PSR to FCA: What Treasury’s Streamlined Payment Systems Regulation Consultation Means for Banks, Fintechs and Payment Systems

ByRob Bratby Posted on Payments Regulation, UK
PSR to FCA: What Treasury's Streamlined Payment Systems Regulation Consultation Means for Banks, Fintechs and Payment Systems

Quick answer. The Payment Systems Regulator (PSR) is the UK regulator for designated payment systems under Part 5 of the Financial Services (Banking Reform) Act 2013 (FSBRA 2013). HM Treasury has consulted on abolishing the PSR and transferring its functions to the Financial Conduct Authority (FCA). The consultation closed on 20 October 2025 and a Government response is awaited. The Bank of England’s role under Part 5 of the Banking Act 2009 is unaffected. PSR consolidation will require primary legislation. Until the legislation is in force, the PSR remains the competent authority for designated payment systems.

Position as at 17 April 2026. This note will be updated when the Government publishes its response to the consultation.

PSR consolidation into the FCA is the largest institutional change to UK payment systems regulation since the PSR was created in 2015. This note sets out what PSR consolidation is, where it currently stands, and what banks, fintechs and investors should do to prepare. For banks, card schemes, interbank payment system operators and fintechs, the question is not whether to engage with the reform but how to prepare for a single FCA supervisory relationship covering conduct, prudential and payment systems economic regulation.

The current PSR framework

The PSR was established by Part 5 of FSBRA 2013 as a subsidiary of the FCA but operationally independent, with its own Board and statutory objectives. Its remit covers designated payment systems: at present Faster Payments, Bacs, CHAPS, LINK, Mastercard, Visa Europe, the Image Clearing System and the Sterling Fnality Payment System (designated in August 2022). Its statutory objectives under section 49 of FSBRA 2013 are competition, innovation and the interests of service users. The PSR exercises powers of direction, requirements, general rules, and enforcement including financial penalties. Appeals against certain regulatory and penalty decisions lie to the Competition Appeal Tribunal under sections 77 and 78; access, variation and divestiture decisions are appealable to the CMA under section 79.

The FCA’s payments perimeter is set separately. Payment institutions and electronic money institutions are supervised by the FCA under the Payment Services Regulations 2017 (PSRs 2017) and the Electronic Money Regulations 2011 (EMRs 2011). Consumer credit, deposit-taking and investment firms fall under Part 4A of the Financial Services and Markets Act 2000 (FSMA 2000). The Bank of England oversees recognised systemic payment systems under Part 5 of the Banking Act 2009, a financial stability remit that PSR consolidation does not affect.

What the consultation proposes

The consultation proposes to transfer the PSR’s functions under FSBRA 2013 to the FCA and wind up the PSR as a standalone body. The FCA would inherit the statutory objectives of competition, innovation and service user interests in relation to designated payment systems, sitting alongside its existing FSMA 2000 and PSRs 2017 objectives. Enforcement powers, monitoring powers, and appeal routes would be preserved in substance but re-housed within the FCA legal framework.

Three features stand out. Primary legislation is required: a Payment Systems (Consolidation) Bill or a vehicle within a wider Financial Services Bill is contemplated. The Bank of England’s remit under Part 5 of the Banking Act 2009 is preserved; systemic risk oversight of recognised inter-bank payment systems is not disturbed. The consultation canvasses transitional arrangements, including the continuation of existing PSR general directions, specific directions, and enforcement proceedings under FCA authority on commencement. The FCA and PSR published a joint response broadly supporting PSR consolidation while flagging governance and accountability questions.

Practical changes

For regulated firms the most immediate change is institutional, not substantive. The PSR’s existing rulebook and live workstreams, including the General Directions and Specific Directions on APP fraud reimbursement in Faster Payments, the joint FCA/PSR policy framework for commercial variable recurring payments (cVRPs), and the current market reviews into card acquiring and cross-border interchange, would transfer under the Treasury’s proposal without substantive rewriting at commencement. Over time the FCA will integrate payment systems regulation with its wider rulebook, presenting both simplification opportunities and rulebook consistency risks.

