UK government consults on consolidating payment regulator into FCA

On 8 September 2025, HM Treasury (HMT) published a consultation paper that sets out the government's proposed approach to transferring the Payment Systems Regulator's (PSR) responsibility for regulation of UK payment systems to the Financial Conduct Authority (FCA).

Background

The government announced its intention to consolidate the PSR into the FCA in March 2025, as part of its commitment to simplify regulatory structures and create a more agile regulatory environment.

In keeping with the vision set out in its Regulatory Action Plan (also published in March 2025), the government's objective is to deliver a new payment regulatory framework that:

• Supports growth.

• Is targeted and proportionate.

• Is transparent and predictable.

• Adapts to keep pace with innovation.

In addition, the integration of the PSR into the FCA is part of the government's approach to improve the retail payments ecosystem and support the digitalisation of wholesale financial markets.

Key proposals

• Integrate the PSR's functions within the FCA's current framework in the Financial Services and Markets Act 2000 (FSMA) where practicable, otherwise create a new part of FSMA.

• The scope (designated systems and participants in those systems including operators of payment systems, infrastructure providers and payment service providers) remains unchanged; no new regulated activity will be created.

• Retain HMT's designation regime (under the Financial Services (Banking Reform) Act 2013 (FSBRA)) to bring payment systems in and out of scope of the FCA's oversight.

• Ensure the FCA has objectives equivalent to the PSR’s competition, innovation and service-user objectives, and apply the FCA’s strategic objective and competitiveness and growth secondary objective to payment systems, with modifications as required.

• Ensure the FCA has 'have regard' requirements that reflect what the PSR currently has under FSBRA.

• Like the FCA and PRA, the PSR is currently subject to a number of regulatory principles. The government has been consulting on changes to the regulatory principles of the FCA and PRA as part of its cross-cutting reforms. If the government decides to proceed with a proposal that changes regulatory principles from 'day to day' principles to something the regulator must consider at a more strategic level, then the FCA would consider any regulatory principles when it acts in relation to payment systems as part of its broader strategy. 

• Ensure the FCA has powers largely equivalent to those of the PSR. The PSR's powers cover regulatory and competition powers, enforcement powers, and information and investigation powers; the FCA has many of these powers already.

• Consider whether the FCA should use direction-making and requirement making powers in the way that the PSR does, rulemaking and requirements-based powers in the way the FCA does in other areas of financial services, or both.

• Simplify the framework for governing access to payment systems by ensuring there is only access regime rather than two (one under FSBRA and one under the Payment Services Regulations 2017 (PSRs). The government proposes removing overlapping provisions in the regime under the PSRs and develop a legislative approach that reflects the provisions under FSBRA.

• Preserve key definitions ('payment system', 'digital settlement asset', 'participants', 'direct access') and HMT's power to amend the definition of 'digital settlement asset' and modify descriptions of what are or what are not to be considered as payment systems.

• Integrate oversight and accountability mechanisms in FSMA as appropriate.

• Maintain the roles and responsibilities of the Bank of England and PRA, including reflecting their veto-style powers over what will become FCA payment system regulation functions.

Transition to the new framework

In advance of the consolidation of the PSR into the FCA, the two regulators have been collaborating closely with each other. In particular:

• In May 2025, David Geale was appointed as the new permanent executive director for payments and digital finance, and managing director of the PSR.

• In June 2025, the Memorandum of Understanding between the PSR, FCA, Bank of England and PRA was updated, to improve co-ordination and enable greater collaboration.

• The FCA and PSR are progressing Open Banking, including setting up a joint steering group to accelerate the work on variable recurring payments.

• Through the Payments Vision Delivery Committee, the FCA and PSR along with the Bank of England and HMT are helping to determine the strategy for retail payments infrastructure, as part of the government's National Payments Vision.

• The regulators have been carrying out joint stakeholder engagement so that stakeholders receive consistent messages.

• The regulators have been undertaking horizon scanning to support longer term priorities and creating joint project teams on topics of shared interest.

Next steps

The consultation closes on 20 October 2025. The government will review feedback to the consultation and use it to inform its response and final policy decisions. It will aim to bring forward legislation to implement its final policy when parliamentary time allows.

Help is at hand

If you have any questions about the government's proposals, please let us know.