the PSR stated: “Legislation will take time, but we do not need to wait to realize the benefits of an even more streamlined regulatory approach. This builds on recent efforts to bring the PSR and FCA closer together.” The PSR has already merged its managing director role with that of the FCA’s executive director of payments and digital finance.
Chancellor Rachel Reeves remarked, “The regulatory system has become burdensome to the point of choking off innovation, investment, and growth. We will free businesses from that stranglehold.”
The decision to eliminate the PSR comes in response to concerns from businesses regarding the complexity of the regulatory landscape, which currently requires payment system firms to navigate multiple regulators, consuming valuable time and resources.
Prime Minister Keir Starmer added, “For too long, the previous Government hid behind regulators—deferring decisions and allowing regulations to bloat and obstruct meaningful growth. This is another step in our ongoing efforts to spur economic development, which is essential for improving living standards and increasing disposable income.”
The Payments Association has praised the decision. Riccardo Tordera, the director of policy and government regulation, commented, “The PSR very much sealed its own fate by continuing to ignore industry advice on APP fraud. Though it can be commended for its recent change in stance to lower the threshold, a long series of errors has led to this complete rethink on its existence. It’s time for a bold decision.”
However, not everyone in the industry agrees with this perspective. Jonathan Frost, director of global advisory for EMEA at BioCatch, argued, “The closure of the PSR seems to be more of a branding exercise. As a subsidiary of the FCA, which shares both office space and personnel, its functions are already well integrated. Aside from changing a logo, it’s unclear what substantive changes will occur.”
He emphasized, “Positive consumer outcomes in the financial services sector rely on effective regulation of payment services. Therefore, it makes sense for a singular agency to ensure that financial institutions meet the expectations outlined in the FCA’s Consumer Duty.”
This move to dissolve the PSR aligns with the current Government’s broader initiative to streamline regulatory bodies. Last month, the chairman of the Competition and Markets Authority, Marcus Bokkerink, was dismissed due to concerns about hindering growth, and his replacement, Doug Gurr, is a former Amazon executive.
Since then, both the chair and chief executive of the Financial Ombudsman Service have announced their plans to resign.