PSR and Scheme Governance
Payment Systems Regulator engagement, scheme rule compliance and governance for operators and participants
Payments regulation in the UK operates through a designated system of operators, infrastructure providers and participants, each subject to governance obligations under the Financial Services (Banking Reform) Act 2013. Bratby Law advises payment service providers, scheme participants and infrastructure operators on their regulatory obligations under the Payment Systems Regulator, competition law compliance within scheme governance frameworks, and the implications of upcoming regulatory consolidation. Our Managing Partner, Rob Bratby, holds the General Counsel appointment at UK Payments Initiative, providing direct insight into governance challenges from the operator perspective.
When does PSR engagement become an issue?
Payment systems regulation becomes operationally significant at several critical junctures. Becoming a direct participant in a designated payment system triggers detailed governance obligations under the scheme rules and PSR directions. Disputes over access terms, participation fees or the cost of membership changes demand prompt regulatory analysis, particularly where the operator has exercised discretion in setting those terms. Scheme rule changes occur regularly as payment systems evolve and the operator balances the interests of participants, users and the wider ecosystem. These changes may have substantial implications for compliance costs, technical infrastructure or competitive positioning, requiring participants to engage during the consultation period or risk losing input on rules that will bind them.
PSR market reviews and competition investigations represent escalated regulatory moments. A market review signals the PSR’s concern about competition or innovation within a specific payment system function, and participants should expect consultations, information requests and potentially behavioural or structural remedies. The PSR and FCA consolidation, targeted for legislation by the end of 2026, will reshape the regulatory relationship itself. Pay.UK governance reform and the infrastructure upgrades to Faster Payments and BACS, scheduled to complete in 2026, create further governance demands as participants navigate changes to the systems they depend on. Each of these moments requires strategic engagement rather than passive compliance.
Why scheme governance matters now
The PSR’s Annual Plan for 2025/26 sets out three core strategic commitments: completing ongoing work to protect users and promote competition and innovation; driving infrastructure upgrades to Faster Payments and reform of Pay.UK in partnership with the Bank of England; and sharpening focus on competition and innovation to support economic growth. The regulator is actively working on multiple fronts that directly affect participant governance, particularly the card fees market review, where the PSR has confirmed its power to impose price caps on cross-border interchange fees following judicial review confirmation by the High Court in January 2026.
The regulatory landscape itself is shifting rapidly. HM Treasury launched a consultation in September 2025 on consolidating the PSR within the FCA, with legislation targeted for the end of 2026. This structural change will alter how participants engage with the regulator, the precedence of different regulatory objectives and the interaction between payments oversight and financial conduct supervision. Pay.UK is undergoing governance reform and leading the infrastructure upgrade programme, with Faster Payments and BACS upgrades due by the end of 2026, creating operational demands on all participants using those systems. The PSR is also rolling out low-risk variable recurring payment arrangements under open banking rules, expanding the competitive landscape within scheme governance. For a General Counsel overseeing scheme participation, these developments create both immediate compliance obligations and strategic planning challenges that require specialist insight.
Where participants get scheme governance wrong
The most common error is treating scheme rules as static. Payment system operators update their rules regularly in response to competition, regulatory direction, technological change and participant feedback. Organisations that regard the rulebook as a one-time reference document often miss the consultations through which operators invite comments on proposed changes. A rule change that increases participation costs, alters technical standards or introduces new governance obligations becomes binding on all participants unless they have engaged strategically during the consultation window. The PSR expects scheme participants to respond to industry consultations that affect their business model, yet many organisations lack the internal capacity or regulatory sophistication to distinguish between consultations that matter and those that do not.
A second widespread mistake is misinterpreting the PSR’s regulatory powers. The PSR operates both a competition law jurisdiction under the Competition Act 1998 and a specific powers regime under the Financial Services (Banking Reform) Act 2013, which allows it to issue general directions to payment system participants and to investigate suspected breaches. Participants sometimes assume that if a practice is permitted under scheme rules, it cannot trigger PSR scrutiny. Competition concerns can exist independently of scheme rules; the PSR’s directions power allows it to impose obligations that supplement or override the rulebook. Understanding the distinction between these regimes is critical when designing participant conduct, managing access disputes or responding to regulatory enquiries.
