The UK’s Payment Systems Regulator (PSR) could be scrapped as the government looks to streamline regulations and boost economic growth.
According to Sky News, ministers and officials are examining whether to scrap the PSR and merge it into the remit of the Financial Conduct Authority (FCA). The news outlet says a decision is expected to be made within the coming weeks.
Founded in 2015, the PSR ensures UK payment systems operate fairly, efficiently and competitively. The independent body oversees major systems like Faster Payments and Visa/Mastercard networks, focusing on consumer protection, fraud prevention and encouraging innovation in payment methods.
The regulator made waves across the payments sector last year when it introduced new fraud reimbursement rules in reaction to rising levels of Authorised Push Payment (APP) fraud.
The PSR, despite some criticism from financial institutions regarding certain regulations, has recently focused on encouraging competition in the payments industry. For example, last week alongside the FCA, it released feedback highlighting a lack of competition among digital wallet providers.
Additionally, the regulator has been exploring ways to reduce the dominance of Mastercard and Visa by promoting alternative payment systems, aiming to create a more level playing field for new entrants in the sector.
Labour’s regulatory approach
Supporting competition aligns with the Labour government’s focus on attracting investment. However, the potential scrapping of the PSR fits into UK Prime Minister Keir Starmer’s broader push to streamline regulations.
In December, Starmer urged major UK regulators to eliminate barriers that hinder economic growth. In October, he vowed to “get rid” of regulations that impede investment, a stance that was reinforced in a recent speech when he stated that the UK will go its ‘own way’ on AI regulation.
It’s clear that some ministers may view the PSR as an unnecessary layer of bureaucracy, preferring to deal with the FCA directly. A source quoted by Sky News supported this perspective, stating: “No other major economy has a standalone payments regulator like this, and it is hard to make the case for it continuing to exist”.
Responding to Payment Expert‘s request for comment, the PSR said: “It’s well known the government is auditing the role of regulators, and decisions on the regulatory structure are rightly for them and parliament. We are focussed on working with the FCA and the Bank of England to deliver safe, competitive and innovative payment systems.”
