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, integrates the Payment Services Regulations 2017 and Electronic Money Regulations 2011 with the FSMA 2000 framework, and sets a single rulebook for traditional and tokenised payments. A sector consultation follows.
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 integrating the Payment Services Regulations 2017 (PSRs 2017) and Electronic Money Regulations 2011 (EMRs 2011) with the UK’s core financial services framework under the Financial Services and Markets Act 2000 (FSMA 2000), and signals a single regulatory book covering traditional payments, stablecoin payments and tokenised deposits. A sector consultation on reform of the PSRs 2017 and EMRs 2011 will follow. For electronic money institutions (EMIs), authorised payment institutions and scheme participants, the direction of travel is unified supervision under the FCA inside the FSMA architecture.
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 retained EU 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 sets out the government’s response and confirms consolidation will proceed when Parliamentary time allows. 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 will legislate to integrate payment services and e-money regulation with the UK’s core financial services regulatory framework under FSMA 2000. Moving the substance of the PSRs 2017 and EMRs 2011 into the FSMA architecture lets the FCA regulate payment services through its ordinary supervisory toolkit and Handbook rules rather than through a free-standing statutory regime with limited rule-making powers. 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 will eventually be regulated through a single Handbook sourcebook, with the FCA’s ordinary rule-making powers applying to payment services and e-money. 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 the sector 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 the forthcoming HM Treasury consultation on the PSRs 2017 and EMRs 2011. Two issues to watch. First, whether safeguarding architecture under CASS 15 survives FSMA integration 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 the integrated regime. 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.