A third error is assuming that access terms are genuinely non-negotiable. Scheme operators have discretion in setting participation fees, technical requirements and access conditions, but that discretion is exercisable only within the PSR’s competition and regulatory framework. Where a participant believes that access terms are discriminatory, disproportionate or otherwise inconsistent with regulatory obligations, challenging those terms is both legitimate and increasingly common. Organisations that accept unfavourable access terms without challenge leave value on the table and signal weakness to future dealings with the operator. Finally, many participants under-resource their internal governance function. Scheme participation generates compliance obligations relating to system security, participant conduct, reporting and operational resilience. Organisations that treat these as tick-box exercises without adequate resourcing face both regulatory risk and operational risk when systems experience stress or when the operator conducts compliance audits.
What good looks like
Effective scheme governance begins with active monitoring. Participants should subscribe to operator consultations and PSR policy updates, identify those consultations that materially affect their business model or competitive position, and resource a meaningful response. This does not require a dedicated team; many organisations designate a member of the compliance, legal or commercial team to track consultations quarterly and flag those that warrant engagement. Good governance also involves strategic engagement with the regulator. The PSR operates through published work programmes, consultations and industry liaisons. Participants who respond to consultations thoughtfully, provide relevant data when requested and engage proactively with PSR staff on emerging issues build relationships that serve them well when disputes arise or when the regulatory environment shifts.
Understanding governance obligations as a scheme participant is foundational. These obligations typically include compliance with the scheme rulebook, implementation of the operator’s directions, notification of breaches, maintenance of system security and resilience, and regular testing of recovery procedures. Participants who build these obligations into their technology roadmaps, compliance calendars and board reporting manage them far more effectively than organisations that treat them as ad hoc requests. Rob Bratby’s role as General Counsel at UK Payments Initiative provides direct insight into how payment system operators manage governance, communicate rule changes and enforce compliance. This perspective informs our advice to participants by grounding it in the operational realities of the operator side. Finally, good governance includes planning for consolidation. The move towards FCA oversight will eventually change the regulatory contact point, the interaction between payments and conduct regulation and potentially the precedence given to different regulatory objectives. Participants who build that transition into their compliance roadmaps now will adapt far more readily when the consolidation takes effect.
When to instruct a PSR specialist
A specialist is needed when access disputes arise. These disputes often involve technical arguments about interoperability, cost arguments about participation fees, or regulatory arguments about proportionality and non-discrimination. Having specialist regulatory advice before entering formal dispute procedures with the operator dramatically improves outcomes. Competition investigations or market review consultations where your business model may be implicated also warrant early specialist input. The PSR’s information requests can be costly to process and the substantive responses carry regulatory weight; a specialist can help you understand what the PSR is really asking and craft responses that address the underlying regulatory concern. Changes to scheme rules, particularly those affecting technical standards, operational resilience or participant conduct, may benefit from specialist analysis to identify hidden implications. Finally, the PSR/FCA consolidation requires planning now. If your firm has existing relationships with the FCA on other matters, or if your business model is affected by ongoing PSR investigations, now is the time to think about consolidation planning with specialist support.
How Bratby Law helps with PSR and scheme governance
We provide active PSR regulatory engagement and consultation responses, helping you identify which of the PSR’s consultations and policy initiatives materially affect your business and crafting substantive responses that carry weight with the regulator. We advise on access to payment systems, including structured advice on the grounds on which you can contest access terms, the regulatory framework against which the operator must exercise its discretion, and the best tactical approach to access disputes. We analyse scheme rule changes for competitive implications, compliance impacts and hidden operational burdens, helping you understand the true cost of compliance and identify opportunities to challenge rules that are disproportionate or lacking in justification.
We investigate Competition Act concerns within the payment systems context, including allegations of abuse of dominance, concerted practices or predatory conduct by scheme operators or other participants. We advise on Pay.UK governance reform and the infrastructure upgrade programme, including the implications of Faster Payments and BACS upgrades for your business and the governance arrangements that will flow from the Payments Vision Delivery Committee. We help you navigate the PSR/FCA consolidation planning process, structuring your relationship with the FCA in anticipation of the transfer and identifying any implications for your broader financial services regulatory profile. We also advise on dispute resolution, either within informal resolution procedures available under scheme governance frameworks or through formal mechanisms including industry arbitrations and regulatory escalations.
