In March 2025, the government announced that it planned to consolidate the Payment Systems Regulator (PSR) primarily within the Financial Conduct Authority (FCA) as part of the Regulatory Action Plan to simplify regulation.
It is now consulting on its proposals for integrating the functions of the PSR entirely within the FCA. The FCA will take on the PSR's responsibilities, including for promoting competition and innovation in payment systems and the services provided by payment systems, as well as supporting the interests of consumers and businesses. The proposed consolidation seeks to deliver a more streamlined regulatory environment for payment systems by reducing the number of regulatory bodies, simplifying the regulatory landscape.
The steps being taken ahead of the transition to facilitate operational readiness include:
- Creating a new FCA Executive Director role for Payments and Digital Finance that includes responsibility for both FCA Payments and as Managing Director of the PSR.
- Updating the Memorandum of Understanding between the PSR, FCA, Bank of England and PRA required under section 99 of the Financial Services (Banking Reform) Act 2013 with the aim of enhancing coordination and supporting closer working.
- Jointly progressing Open Banking, including by establishing a joint steering Group to work on variable recurring payments, aiming to support pace and clarity.
- Working together with the Bank of England and HM Treasury through the Payments Vision Delivery Committee to drive delivery of the government's National Payments Vision (NPV).
- Undertaking joint engagement to support coherence and ensure clear, joined-up messages.
- Building closer joint working on horizon-scanning to support forward-looking priorities, and creating joint project teams on areas of mutual interest to bring together perspectives across the authorities.
The key elements of the proposed new regulatory regime are as follows.
- In so far as possible, the existing framework under the Financial Services and Markets Act 2000 (FSMA) will apply. In so far as this is not possible, a new Part may be added to FSMA.
- The categories of person within the FCA's payment systems regulatory regime would be the same as those under the Financial Services (Banking Reform) Act 2013 (FSBRA).
- The designation regime will be maintained; it is not proposed to apply FSMA-style conduct and prudential regulation to payment systems.
- No new categories of person will come within scope of the Payment Services Regulations 2017 or the Electronic Money Regulations 2011 due to the integration of the PSR into the FCA (any changes to this legislation will be considered as part of the Financial Services Growth and Competitiveness Strategy).
- The roles of the Bank of England and PRA in relation to payment systems will not change.
- The FCA will have equivalent objectives to that of the PSR in relation to payment systems, as well as equivalent "have regards" requirements. The PSR's FSBRA objectives will be integrated into FSMA.
- The FCA will have equivalent powers to the PSR under FSBRA integrated into FSMA in relation to payment systems. One aspect still under consideration is whether the FCA will have direction-making and requirement-making powers as the PSR has, or rulemaking and requirements-based powers as the FCA has in other areas, or both.
The consultation ends on 20 October 2025. The FCA has commented: "the Government's consultation is an important next step in simplifying and clarifying payments regulation. The consolidation will ensure there is a clear, predictable and proportionate regulatory framework that supports the UK's dynamic and fast-evolving payments landscape. We will continue to work with the Government and sector as plans for consolidation are finalised. We've already developed a more streamlined and joined up approach to payments regulation and removed some of the regulatory burden on firms, for example on our joint approach to open banking and our close partnership on delivering the NPV."
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
