On 12 March 2025, the Government announced that it intends to abolish the Payment Systems Regulator (PSR), as part of its plan to reduce regulation.

Plans for the PSR

Under the plans, the PSR will mainly be consolidated into the Financial Conduct Authority (FCA), with the aim of making it easier for firms to deal with one port of call. The announcement follows complaints from businesses that the regulatory environment was too complex, with payment system firms having to engage with three different regulators which has implications in terms of time, money and resource. The Government is concerned that this has a greater impact on smaller businesses that are trying to scale and grow, as the costs are disproportionately higher for them, and through its planned changes it aims to streamline the regulatory process.

The Government confirms that there will be no immediate changes to the PSR’s remit or ongoing programme of work, and that the PSR will continue to have access to its statutory powers until legislation is passed by Parliament to enact these changes. In the meantime, the PSR and FCA will “work closely to deliver a smooth transition of responsibilities to ensure the market remains competitive”.

Further detail on the plans are set out in a letter from the Economic Secretary to the Treasury to the Treasury Committee, which notes that the Government will consult on the detail of this proposal during Summer 2025 and will legislate “as soon as possible”.

Wider changes

The announcement also flags that the entire regulatory landscape will continue to be reviewed and finessed as part of a wider Government effort to “kickstart economic growth and make regulators work for the country, rather than block progress”.

PSR response

The PSR has published its response to the announcement, noting that it is a “pragmatic next step in simplifying and clarifying payments regulation” and welcoming the Government’s commitment to maintaining effective regulation of payment systems, which it says was a gap before the PSR was established. The statement highlights the central role played by the PSR in supporting open banking and innovation, opening up access to payment systems, promoting competition, and introducing world leading protections for victims of fraud.

The PSR confirms that it is committed to working with Government, the FCA and the Bank of England as decisions are taken on the transfer of regulatory responsibilities and, when they are, help ensure the process is smooth. It flags recent work to bring the PSR and FCA closer together, including joining the roles of PSR managing director and FCA executive director of payments and digital finance. It also commits to continue ensuring payment systems are competitive, innovative and safe until the transfer of responsibilities takes place.

FCA response

In its own response to the announcement, FCA CEO Nikhil Rathi acknowledges the PSR’s work which has made payment systems “safer, more competitive and increasingly innovative”, and explains that now is the right time to put in place a more streamlined regulatory framework. He notes that this is a “natural next step” following recent work to improve co-ordination and clarity on regulatory responsibilities. Mr Rathi commits to working closely with the Government, Bank of England and the payment sector as the details of the change are decided and to ensure a smooth transfer of any powers. In the meantime, he confirms that the FCA will drive forward with change, including “welcoming the deep expertise of PSR colleagues within the FCA”.