Need advice on PSR requirements or scheme governance?
Frequently asked questions about PSR and scheme governance
What does the Payment Systems Regulator do?
The PSR is the economic regulator of designated payment systems in the UK, appointed under the Financial Services (Banking Reform) Act 2013. It promotes effective competition, fosters innovation and protects the interests of users of payment systems. It regulates the operators of designated systems (such as Pay.UK, which operates Faster Payments and BACS), infrastructure providers and direct participants. The PSR enforces competition law under the Competition Act 1998 and has specific powers to issue directions to participants and investigate breaches of those directions.
How does the PSR regulate access to payment systems?
Scheme operators must set access terms on a non-discriminatory and proportionate basis. The PSR exercises this control through directions to operators, consultations and enforcement action against operators that breach their obligations. Participants who believe they have been denied access unfairly or charged excessive fees can escalate their concerns to the PSR formally. The PSR has specific powers to investigate access disputes and to impose remedies if it finds that the operator has acted outside its regulatory authority. Access rights also flow from European law where UK firms participate in EEA payment systems or where EEA firms participate in UK systems.
What are the governance requirements for scheme participants?
Scheme governance typically requires participants to comply with the scheme rulebook, implement operator directions, report certain events or breaches to the operator, maintain system security and resilience standards, test recovery procedures, and submit to regular compliance audits by the operator. The specific obligations depend on the payment system and the participant’s role within it. Participants should obtain a full governance obligation schedule from the operator and build those obligations into their compliance frameworks, with clear accountability for delivery.
How will the PSR/FCA consolidation affect my business?
HM Treasury’s September 2025 consultation proposes to transfer all PSR functions to the FCA by the end of 2026. The regulatory objectives and powers will transfer intact; the change is primarily structural rather than substantive. However, the FCA brings existing oversight of payment service providers and financial conduct obligations alongside the PSR’s economic regulation of systems. For participants, the main effects will be integration of payments oversight with broader financial conduct regulation, a single regulatory contact point instead of two regulators, and potential shifts in regulatory priority or enforcement practice as the FCA embeds payments within its existing framework.
What happens during a PSR market review?
A market review is a formal PSR investigation into a specific payment system function where the PSR suspects that competition or innovation may be restricted. The PSR publishes a scope document, invites industry consultations and data submissions, and conducts detailed analysis. At the end, the PSR publishes a final report setting out whether it has identified competition or innovation concerns and, if so, what remedies it proposes. Participants are expected to respond meaningfully to information requests during a market review. The PSR’s current market review into cross-border interchange fees has confirmed its power to impose price caps, following judicial review confirmation in January 2026.
Can I challenge scheme rules or access terms?
Yes, but the challenge must be grounded in regulatory law rather than mere commercial disagreement. If a scheme rule is discriminatory, disproportionate or unsupported by a legitimate regulatory objective, you can challenge it through the operator’s governance procedures or escalate to the PSR. If access terms are imposed unfairly or at non-competitive rates, the PSR has power to investigate and impose remedies. Disputes are best resolved with specialist regulatory advice early, as the technical and competitive arguments can be complex.
What is Pay.UK and why does its governance matter?
Pay.UK is the operator of Faster Payments and BACS, the two largest designated payment systems in the UK. Its governance affects the costs, technical standards and operational resilience of payments infrastructure used by most financial institutions. Pay.UK is currently leading the infrastructure upgrade programme to replace Faster Payments and upgrade BACS, due to complete by the end of 2026. Changes to Pay.UK’s governance structure or cost recovery model directly affect all participants in those systems.
When should I engage with the PSR directly?
You should engage directly with the PSR when you have concerns about operator conduct that you believe breaches regulatory obligations, when you are responding to a PSR consultation or information request, and when you have strategic observations on competition or innovation within a payment system that the regulator should consider. You should also engage when responding to market reviews or when you suspect that another participant or the operator is breaching PSR directions or competition law. Direct engagement is more effective with specialist regulatory support, particularly where the concerns are technical or where they might trigger formal investigations.
Related payments regulation pages
See also our other payments regulation pages: