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The UK government has announced plans to abolish the Payment Systems Regulator (PSR) as part of Prime Minister Keir Starmer’s broader initiative to streamline regulation and boost economic growth.
The PSR, which oversees payment networks such as Faster Payments and Mastercard, will see its responsibilities consolidated into the Financial Conduct Authority (FCA), in order to make the regulatory landscape more coherent by reducing the number of bodies that payment firms must engage with.
“For too long, the previous Government hid behind regulators – deferring decisions and allowing regulations to bloat and block meaningful growth in this country,” Prime Minister Starmer said in a statement. “And it has been working people who pay the price of this stagnation.”
Payment system firms had to engage with three different regulators, which has raised complaints, particularly regarding the disproportionate burden of this complexity on small and medium-sized enterprises (SMEs).
Chancellor Rachel Reeves highlighted the SME impact, stating, “The regulatory system has become burdensome to the point of choking off innovation, investment and growth. We will free businesses from that stranglehold, delivering on our Plan for Change to kickstart economic growth and put more money into working people’s pockets.”
The PSR, with 160 employees and a £28 million annual budget, is already housed in the same east London headquarters as the FCA and shares senior staff, including its leader David Geale, who is an FCA director. Primary legislation will be required to enact the merger, with the FCA set to retain the payments agency’s powers after consolidation.
However, some officials question whether formally scrapping the PSR is worth the disruption, given it already functions essentially as an FCA subsidiary. Charles Randell, former FCA chair, cautioned that merging regulators “might be a crowd-pleasing thing to do” but doubted it would “produce payback in the life of this parliament.”
The PSR came under fire last week by Visa and Revolut, who argued that the regulator had overstepped by proposing a cap on international transaction fees. This is the latest in a string of controversial decisions made by the PSR in recent years, including its approach to introducing a mandatory refund system for payments fraud.
Responses from the payments and fintech industries have been mixed. Kamran Hedjri, CEO of PXP, welcomed the potential for simplified compliance but expressed concern that progress in areas such as Open Banking could stall if the FCA does not prioritise payments with the same focus as the PSR. On the other hand, Jonathan Frost, Director of Global Advisory for EMEA at BioCatch, downplayed the significance of the change, describing it as “little more than a branding exercise” given the existing integration between the two bodies.
The government has emphasised that the regulator will continue to have access to its statutory powers until legislation passes parliament; change will be incremental rather than immediate.
The initiative follows other deregulatory measures, including lifting the onshore wind ban, introducing the Planning and Infrastructure Bill, and setting financial services regulators on a growth agenda, as part of a wider government review of Britain’s estimated 130 regulators.
