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The UK’s Payment Systems Regulator (PSR) has officially revoked Specific Direction 3 (SD3), the regulatory requirement mandating competitive procurement for Faster Payments infrastructure.
The decision follows a consultation launched in December 2024, in which the PSR initially proposed amending SD3. However, after reviewing 14 responses — many of which favoured full revocation — the regulator opted to repeal SD3 and its amending direction, SD3a, altogether.
SD3 was introduced in the wake of the PSR’s 2016 market review of the competitiveness of UK interbank payment systems, and required that any central infrastructure for Faster Payments from July 2026 onwards be competitively procured.
That obligation has now been removed, with the revocation coming into force on May 21, 2025.
The change reflects a broader regulatory pivot towards enabling the government’s National Payments Vision (NPV), which was published in November 2024.
The NPV tasks the PSR and the Bank of England with reassessing the UK’s retail payments infrastructure, and recommends stronger governance and funding arrangements.
“In terms of the future infrastructure, this decision keeps regulatory options open. The government has confirmed that payment systems must continue to be effectively regulated,” the PSR policy statement says.
“The revocation of SD3 allows regulators to consider the best approach in the future to ensure that payment systems support competition, innovation and service users. If required, and where the evidence, analysis and regulatory strategy support it, there will still be regulatory powers available to use.”
The PSR has said that going forward it will continue monitoring Pay.UK and the wider payments sector to ensure competition remains a core priority
A welcome move
A majority of consultation respondents welcomed the revocation of SD3. According to the PSR policy statement, they argued that it would allow the Payments Vision Delivery Committee (PVDC) to define future infrastructure plans without the risk of outdated regulatory constraints.
Some highlighted the importance of retaining flexibility and not prematurely committing to any particular infrastructure model.
For example, one piece of feedback highlighted by the PSR says that there is “merit in revoking SD3 as it would provide greater regulatory certainty and would remove the current obligations in SD3. They expressed concerns that the minimum ten-year period may cause constraints as the future infrastructure develops.”
However, some stakeholders were worried about locking in the current centralised model for Faster Payments and stressed the need to preserve future competition and innovation through other means.
Though the revocation removes several legal obligations, including requirements around ISO 20022 compliance and functionality extensions, the PSR emphasised that it will continue to apply “the most appropriate regulatory tools” as needed, adding that ISO 20022 remains a priority.
Another revocation could be coming
The regulator is also considering revoking Specific Direction 2 (SD2). This SD relates to the competitive procurement of Bacs infrastructure.
Although its SD2 requirement has no set deadline, the PSR says that similar reasoning may apply and is now seeking stakeholder views on its potential revocation.
Feedback is welcomed until 5pm on June 5, 2025.
