UK to abolish PSR, consolidate oversight under FCA

In a significant regulatory shift, the UK government disclosed plans to abolish the Payment Systems Regulator as an independent body, folding its responsibilities into the Financial Conduct Authority (FCA). The move, aimed at reducing regulatory complexity and boosting economic growth, sparked a mix of optimism and concern within the financial sector.

The Prime Minister's Office confirmed the decision in a statement released Tues., March 11, 2025, asserting that consolidating the PSR into the FCA would "make it easier for firms to deal with one port of call" while addressing long-standing complaints about the burdens of engaging with multiple regulators.

"The Prime Minister wants to make regulation work for the UK," the statement read. "It is only by creating growth that people will see a genuine increase in their living standards—with higher wages and more money in their pocket at the end of the month."

For now, the PSR will continue operating under its current statutory powers until the necessary legislation is passed. The government has yet to provide a concrete timeline but has pledged to unveil further steps in its broader effort to reduce regulatory "red tape" in the coming days.

Industry leaders react to the change

The plan has drawn mixed reactions from industry executives, with some welcoming the potential for streamlined oversight and others warning of risks to payments innovation, security and competition.

Zaki Farooq, chief technology officer and co-founder of PayFuture, acknowledged the potential benefits of regulatory simplification but cautioned against losing the PSR's advocacy for payments innovation and financial inclusion.

"Regulatory consistency is essential to fostering innovation and cross-border growth," he said. "Streamlining oversight could reduce operational friction and make compliance more predictable, which is beneficial for fintech firms. However, the PSR played a crucial role in promoting competition and next-gen payment technologies. The transition must not come at the cost of progress."

Alan Stephenson-Brown, CEO of Evolve, emphasized the PSR's role in ensuring the resilience of payment networks, particularly as real-time payments and open banking adoption continue to accelerate. While he sees the potential for reduced complexity, he warned that "the process of merging regulatory bodies can create temporary uncertainty and operational challenges, potentially disrupting the fintech ecosystem during the transition period."

Dima Kats, CEO and founder of Clear Junction, was more optimistic, viewing the move as a logical step that aligns with the UK's National Payments Vision, which had foreshadowed the PSR's dissolution.

"Regulatory red tape has increased dramatically in recent years, making it harder for businesses to navigate," Kats said. "We welcome this move to streamline oversight, as it will help reduce complexity and create a more efficient regulatory environment." He added that consolidating oversight under the FCA could improve coordination and regulatory clarity, benefiting the industry.

However, Ryta Zasiekina, founder of Concryt expressed concerns about the potential weakening of fraud prevention and payment security measures. "The PSR played a critical role in enforcing strong authentication standards and holding firms accountable for fraud prevention," she said. "With the rise of APP fraud, money laundering threats, and evolving cyber risks, payment security cannot become an afterthought in the push for economic growth."

Derrick Lynagh, head of strategic sales & partnerships at MuchBetter, echoed concerns about the future of payments innovation. "The UK has built a reputation as a global leader in fintech innovation, and regulatory clarity is crucial for companies like MuchBetter that are pushing the boundaries of payments technology," he said. "If the FCA does not prioritize payments innovation with the same focus, fintech firms pioneering next-gen payment methods could face slower adoption and regulatory uncertainty."

Scott Dawson, CEO of DECTA, placed the move in the broader context of the government's regulatory overhaul, which has included leadership shake-ups at the Competition and Markets Authority and the Financial Ombudsman Service. While he acknowledged that excessive bureaucracy can stifle growth, he warned against the dangers of deregulation.

"You can have effective regulation without bureaucracy, and getting rid of bureaucracy shouldn't mean getting rid of effective regulation," he stated. "We have a recent example of what happens when the sector is unregulated—the 2008 financial crash happened, in large part, because of a lack of effective regulation."

Looking Ahead

As the government moves forward with its regulatory consolidation efforts, all eyes will be on how the FCA manages its expanded role. Industry leaders are calling for assurances that payments-specific challenges will remain a priority, particularly in areas such as fraud prevention, network resilience and fintech innovation.

A number of industry observers concluded that while the transition promises regulatory simplification, the challenge will be ensuring that it strengthens rather than weakens the UK's position as a global leader in fintech and financial services.

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