In a bold move aimed at simplifying the UK’s financial regulatory landscape, the government has announced plans to abolish the UK Payment Systems Regulator (PSR) and integrate its functions into the Financial Conduct Authority (FCA). Established in 2015 to oversee fair and efficient payment systems, the PSR will now transition its responsibilities to the FCA, marking a significant step in FCA regulatory reform. This decision seeks to address growing concerns about regulatory complexity and administrative burdens faced by businesses operating in the payments sector.
Why is the PSR Being Abolished?
The decision to merge the PSR into the FCA stems from feedback highlighting the challenges businesses face when navigating multiple regulatory bodies. Payment system firms currently interact with several regulators, leading to increased operational costs and inefficiencies. In a statement released on 11 March 2025, the government outlined its vision for a streamlined regulatory framework, asserting that reducing bureaucratic overlap would foster economic growth and innovation within the financial sector.
Prime Minister Sir Keir Starmer reinforced this vision during a speech on 13 March 2025, criticising previous administrations for relying too heavily on regulators, which he argued often delayed decisions and stifled progress. “For too long, regulators have been used as tools to defer action, resulting in excessive bureaucracy,” Starmer remarked. “We need a system that encourages innovation and supports businesses, not one that holds them back.”
Transition to the FCA
The integration process between the PSR and the FCA has been underway for some time, with both organisations sharing office space in London and gradually aligning their operations. David Geale, who has served as the PSR’s interim managing director since June 2024, was appointed interim executive director of payments and digital finance at the FCA in January 2025. According to the FCA’s latest annual report, the organisation employed 4,995 staff in 2024, including 140 from the PSR, reflecting the growing convergence of their roles.
While the PSR will continue to operate under its statutory powers in the short term, its full transfer to the FCA will require new legislation, which the government plans to introduce later in 2025. The transition aims to consolidate oversight of payment systems under one roof, ensuring a more cohesive approach to regulation.
Impact on the UK Payments Sector
The PSR has played a pivotal role in addressing key issues affecting the payments industry, including:
- Combatting Authorised Push Payment (APP) fraud, where individuals are deceived into transferring money to scammers.
- Regulating card fees and charges to ensure fairness for consumers and businesses.
- Developing an open banking framework to enhance competition and innovation.
Despite these achievements, critics argue that the PSR’s structure had become outdated and required reform. Tony Craddock, Director-General of the Payments Association, acknowledged the need for change but cautioned against compromising regulatory standards, particularly in areas critical to fintech innovation. Meanwhile, Adam Jackson, Chief Strategy Officer at Innovate Finance, welcomed the move, stating that it would simplify processes for fintech firms and accelerate decision-making.
FCA Regulatory Reform – Next Steps!
The government plans to launch a consultation on the details of the PSR’s abolition during summer 2025, with legislation expected to follow shortly thereafter. In the meantime, the FCA will collaborate closely with the government, the Bank of England, and industry stakeholders to ensure a seamless transition.
While the closure of the UK Payment Systems Regulator marks a shift towards a more consolidated regulatory framework, its success hinges on how effectively the FCA manages its expanded responsibilities. Businesses and consumers alike will be watching closely to see whether this reform delivers on its promise of fostering innovation while maintaining robust oversight of the payments sector.
