The UK Payment Systems Regulator (PSR)will be shuttered by the UK government.
The move is described as reducing “red tape” or “unnecessary regulation” to improve growth by reducing the burdens ladled upon businesses.
The PSR oversees payment systems like card rails. Its responsibilities will be consolidated with the Financial Conduct Authority (FCA), the top securities regulator.
The government said the decision was made as many businesses complained the regulatory environment was too complex with payment system firms dealing with three different regulators.
Prime Minister Keir Starmer claimed the prior government hid behind regulators, causing regulatory bloat and impeding growth.
“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,” said the PM, adding that it has been working people who pay the price of excessive regulation.”
Chancellor of the Exchequer Rachel Reeves added that the move builds upon the government’s deregulation ambitions.
“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.”
A letter was forwarded to the Chair of the Treasury Committee in Parliament, explaining the government’s intent to combine PSR operations at the FCA. The missive acknowledged the critical work of the PSR while expressing a need to remove government obstacles for firms challenged by the agency:
“.. the Government wishes to see a more streamlined regulatory environment which manages the burdens on all businesses, with minimal overlap between regulators’ responsibilities. This requires a rethink of existing regulatory structures for payments, so that firms can focus more of their resources on delivering valuable services and innovations that will deliver on the government’s central growth mission.”
The PSR posted about its future on its website, calling the change a “pragmatic next step.”
“The PSR has played a central role, supporting open banking and innovation, opening up access to payment systems, promoting competition, and introducing world leading protections for victims of fraud. Colleagues should rightly be proud of all they have achieved.
We’re 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. Legislation will take time, but we do not need to wait to realise the benefits of an even more streamlined regulatory approach. Doing so builds on recent work bringing the PSR and FCA closer together. We have, for example, already joined the managing director of the PSR role with that of executive director of payments and digital finance at the FCA.”
Multiple insiders shared their opinion on the UK government’s decision to terminate the PSR.
Dima Kats, CEO and founder of Clear Junction, said the decision comes as no surprise as the UK’s National Payments Vision (NPV) foreshadowed the shuttering of the PSR.
“This is a positive step forward, showing that the UK government is not just setting out a vision for payments but actively implementing it. Regulatory red tape has increased dramatically in recent years, making it harder for businesses like ours to navigate. We welcome this move to streamline oversight, as it will help reduce complexity and create a more efficient regulatory environment.”
Kats noted that the FCA and PSR have not always been completely aligned, creating challenges for the payments sector. By combining responsibilities, coordination should improve, and regulation should be more consistent.
“We fully trust that the FCA can regulate this industry effectively – ensuring the integrity of financial infrastructure, fostering competition, and ultimately delivering the best outcomes for consumers.”
Director General of The Payments Association, Tony Craddock, declared that if regulators lived by the rules of the market, the PSR and FCA would have merged years ago. He described the PSR as “beyond its use date,” criticizing its structure and government.
“Today’s world demands resourceful, agile, responsive regulators that are in tune with the market. A world in which regulators let entrepreneurs get on with what they do best: investing in new products and improved services that better serve the interests of consumers and companies everywhere,” explained Craddock. “If they can do this – without carrying an unnecessary burden of compliance, reporting and consumer protection to the Nth degree – then they will grow, reinvest and grow more.”
Cradded noted that the FCA is committed to effective regulation, especially in areas vital to investment and innovation.
“We believe effective regulation that enables growth can be achieved without unnecessary bureaucracy.”
Riccardo Tordera, Director of Policy and Government Relations at the Payments Association, echoed Craddock’s sentiment, slamming the previous government as hiding behind “regulators issuing wrong regulations.”
Luke Charters MP welcomed the news, stating it was indicative of a government willing to strike a balance between innovation and regulation.
“This is another step to freeing innovative firms so that they can get on with what they do best, which is delivering economic growth and creating opportunities for our world-leading financial services sector.”
The CEO of payments firm PXP, Kamran Hedjri, said that overlapping rules can create unnecessary costs and undermine innovation.
“Moving the PSR’s responsibilities to the FCA could, in theory, make compliance more straightforward. 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. Merchants need fair access to diverse and cost-effective payment options, and fintech innovation depends on a regulator that actively pushes for market improvements. The UK has led the way in Fintech growth and this change will be positive if the FCA champions payments innovation with the same energy as the PSR.”
Scott Dawson, CEO of DECTA, predicted that others could follow, alluding to more red tape reduction under the Starmer government.
“While it was previously reported the FCA was also seeking to ditch policy proposals and is committing to launch fewer “large-scale” initiatives over the next five years, as it steps up efforts to support Britain’s flagging economy.”
Dawson explained that effective regulation can be achieved without bureaucracy. He also noted that lack of regulation can be a problem, too, as evidenced by the 2008 financial crisis, due to ineffective oversight.
“I’m confident this story will develop at pace over the next week and clearly be a major talking point in the PM’s speech, as it’s following a trend of so-called ‘purging’ under the current Government – the chairman of the Competition and Markets Authority, Marcus Bokkerink, was removed last month amid concerns that it was hindering growth. Bokkerink was replaced by Doug Gurr, a former Amazon executive ,and both the chair and chief executive of the Financial Ombudsman Service have announced plans to step down.”
Dawson advised that there needs to be an “alignment from authorities to avoid superfluous red tape.”
Finally, Laurent Descout, CEO and co-founder at Neo, said that as operations shift from the PSR to the FCA, it is vital that Fintechs are given the right regulatory environment to thrive.,
“A clear and forward-looking approach will help maintain the UK’s position as a global leader in payments and ensure a competitive, dynamic market that benefits businesses and consumers alike.”