A direct participant in a designated payment system must meet the scheme’s governance obligations and the directions the Payment Systems Regulator gives under the Financial Services (Banking Reform) Act 2013. The operator of a designated system and its infrastructure providers carry their own obligations under the same Act. Bratby Law advises payment service providers, scheme participants and infrastructure operators on those obligations, on competition law compliance within scheme governance, and on the consolidation of the Payment Systems Regulator into the FCA. Rob Bratby holds fractional general counsel appointments in the payments and telecoms sectors, which is day-to-day work inside regulated businesses rather than a view from outside them.

When PSR engagement becomes material

A firm that becomes a direct participant in a designated payment system takes on detailed governance obligations under the scheme rules and the PSR’s directions. A participant that disputes access terms, participation fees or the cost of a membership change needs the regulatory analysis early, particularly where the operator has exercised a discretion in setting those terms. Operators change scheme rules regularly. Once a change is adopted under the scheme’s governance arrangements it binds participants under the rulebook, whether or not they responded during the consultation, so a participant that wants to shape the rule has to respond within the consultation window.

A PSR market review or competition investigation is a further point of engagement. A market review means the PSR has a concern about competition or innovation in a particular payment system function, and a participant should expect consultations and information requests. What follows a finding depends on the route the PSR takes: a direction under section 54 of the Act, a requirement about the system rules under section 55, a Competition Act 1998 investigation under its concurrent functions, or a market investigation reference for the Competition and Markets Authority to determine. Divestment under section 58 is available only where the PSR is satisfied that competition would otherwise be restricted or distorted, and only with the consent of the Treasury. The consolidation of the PSR into the FCA will change the regulatory relationship itself. It requires primary legislation. The vehicle is the Financial Services and Markets Bill [HL], introduced in the House of Lords on 19 May 2026. It completed its Lords committee stage on 8 July 2026 and report stage is scheduled to begin on 7 September 2026. Nothing changes until Royal Assent and commencement. Data and operational enhancements to the current Faster Payment System and Bacs Payment System are due to be implemented by the end of 2026, so participants in those systems have to absorb the changes.

Why scheme governance matters now

The PSR set out its 2026/27 work programme in its Annual Plan and Budget 2026/27, published on 26 March 2026: action on card fees, including next steps on cross-border interchange fees and remedies on domestic scheme and processing fees; continued action on authorised push payment fraud; oversight of the delivery of critical payments infrastructure through the Payments Vision Delivery Committee; support for the FCA on the next phases of open banking; a supervision and enforcement approach aligned with the FCA; and consolidation planning. Its card fees work bears directly on participants. On 15 January 2026 the High Court held that the PSR has power under section 54 of the Financial Services (Banking Reform) Act 2013 to impose price caps on interchange fees by general direction, and dismissed the judicial review claims brought by Visa, Mastercard and Revolut: R (Mastercard Europe SA) v Payment Systems Regulator [2026] EWHC 64 (Admin) at [290] to [291]. The PSR has decided in principle to impose caps on cross-border interchange fees, but the level of the caps and the date of implementation are not yet set. Under the Interchange Fee Regulation (EU) 2015/751 as it applies in UK law, a payment service provider must not offer or request a per transaction interchange fee of more than 0.2% of the value of the transaction for a UK debit card transaction, or more than 0.3% for a UK credit card transaction. Those caps sit in Chapter II, which applies only where both the payer’s and the payee’s payment service providers are in the United Kingdom, and which does not apply to commercial card transactions, to cash withdrawals at a cash machine or at the counter of a payment service provider, or to transactions on cards issued by three party card schemes. That UK text is up to date with all changes in force on or before 19 August 2026; one change is not yet applied, a power to revoke conferred by Schedule 1, Part 1 to the Financial Services and Markets Act 2023, which is a power and not a revocation.

HM Treasury’s 2025 consultation on consolidating the PSR within the FCA closed in October 2025. On 21 April 2026 it published its consultation response, which records that consolidation requires primary legislation. That legislation was introduced as the Financial Services and Markets Bill [HL] on 19 May 2026. Its Lords committee stage ran from 22 June to 8 July 2026 and report stage is scheduled to begin on 7 September 2026. Ahead of legislation, the PSR and the FCA are coordinating and preparing for operational readiness. A participant will then deal with one regulator where it now deals with two, and payments oversight will be integrated with financial conduct supervision. The Payments Forward Plan puts data and operational enhancements to the current Faster Payment System and Bacs Payment System at the end of 2026, so every participant using those systems has work to do to meet them. The next generation of retail payments infrastructure is a separate programme, run through the Retail Payments Infrastructure Board, which consulted in Spring 2026 with a response due in the second half of the year. The FCA leads the next phases of open banking, and the PSR supports it in establishing a long-term regulatory regime and a future entity. The phase one roll-out of variable recurring payments is delivered by an industry-led scheme, not by either regulator. A general counsel responsible for scheme participation has both immediate compliance obligations and a transition to plan.

