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The payments industry is divided on what the future holds now that the UK government has made clear its intentions to shut down the Payment Systems Regulator (PSR).
The PSR never quite got off on the right foot with the industry that it oversees — some described it as “useless” and “lacking teeth”, and one fintech insider said its authorised push payment (APP) fraud rules were “absolutely insane”.
And yet, in many ways, it was ahead of other regulators globally, in that it was challenging card schemes such as Visa and Mastercard and updating its policies in response to changes in fraud typologies.
Both the APP fraud rules and Confirmation of Payee (CoP) addressed issues that regulators in jurisdictions such as the EU and Australia are only now considering.
Its work was even commended by members of parliament last week, with the Conservative lawmaker Dame Harriet Baldwin praising it for not backing down on some of its changes.
However, its days are now numbered as policymakers consider how to divide its workforce between the Financial Conduct Authority (FCA) and the Bank of England.
The case against
One of the biggest cheerleaders for the government’s change in direction is The Payments Association, which did not hold back.
“If regulators adhered to the rules of the market, the PSR and FCA would have merged years ago,” said Tony Craddock, the association’s director general.
“The PSR was beyond its ‘use by’ date, with its structure and governance designed for a different world. Today’s world demands resourceful, agile, responsive regulators that are in tune with the market.”
Meanwhile, his colleague Riccardo Tordera-Ricchi, director of policy and government relations, said that the regulator “sealed its own fate by continuing to ignore the industry’s advice on APP fraud”.
“Although it could be commended for its last-minute U-turn to lower the threshold, a long series of mistakes has triggered a complete rethink on the point of its existence. It’s about time a bold decision was made. Go ahead, Keir!”
Dima Kats, CEO of the payments firm Clear Junction, agreed that this is a positive step forward.
“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 added that the FCA and the PSR have not always been fully aligned, resulting in challenges for the industry.
“Consolidating oversight under one regulator should improve coordination, providing clearer and more consistent regulation. 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."
Reasons to be wary
In contrast to these strongly held opinions, others in the industry are less certain about the move.
Zaki Farooq, co-founder of PayFuture, said that although streamlining oversight could reduce operational friction and make compliance more predictable, the PSR has been a strong advocate for payments innovation and competition.
“The UK has long positioned itself as a fintech powerhouse. To retain this status, the transition must not come at the cost of progress in financial inclusion, next-gen payment technologies, and cross-border payment accessibility,” he said.
Farooq’s sentiment was echoed by Kamran Hedjri, CEO of PXP Financial, who warned that “the PSR was a strong advocate for improving payments competition, reducing card fees, and advancing open banking adoption”.
He added that if the FCA does not give payments the same level of attention, there is a risk that progress in these critical areas will stall.
“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,” he said.
Elsewhere, some questioned whether the decision would actually cut red tape or save taxpayers money, especially given that PSR managing director David Geale said it was unlikely that staff levels would be reduced with the transfer to the FCA and the Bank of England.
“The closure of the PSR appears to be little more than a branding exercise,” said Jonathan Frost, director of global advisory for EMEA at fraud prevention company BioCatch.
“As a subsidiary of the FCA, sharing both office space and personnel, its functions are already deeply integrated,” he said.
“Beyond dropping a logo, it’s unclear what, if anything, will materially change.”
There will be much to consider in the coming weeks, with a consultation process on what should happen next no doubt looming.
For now, it is business as usual, but whether payments policy in the UK is about to take a different route — or even be put on the backburner — is yet to be revealed.
