The UK government has announced a significant regulatory restructuring by dissolving the Payment Systems Regulator (PSR) and consolidating its functions into the Financial Conduct Authority (FCA). This move is part of a broader effort to simplify financial oversight, with officials stating that excessive regulations have hindered economic growth. The decision is expected to impact businesses large and small by shifting how payment systems are regulated. Policymakers argue that integrating the PSR into the FCA will enhance efficiency without compromising oversight. Some experts question whether this shift will reduce regulatory burdens or simply centralize authority under a single entity.
When financial regulatory changes were previously introduced, the UK government often cited economic efficiency as a core justification. However, past efforts to streamline oversight have faced mixed results, with businesses expressing both optimism and concerns about potential disruptions. The FCA, which will absorb the PSR’s responsibilities, has historically been tasked with a broader regulatory role, including consumer protections and financial market supervision. By shifting the PSR’s oversight to the FCA, officials are reinforcing a trend of regulatory consolidation seen in prior administrations. While similar measures have been explored before, this shift represents one of the most direct efforts to remove an independent financial watchdog.
What Will Happen to Payment System Oversight?
The PSR was responsible for monitoring payment networks, including Faster Payments and Mastercard (NYSE:MA)’s infrastructure. Under the new structure, the FCA will assume these duties, ensuring that payment providers and financial institutions comply with regulatory standards. The transition process is expected to take time, as legislation must be passed to formalize the move. Until then, the PSR will continue to operate under its existing mandate. Officials have stated that the goal is to create a seamless transition without disrupting financial market operations.
How Are Regulators and Businesses Responding?
Prime Minister Keir Starmer defended the decision, stating that excessive regulatory barriers have slowed economic progress.
“For too long, the previous Government hid behind regulators — deferring decisions and allowing regulations to bloat and block meaningful growth in this country. And it has been working people who pay the price of this stagnation.”
The PSR acknowledged the government’s decision and expressed its willingness to collaborate on the regulatory transfer.
“We’re committed to working with government, the FCA and the Bank of England as decisions are taken on the transfer of regulatory responsibilities and, when they are, help ensure the process is smooth.”
Some industry observers argue that eliminating an independent regulator could reduce scrutiny over payment systems, while others believe that consolidating oversight could lead to faster decision-making.
The UK government has positioned this regulatory shift as part of a larger effort to support economic expansion. Officials argue that a more centralized regulatory system will provide businesses with clearer guidance while maintaining oversight of payment networks. However, financial institutions and payment providers will likely monitor how the FCA adapts to its expanded role. The transition process may introduce short-term uncertainties, particularly for industries that previously worked directly with the PSR. Critics warn that without a standalone regulator, specific concerns related to payment systems may receive less dedicated attention.
As the transition unfolds, businesses operating in the UK’s payment sector will need to adjust to the new regulatory framework. While some companies may welcome fewer regulatory touchpoints, others could face uncertainties regarding enforcement priorities. The FCA’s ability to manage an expanded portfolio will be closely observed, especially regarding consumer protection measures and competition among payment service providers. By integrating the PSR into the FCA, the government aims to create a more streamlined regulatory system, though the long-term effects on market stability and innovation remain to be seen.