Scheme rules, PSR powers and access terms

Payment system operators change their scheme rules regularly, in response to competition, regulatory direction, technological change and participant feedback. An operator consults on a proposed change, and a participant that wants to influence it must respond within the window; once the change is made, the rule binds every participant. A change that raises participation costs, alters technical standards or adds a governance obligation therefore has to be read at consultation stage rather than at implementation. Whether to respond is a commercial judgement rather than a legal duty, and a participant that stays silent is still bound by the rule once it is adopted.

The PSR has two sources of power. It enforces the Competition Act 1998 in relation to payment systems, and it has specific powers under the Financial Services (Banking Reform) Act 2013 to give general directions to participants and to investigate suspected breaches. A practice that the scheme rules permit can still attract PSR scrutiny, because a competition concern does not depend on the rulebook and a direction can impose an obligation that supplements or overrides it. A participant designing its conduct, managing an access dispute or answering a regulatory enquiry has to keep the two apart.

A scheme operator has discretion over participation fees, technical requirements and access conditions, but the constraint on that discretion depends on the system. Where regulation 103 of the Payment Services Regulations 2017 applies, the rules and conditions governing access must be objective, proportionate and non-discriminatory. Regulation 102 puts designated systems and single-group systems outside regulation 103, and for the systems designated under the 2013 Act that fall outside it the equivalent obligation comes from the PSR’s General Direction 2, which requires the operator to have proportionate, objective and non-discriminatory access requirements, to publish them, to notify changes and to report annually. A participant that considers access terms inconsistent with those obligations may raise them through the operator’s governance procedures or escalate to the PSR, which may order access under section 56 of the Act or vary an agreement, including the fees payable under it, under section 57. Scheme participation also generates continuing obligations on system security, participant conduct, reporting and operational resilience. Their source is the scheme rulebook, the participation agreement and any applicable direction rather than the 2013 Act itself, so they differ between systems, and a participant must resource the function that discharges them, because the operator audits compliance and the obligations are tested when a system comes under stress.

Monitoring, engagement and governance obligations

A participant should track operator consultations and PSR policy publications, identify those that affect its business model or competitive position, and resource a response to them. That does not need a dedicated team: one person in the compliance, legal or commercial function can review consultations quarterly and flag those worth answering. Responding to consultations with evidence, providing data when the PSR asks for it and raising developing issues with PSR staff also builds the relationship a participant relies on when a dispute arises.

Depending on the scheme rules, the participation agreement and any applicable direction, a scheme participant may be required to comply with the rulebook, implement the operator’s directions, notify breaches, maintain system security and resilience, and test recovery procedures. A participant that puts those obligations into its technology roadmap, compliance calendar and board reporting manages them more easily than one that handles them as they arrive. Rob Bratby holds fractional general counsel appointments in regulated payments and telecoms businesses, which is day-to-day work on governance, rule changes and compliance inside a regulated business. On consolidation, the transfer to the FCA will change the regulatory contact point and the interaction between payments and conduct regulation, and a participant that puts the transition into its compliance roadmap now will adapt more readily when it takes effect.

When to instruct a PSR specialist

An access dispute is the clearest case for specialist advice. These disputes turn on interoperability, on the level of participation fees, or on proportionality and non-discrimination, and the position is better settled before the formal dispute procedure with the operator opens. A competition investigation or a market review touching the firm’s business model calls for early input too: the PSR’s information requests are expensive to answer and the answers carry regulatory weight, so a firm has to work out what the PSR is asking and address the concern behind it. A change to scheme rules affecting technical standards, operational resilience or participant conduct often carries implications that are not on the face of the rule. Consolidation planning starts now for a firm that already deals with the FCA on other matters or whose business model is affected by a live PSR investigation.

Bratby Law’s PSR and scheme governance work

Bratby Law advises on engagement with the PSR, identifying which of its consultations and policy initiatives affect a client’s business and drafting responses that answer the regulator’s actual question. On access to payment systems, that work covers the grounds on which a participant can contest access terms, the framework within which the operator must exercise its discretion, and the tactical order in which to run a dispute. The firm analyses scheme rule changes for their competitive effect, their compliance cost and the operational burden they carry, and identifies rules that are disproportionate or unsupported.

Bratby Law advises on Competition Act 1998 questions in payment systems, including allegations of abuse of dominance, concerted practices or predatory conduct by an operator or another participant. It advises on Pay.UK governance reform and the infrastructure upgrade, including what the Faster Payments and Bacs enhancements mean for a participant and the governance arrangements flowing from the Payments Vision Delivery Committee, which HM Treasury chairs and on which the Bank of England, the FCA and the PSR sit. It advises on planning for the PSR and FCA consolidation, on how a firm structures its relationship with the FCA before the transfer, and on what the transfer means for its wider financial services regulatory profile. It also advises on dispute resolution, whether through the informal procedures in scheme governance frameworks or through industry arbitration and regulatory escalation.

