UK payments regulation modernisation: the Fintech Week 2026 package
In short: HM Treasury published its UK payments regulation modernisation package on 21 April 2026. It confirms consolidation of the Payment Systems Regulator into the Financial Conduct Authority, announces that HM Treasury will modernise payment services and e-money regulation so that the FCA can regulate it through its ordinary supervisory toolkit, and points to a single framework for traditional and tokenised payments. In its July 2026 consultation, Modernising Payment Services Regulation, HM Treasury proposes to move detailed requirements from the Payment Services Regulations 2017 and Electronic Money Regulations 2011 into FCA rules and to keep the perimeter and core rights and obligations in legislation.
HM Treasury published its payments regulation modernisation package on 21 April 2026, the opening day of UK Fintech Week. The package confirms the Payment Systems Regulator (PSR) will be consolidated into the Financial Conduct Authority (FCA), commits to modernising the Payment Services Regulations 2017 (PSRs 2017) and Electronic Money Regulations 2011 (EMRs 2011) so that the FCA can regulate payment services and e-money through its ordinary supervisory toolkit, and signals a single framework covering traditional payments, stablecoin payments and tokenised deposits. HM Treasury consulted on that reform in July 2026, in Modernising Payment Services Regulation, and the consultation closed on 6 October 2026. HM Treasury proposes that detailed and technical requirements move into FCA rules, while the perimeter, key definitions and core rights, obligations and protections stay in legislation. For electronic money institutions (EMIs), authorised payment institutions and scheme participants, the direction of travel is supervision by the FCA, with more of the detailed requirements set in its rules.
Two regulators, two rulebooks: the starting position
The UK currently regulates payments through two separate bodies and two separate rulebooks. The FCA supervises authorised payment institutions, EMIs and small payment firms under the PSRs 2017 and the EMRs 2011, both assimilated law instruments originally implementing the Second Payment Services Directive and the Second E-Money Directive. The PSR was established under Part 5 of the Financial Services (Banking Reform) Act 2013 with a distinct mandate over the operators, participants and infrastructure of designated payment systems, including Faster Payments, CHAPS, Bacs and the card schemes. The PSR sets access and governance rules, regulates interchange fees and leads specific-direction enforcement, including on APP fraud reimbursement. The two regimes have overlapped on issues such as scheme access, open banking and fraud. In March 2025 the government announced, as part of its Regulatory Action Plan, its intention to consolidate the PSR into the FCA. In September 2025 HM Treasury opened its consultation, A Streamlined Approach to Payment Systems Regulation, proposing to transfer the PSR’s statutory functions entirely to the FCA. The 21 April 2026 package set out the government’s response, which said that it would bring forward legislation for the consolidation when Parliamentary time allowed. That legislation is now before Parliament: the Financial Services and Markets Bill [HL], introduced on 19 May 2026, completed its Lords stages on 15 September 2026 and awaits second reading in the Commons. For background, see our earlier analysis of the PSR-to-FCA consolidation consultation.
What the 21 April 2026 package does
The package has four substantive limbs beyond the PSR consolidation response. First, the government announced that it will modernise payment services and e-money regulation so that the FCA can regulate it through its ordinary supervisory toolkit. HM Treasury consulted on the method in July 2026, in Modernising Payment Services Regulation, and the consultation closed on 6 October 2026. HM Treasury proposes to move detailed and technical requirements out of the PSRs 2017 and EMRs 2011 and into FCA rules, to support a more agile and outcomes-focused regime, and to keep the perimeter, key definitions and core rights, obligations and protections in legislation. HM Treasury has said that it would make any change to the existing regulations by secondary legislation. Second, the package establishes a single regulatory perimeter for traditional payments, stablecoin payments and tokenised deposits. Stablecoins will be regulated for use in payments where issued under the forthcoming new regulated activity for stablecoin issuance, supervised by the FCA. Tokenised deposits are expected to sit inside the existing deposit-taking perimeter. Third, the government will give the FCA new powers to regulate the future of open banking, including to underpin commercial variable recurring payment schemes developed by industry. This is the legislative vehicle for the long-trailed move beyond the original Open Banking Implementation Entity framework. Fourth, HM Treasury has said it will examine how payment services regulation should adapt to payments initiated by AI agents, addressing consent and authentication issues under regulation 67 of the PSRs 2017. We have analysed the AI agent consent question separately in agentic AI and payment consent. The package runs alongside a separate cryptoasset track, confirmed the same day through a draft amending statutory instrument to the FSMA 2000 (Cryptoassets) Regulations 2026, which come into force in October 2027. That track is about authorisation of cryptoasset firms and does not affect the payments consolidation programme.
Commercial and operational implications
The consolidation programme affects every payments firm holding FCA authorisation, every operator of a recognised payment system and every scheme participant. Three shifts warrant planning now. On EMI authorisation architecture, firms whose regulatory file sits across the PSRs 2017, EMRs 2011 and multiple FCA Handbook touchpoints may in time find more of their requirements in FCA rules, if HM Treasury delegates detailed requirements to the FCA as it proposes. Firms should expect more frequent rule changes than the retained-EU-law regime has permitted, and clearer FCA supervisory priorities. Safeguarding and prudential treatment of customer funds, already the subject of extensive FCA reform through the CASS 15 safeguarding regime, will be a focus area under the new regime. On scheme governance, participants in Faster Payments, CHAPS, Bacs and the card schemes should expect the PSR’s access, fee and governance regimes to migrate into the FCA in substance, with continuity rather than disruption as the stated aim. Inter-participant liability frameworks built on PSR specific directions, including on APP fraud reimbursement, will need to be read against the new statutory home. On perimeter clarity for stablecoin and tokenised payments, firms exploring stablecoin payment use cases, tokenised deposits or commercial open banking propositions now have a clearer picture of the regulatory destination, although the detailed rules will follow HM Treasury’s response to its consultation. Firms considering market entry should review authorisation strategy in light of this direction of travel. If you are assessing market entry or the regulatory perimeter for a new payments proposition, see our guidance on regulatory perimeter and market entry.
Viewpoint
This is the largest restructuring of UK payments regulation since the PSRs 2017 took effect. The structural direction is right. Two regulators and two rulebooks has never been the most efficient architecture for a sector whose technology cycle is shorter than its regulatory one. The harder questions sit in the detail, and those will arrive with HM Treasury’s response to its July 2026 consultation on the PSRs 2017 and EMRs 2011. Two issues to watch. First, whether safeguarding architecture under CASS 15 survives the move of detailed requirements into FCA rules intact or moves closer to full client-asset segregation. Second, how the new Handbook treats stablecoin payments alongside traditional e-money, given commercial pressure to rationalise compliance costs. In practice, the operational reality for EMIs is managing two regulatory transitions at once: near-term implementation of existing reforms and longer-term migration to a regime in which more of the detail sits in FCA rules. This is the issue in-house payments counsel raise most often and the one the modernisation package does not yet address.
Links
HM Treasury’s announcement and the government response to A Streamlined Approach to Payment Systems Regulation are on gov.uk. The FCA’s supervisory pages are at fca.org.uk. The Payment Services Regulations 2017 (SI 2017/752) and Electronic Money Regulations 2011 (SI 2011/99) sit on legislation.gov.uk. The separate cryptoasset amending statutory instrument was published alongside the package. See also our Payments Regulation practice area page.
Bratby Law advises EMIs, authorised payment institutions, fintech founders and scheme participants on FCA authorisation, safeguarding, open banking and scheme governance. To discuss the impact of the payments regulation modernisation package on your firm, contact Rob Bratby at Bratby Law.
