Recent years have brought significant change to the global payments landscape, with the rise of emerging technologies and innovation attracting significant regulatory focus around the world.
In the EU, notable developments include proposals to amend and modernise the current Payment Services Directive (PSD2) with the creation of PSD3, alongside the introduction of a Payment Services Regulation.
In the UK, meanwhile, efforts to transform the interbank payments landscape include the New Payments Architecture (NPA), an initiative intended to future-proof payment services in the UK. In late 2024, the government unveiled a new National Payments Vision, noting that the government had “considered carefully the role of the New Payments Architecture programme and concluded a more agile and flexible approach” was needed.
Scrapping the PSR
Further change is now afoot, following the government’s recent announcement that it plans to abolish the Payment Systems Regulator (PSR) as an independent body. The UK payments industry has long faced the challenge of regulatory congestion, and in particular the overlap between the Financial Conduct Authority (FCA) and the PSR.
The PSR, which was launched in April 2015, is an independent regulator for payment systems in the UK. It sparked controversy last year with a proposed reimbursement limit of £415,000 for victims of Authorised Push Payment (APP) fraud, which was later reduced to £85,000 following concerns about the risk of fraudulent claims.
Under the latest plans, the PSR will be largely consolidated into the FCA. According to a statement released by the Prime Minister’s office on 11th March, this “follows complaints from businesses that the regulatory environment was too complex – with payment system firms having to engage with three different regulators, costing them time, money and resource.”
The statement adds that the PSR and FCA will work closely together to ensure the market remains competitive. Meanwhile, the “entire regulatory landscape will continue to be reviewed and finessed”.
Simplified landscape
The decision to scrap the PSR has been welcomed by many in the industry. “The UK has always been a real innovator in payments and helping to provide a clear, aligned and simplified regulatory landscape can only help the industry drive forward,” Mike Walters, CEO of Form3, told Treasury Today.
However, the longer-term implications of this development will take time to materialise. A consultation is due to be carried out over the summer, with no immediate changes to the PSR’s remit or statutory powers.
“The scrapping of PSR doesn’t happen overnight – a royal decree is needed to abolish it,” observed industry expert Dr Ruth Wandhöfer, an experienced Non-Executive Director, committee chair and adviser. “What we’re seeing in the meantime is that some folk have moved to FCA, and the rest is business as usual until further notice.”
Looking further ahead, Wandhöfer says it remains to be seen what the latest development means for the NPA, as well as for the PSR’s recent investigation into cross-border interchange fees.
“The big questions for me are: who will be in charge of the New Payments Architecture project? Who will sort out the UK/EU cross-border interchange fee issue? How will the FCA continue its role in supporting the evolution of Open Banking, and what happens to the Joint Regulatory Oversight Committee (JROC)? And will the FCA expand its role to support Variable Recurring Payments (VRP) and other market-wide change?”
As Wandhöfer concludes, “At this stage, there are more questions than answers.”