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, established under section 40 of the Financial Services (Banking Reform) Act 2013 and operational since April 2015. Section 49 imposes a general duty to advance three payment systems objectives: competition (section 50), innovation (section 51) and the interests of service-users (section 52). 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?

Where regulation 103 of the Payment Services Regulations 2017 applies, rules or conditions governing access to a payment system must be objective, proportionate and non-discriminatory. Regulation 102 excludes designated systems and systems made up solely of providers in one group, so for the systems designated under the Financial Services (Banking Reform) Act 2013 that fall outside regulation 103, including Bacs, CHAPS, Faster Payments and Cheque and Credit, the equivalent obligation comes from the PSR’s General Direction 2, which requires the operator to have proportionate, objective and non-discriminatory access requirements, to publish them, to notify the PSR of changes and to report annually. 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 obligations for participants in designated payment systems are governed by Part 5 of the Financial Services (Banking Reform) Act 2013, in particular section 56, under which an applicant may apply for an order requiring the operator to enable it to become a payment service provider in relation to the system, or requiring a provider with direct access to enter into an agreement with it, for a period and on terms the order specifies. Section 57 is the companion power to vary an existing agreement, including the fees and charges payable under it. Those powers sit alongside the PSR’s General Directions and Specific Directions and the rules of individual payment schemes.

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 2025 consultation proposed to transfer all PSR functions to the FCA. On 21 April 2026 HM Treasury published its consultation response. Consolidation requires primary legislation. The Bill is the Financial Services and Markets Bill [HL], HL Bill 5 of 2026-27, introduced in the House of Lords on 19 May 2026. Its Lords committee stage ran from 22 June to 8 July 2026 and report stage is scheduled to begin on 7 September 2026. Nothing changes until Royal Assent and commencement. The government intends to maintain the substance of the PSR’s objectives, so that the FCA is responsible for promoting competition, innovation and the interests of service-users when regulating payment systems, and to integrate those objectives within the FCA’s existing framework under the Financial Services and Markets Act 2000. It has not settled the design, and it is still considering how the FCA’s strategic objective and its secondary international competitiveness and growth objective would apply to payment systems. 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 it proposes to do about them. The action available depends on the route: a direction under section 54 of the Act, a requirement about the system rules under section 55, a Competition Act 1998 investigation under the PSR’s concurrent functions, or a market investigation reference for the Competition and Markets Authority to determine. Divestment under section 58 needs the consent of the Treasury. Participants are expected to respond meaningfully to information requests during a market review. The PSR’s market review into cross-border interchange fees remains live. Its power to impose price caps by general direction was confirmed by the High Court on 15 January 2026 in R (Mastercard Europe SA) v Payment Systems Regulator [2026] EWHC 64 (Admin), and the PSR has yet to set the level of the caps or the date they would take effect.

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 inconsistent with the operator’s obligations under the access rules described above, or raises a competition concern, you can challenge it through the operator’s governance procedures or escalate to the PSR, which has power under section 55 of the Act to require an operator to change its rules. 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, two of the eight payment systems designated for PSR regulation, alongside CHAPS, LINK, Mastercard, Visa Europe, the Image Clearing System and the Sterling Fnality Payment System. Its governance affects the costs, technical standards and operational resilience of payments infrastructure used by most financial institutions. The Payments Forward Plan places data and operational enhancements to the current Faster Payment System and Bacs Payment System at the end of 2026. The design and delivery of the next generation of retail payments infrastructure is a separate programme, taken forward through the Retail Payments Infrastructure Board. 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

Payments regulation covers more than the PSR and scheme governance, and each of these pages deals with one part of it. Agentic AI and Payments: Can an AI Agent Consent to a Payment? examines how the consent framework in the PSRs 2017 applies where an artificial intelligence agent initiates the payment.

Payments Regulation
Payment Institution Authorisation and Licensing
Open Banking and Variable Recurring Payments
Operational Resilience and DORA
Safeguarding and Consumer Duty
EMI Authorisation and E-Money Regulation
FCA Investigations and Enforcement
Digital Money and Central Bank Digital Currencies
The PSRs 2017 Explained: Payment Authorisation, Liability and Execution Times
The PSRs 2017 Explained: Information Requirements and Framework Contracts. A firm working out whether a particular activity is caught by the Payment Services Regulations at all, as distinct from governed only by a scheme’s own rules, should start with The PSRs 2017 Explained: the Payment Services Perimeter and the Exclusions.

Related insight

The hidden architecture of UK open banking sets out the shared directory, the dispute system and the standards regime that underpin UK payments schemes.