On 8 September 2025, HM Treasury issued a consultation paper, A Streamlined Approach to Payment Systems Regulation.
In the consultation paper HMT sets out proposals for integrating the functions of the Payment Services Regulator (PSR) entirely within the Financial Conduct Authority (FCA).
Background
Earlier this year the UK Government announced the abolition of the PSR, as part of its efforts to cut red tape and drive economic growth. The move followed complaints from payment services firms that they were having to engage with three different regulators, costing them time, money and resource.
Ahead of the transition, the PSR and the FCA have already made certain arrangements to ensure operational readiness for implementing the integration and this includes 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.
Consultation
In the HMT consultation paper the UK Government is consulting on proposals for how it will move all of the PSR’s functions into the FCA. This will see the FCA 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 who make payments every day.
In broad terms, the UK Government is proposing to integrate the PSR’s functions within the FCA’s current framework in the Financial Services and Markets Act 2000 (FSMA 2000) to the extent this is practicable. Where this is not practicable, the UK Government expects the relevant functions to be set out in a new part of FSMA 2000.
The consultation paper sets out the UK Government’s approach to the core design decisions for the new regulatory framework, including the role of the FCA alongside other relevant public authorities and the FCA’s proposed future objectives and powers in relation to payment systems, among other key features. The UK Government is not consulting on all the issues associated with the consolidation, but on core design decisions where it would be most useful to receive stakeholder feedback.
For example, under the UK Government’s proposed approach, the transfer of the PSR’s functions to the FCA will not result in new categories of persons being brought in scope of payment systems regulation. Instead, the FCA’s payment systems regulatory regime will apply to the same categories of persons as the PSR’s regime in the Financial Services (Banking Reform) Act 2013 (FSBRA 2013) does at the moment.
Alongside this, the FCA would continue to perform its wider role as a conduct and prudential regulator, including its existing functions in relation to payment services and e-money legislation. The UK Government is not seeking to alter these functions or expand or reduce the FCA’s remit in relation to these functions, as a consequence of integrating the PSR into the FCA. Furthermore, the UK Government does not consider it appropriate to apply FSMA 2000 style conduct and prudential regulation based on an authorisations process to payment systems or participants in a payment system who are not currently in scope of this type of regulation. The UK Government considers it preferable to retain the approach used in the current framework of designating payment systems because it facilitates more targeted regulation.
Next steps
The deadline for comments on the consultation paper is 20 October 2025.
Legislation will be brought forward to implement the UK Government’s final policy when Parliamentary time allows.
By the end of 2025, the UK Government and public authorities, via the Payments Vision Delivery Committee, will publish a Payments Forward Plan, which will provide a sequenced plan of future initiatives across the ecosystem, including initiatives in both retail and wholesale payments, and the role of digital assets.