Payment Systems Regulator Abolished: What It Means for UK Merchants

13 March 2025

Written by Libby James

Libby James is co-founder, director and an expert in all things merchant services. Libby is the go-to specialist for business with more complex requirements or businesses that are struggling to find a provider that will accept them. Libby is regularly cited in trade, national and international media.

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Payment Systems Regulator Axed In UK Government Announcement

The UK Government has announced the abolition of the Payment Systems Regulator (PSR) as part of a broader initiative to reduce regulatory burdens and drive economic growth. This move aims to streamline the regulatory framework for businesses, ensuring that payment system firms have a more straightforward and efficient process when dealing with regulators.

Why Is the PSR Being Abolished?

The Government's decision to abolish the PSR stems from concerns that the current regulatory environment is too complex and costly, particularly for smaller businesses. Previously, payment system firms had to engage with multiple regulators, including the Financial Conduct Authority (FCA) and the Bank of England, which increased operational expenses and administrative burdens.

By consolidating the PSR’s responsibilities primarily into the FCA, the Government intends to create a more efficient regulatory system that supports business growth while maintaining oversight of payment systems such as Faster Payments and Mastercard.

Impact on UK Merchants

For UK merchants, the removal of the PSR could lead to several key changes:

Reduced Bureaucracy: Merchants dealing with payment systems may benefit from streamlined regulatory oversight, reducing the time and effort spent on compliance.
Potential Cost Savings: With a simpler regulatory framework, businesses may experience lower compliance costs, particularly smaller merchants that previously faced disproportionate financial burdens.
Market Stability: The transition of responsibilities to the FCA is designed to ensure that the market remains competitive and that consumers and businesses continue to benefit from secure and reliable payment systems.
Future Regulatory Changes: While no immediate changes will occur, merchants should stay informed about how the transition affects compliance requirements and industry regulations.

Government’s Vision for Economic Growth

This decision is part of the Government’s broader Plan for Change, which seeks to boost economic growth by reducing unnecessary regulation and fostering an environment conducive to business expansion. Other recent deregulatory actions include:

Lifting the onshore wind ban to promote sustainable energy growth.
Introducing the Planning and Infrastructure Bill to streamline project approvals.
Reviewing environmental regulations to ensure they support economic development.
Setting financial services regulators on a pro-growth agenda.

Prime Minister Keir Starmer has emphasised that excessive regulation has hindered business innovation and economic progress, and this move is intended to help businesses flourish by creating a more supportive regulatory environment.

What Happens Next?

Although the Government has announced its intent to abolish the PSR, the process requires legislation to be passed by Parliament. Until that happens, the PSR will continue its regulatory duties, working closely with the FCA to ensure a smooth transition.

Merchants should monitor updates on this transition to understand how the changes may affect payment processing, compliance requirements, and regulatory obligations.

As these changes unfold, Merchant Advice Service (MAS) is here to help. We understand that regulatory shifts can be complex, and our team is dedicated to providing clear guidance and support for UK merchants navigating this transition. Whether you need assistance understanding compliance requirements or exploring cost-effective payment solutions, MAS is on hand to ensure your business remains competitive and informed in this evolving landscape.

FAQs

What is the Payment Systems Regulator (PSR)?

The PSR is the UK’s regulatory body overseeing payment systems, ensuring they operate fairly and competitively for businesses and consumers.

Why is the PSR being abolished?

The Government aims to simplify the regulatory environment, reducing costs and administrative burdens for businesses, particularly smaller firms.

Who will take over the PSR’s responsibilities?

The majority of the PSR’s functions will be transferred to the Financial Conduct Authority (FCA), streamlining oversight of payment systems.

How will this change impact merchants?

Merchants may experience reduced compliance costs and a more straightforward regulatory process when dealing with payment system providers.

Will there be immediate changes to payment regulations?

No. The PSR will continue its current responsibilities until legislation is passed by Parliament to finalise the transition.

Does this affect how I process payments?

Not immediately. Merchants should continue to operate as usual but stay informed about any forthcoming regulatory adjustments.

What other regulatory changes is the Government planning?

The Government is reviewing multiple regulatory frameworks, including financial services, environmental policies, and infrastructure regulations, to promote economic growth.

Where can I find updates on these changes?

Merchants should follow updates from the FCA, HM Treasury, and industry associations to stay informed about the transition and any regulatory changes.