UK dismantles Payments Systems Regulator | PaymentsSource

The U.K. government’s decision to abolish the Payment Systems Regulator has drawn mixed reviews, with the country’s payment firms saying it will make product development easier while creating more risk for fraud as payments-specific oversight wanes.

The PSR, which regulates payments systems and card schemes in the country, will be rolled into the Financial Conduct Authority, of which it was formerly a subsidiary. The move follows complaints from businesses that the regulatory environment was too complex due to the fact that businesses had to deal with three financial regulators in the country: PSR, the Financial Conduct Authority and Bank of England’s Prudential Regulatory Authority. The PSR announcement comes as the FCA signals it may simplify AI regulations. 

“For too long, the previous Government hid behind regulators — deferring decisions and allowing regulations to bloat and block meaningful growth in this country. And it has been working people who pay the price of this stagnation,” Prime Minister Keir Starmer said in a statement. “This is the latest step in our efforts to kickstart economic growth, which is the only way we can fundamentally drive-up living standards and get more money in people’s pockets.” 

PSR’s abolition was foreshadowed in November 2024 with the U.K.’s National Payments Vision, Dima Kats, CEO and founder of global banking and payments solutions provider Clear Junction, said in a statement. 

“This is a positive step forward, showing that the U.K. government is not just setting out a vision for payments but actively implementing it,” Kats said. “Regulatory red tape has increased dramatically in recent years, making it harder for businesses like ours to navigate.” 

Riccardo Tordera, director of policy and government relations at the U.K.-based The Payments Association said the PSR ignored industry’s advice on authorized push payment fraud, which was the proverbial straw that sealed the regulator’s fate. 

“A long series of mistakes has triggered a complete rethink on the point of its existence,” Tordera said. 

Tony Craddock, director of the Payments Association, said PSR’s structure was “designed for a different world” and “beyond its ‘use by’ date.

“If regulators adhered to the rules of the market, the PSR and FCA would have merged years ago,” Craddock said in a statement. 

PSR has also taken heat for trying to cap interchange fees for domestic and cross-border payments. Visa and Revolut last week filed legal challenges against PSR for its 2024 plan to cap interchange fees on online, cross-border payments, the Financial Times reported. PSR also said last week it planned to take action against Visa and Mastercard on domestic interchange fees. Both moves came in response to as much as a fivefold increase in interchange fees. 

While merging the two regulators will likely make compliance more straightforward, some payments companies are concerned that FCA won’t give payments the same level of attention PSR did. 

“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,” said Kamran Hedjri, CEO of commerce and payments platform PXP Financial. 

Fintech firms could also be at risk if FCA doesn’t prioritize payment innovation, said Derrick Lynagh, head of strategic sales & partnerships at London-based digital payments company MuchBetter. 

“There’s a risk that fintech firms, particularly those pioneering next-gen payment methods like wearables and biometric authentication, could face slower adoption and regulatory uncertainty,” Lynagh said. “For this to be a positive step, we need the FCA to actively champion emerging payment technologies and ensure the U.K. remains a prime environment for innovation.”

Fraud and security could also fall through the cracks, said Ryta Zasiekina, founder of Spanish payments company CONCRYT. 

“There is a real risk that payment security and fraud prevention may receive less dedicated focus,” Zasiekina said. “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.”