Three practical consequences follow. One, a single authorisation touchpoint for firms holding FCA permissions under Part 4A of FSMA 2000, PSRs 2017 authorisations, and PSR direct participation in designated systems. Supervisory teams, skilled persons appointments under section 166 of FSMA 2000, and enforcement references should be coordinated under one institution. Two, appeal rights must be preserved with care. FSBRA 2013 sections 77 to 79 route appeals on competition-related regulatory decisions to the Competition Appeal Tribunal. The FCA’s existing decisions are appealable to the Upper Tribunal under section 133 of FSMA 2000. Parliament will need to decide whether to retain CAT jurisdiction for inherited PSR functions or route them to the Upper Tribunal. Three, the FCA’s Consumer Duty under PRIN 2A engages conduct obligations that overlap but do not mirror the PSR’s service user objective. Firms should expect close scrutiny of interchange, access terms and user outcomes through the FCA’s outcomes lens.

Commercial implications

For banks, card schemes and interbank system operators, PSR consolidation concentrates regulatory relationship management. Large banks already have FCA, PRA, Bank of England and PSR touchpoints; one disappears. Firms should review their contractual and disclosure frameworks for references to the PSR that will need transitional wording, including prospectuses, pillar 3 disclosures, Senior Managers Regime statements of responsibility and outsourcing registers. For fintechs and payment institutions, the change is mostly indirect. Most sit under PSRs 2017 and therefore within the FCA’s existing remit. What matters is access to designated payment systems and the terms on which indirect access is provided. For investors in UK payments businesses, PSR consolidation is a modest positive: a single regulator reduces transaction friction in authorisations, change of control notifications under section 178 of FSMA 2000, and regulatory due diligence. Transaction lawyers should watch for conditions precedent and regulatory warranties that cross-refer to the PSR, and for drafting that assumes a stable PSR-FCA division of labour.

Viewpoint

Firms should not wait for primary legislation. Board packs should be updated now to reflect a single-regulator supervisory model in strategic risk reporting. Legal teams should identify contracts, notices and undertakings that cross-refer to the PSR or to FSBRA 2013 and will need updating on commencement. Early engagement with both the FCA and the PSR during the transition, particularly on live workstreams such as APP fraud reimbursement monitoring and VRP commercial frameworks, is the commercial risk mitigant.

The strongest counter-argument to PSR consolidation is that the PSR’s focus and independence are valuable precisely because payment systems economics differ from conduct supervision. A dedicated regulator with a narrow remit can act faster and with sharper technical expertise. The Government’s response is that the duplication costs of two FCA-family regulators outweigh the specialisation benefit and that the FCA can maintain a distinct payment systems function internally. The critical design question is how the FCA structures that function post-consolidation. A clearly named executive lead, a dedicated Board sub-committee, and published objectives distinct from the FCA’s general functions would address much of the specialisation concern.

PSR consolidation is the right direction of travel. Institutional duplication between the PSR and the FCA was an artefact of the 2013 banking reforms, not a policy choice worth repeating. Three points deserve more attention. Named accountability: the FCA Board should publish a named executive with payment systems economic regulation as their first-order responsibility, reporting through a dedicated sub-committee. Without that, the specialisation concern is legitimate. Appeal routes: the Competition Appeal Tribunal has developed expertise in payment systems economics through a line of FSBRA 2013 appeals. Retaining CAT jurisdiction for inherited PSR functions, with Upper Tribunal routes for pure FCA conduct matters, is the more principled design. Live workstreams: APP fraud reimbursement monitoring, VRP commercial frameworks and the card acquiring market review remedies should be insulated from transition risk. The Government response should set out which will continue unbroken and which will pause pending FCA review.

Primary sources and further reading

Bratby Law advises banks, payment institutions, fintechs and PE investors on UK payments regulation and payments-related transactions. For further analysis on PSR consolidation, or to discuss how the change affects your business, please get in touch. We work with clients through Direct Legal Advice, Specialist Co-counsel and Fractional General Counsel engagements.

About the author. Rob Bratby is a specialist UK telecoms, data protection and payments regulation lawyer. Ranked Chambers UK Band 2 for Telecoms and a Legal 500 Leading UK Telecoms Partner, his regulatory experience combines a secondment at Oftel (the predecessor to Ofcom) with operator-side General Counsel roles. He advises telcos, fintechs and PE investors.

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Telecoms | Data | Payments | Founder, Bratby Law | Fractional General Counsel | Chambers-ranked telecoms lawyer

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