GB
The Payment Systems Regulator is being abolished and its functions transferred to the Financial Conduct Authority under legislation now before Parliament, while operational integration between the PSR and FCA is already underway.
The government says the change should simplify UK payments regulation, reduce duplication and give firms a clearer regulatory route - particularly smaller businesses that can struggle with the cost and complexity of overlapping oversight.
This is no longer just an early-stage proposal. The consultation has closed, the government has confirmed its approach and the Financial Services and Markets Bill has begun its passage through Parliament. However, the legal transfer has not yet happened, and the PSR continues to operate as an independent regulator in the meantime.
The Payment Systems Regulator is being abolished as a separate regulator, with its statutory functions transferred mainly to the FCA rather than disappearing.
The PSR became fully operational in 2015 to regulate designated UK payment systems and promote competition, innovation and the interests of people and businesses that use them. The proposed new structure carries those functions, powers and objectives into the FCA, bringing payment systems regulation under one organisation.
Until the necessary legislation takes effect, the PSR remains responsible for exercising its own statutory powers and making its own regulatory decisions.
March 2025
The government announced its plan to abolish the PSR and consolidate its functions within the FCA as part of a wider drive to simplify regulation and support growth.
September to October 2025
HM Treasury consulted on how the new regulatory framework should work, including the transfer of the PSR's functions and the treatment of designated payment systems.
Early 2026
The PSR and FCA moved into closer operational alignment. FCA staff increasingly began supporting PSR work and information handling, while the PSR remained legally independent with its own Board and decision-making committees.
21 April 2026
HM Treasury published its consultation response and confirmed that the government would proceed with abolishing the PSR and transferring its functions to the FCA.
19 May 2026
The Financial Services and Markets Bill was introduced in the House of Lords. It contains provisions to abolish the PSR and transfer its functions to the FCA while broadly preserving their substance and scope.
The current timetable
The Bill is progressing through Parliament. The PSR's latest official reporting says Royal Assent is expected in 2027, subject to the parliamentary process, followed by a transition period. The precise abolition and legal-transfer date therefore remains uncertain.
The merger is now backed by legislation before Parliament rather than being simply a policy proposal. Its purpose is to reduce regulatory fragmentation by moving responsibility for payment systems into the FCA, which already regulates many payment service providers.
For businesses, the potential advantage is a more coherent framework with less duplication and a clearer route through the regulatory system. This could be particularly valuable for smaller firms, which often have fewer resources to manage overlapping regulatory relationships.
The detail will matter, though. A single regulator does not automatically mean fewer obligations, and firms should judge the new framework by how proportionate, consistent and easy to navigate it proves in practice.
Bringing the functions together should create a more joined-up view of firms and payment systems, with fewer gaps between conduct regulation, competition, innovation and consumer protection.
The aim is to give businesses a clearer point of contact, improve coordination and support more efficient decision-making. Done well, that could make it easier for established firms and new entrants to understand regulatory expectations and bring new products to market responsibly.
The structural change is not intended to remove the PSR's underlying focus. Its work on reliable payment systems, competition, innovation, fraud prevention and the needs of payment-system users is expected to continue within the FCA's expanded remit.
There is also no overnight handover. The PSR retains its statutory powers and continues to regulate as normal until the legal transfer takes effect. Its current directions, requirements and live work remain relevant, and firms should continue dealing with the PSR and complying with their existing obligations unless told otherwise.
Operationally, businesses may increasingly hear from FCA staff who are supporting PSR functions. That reflects integration work already taking place; it does not mean the statutory transfer has been completed.
In the short term, the practical message is continuity. Firms should keep complying with the existing framework, monitor communications from both regulators and avoid assuming that the announcement or passage of the Bill removes any current requirement.
The current designation regime is intended to carry across, with regulated payment systems moving to FCA oversight without a regulatory gap. The merger itself is not expected to require firms to make a duplicate FCA registration solely because PSR functions are transferring. However, the position will depend on each firm's activities and existing regulatory status, so firms should watch for detailed transitional directions and any requests from the regulators.
There are still important questions about the longer-term impact. Simplifying the institutional structure may reduce friction, but it does not guarantee stronger economic growth or faster innovation. Much will depend on the FCA's capacity, expertise and approach to its wider remit.
The transition also needs careful management. Fintech and digital payments evolve quickly, and any loss of specialist focus, delayed decisions or uncertainty over accountability could create risk. Firms should keep clear records of regulatory communications, identify which regulator is handling live matters and escalate any ambiguity early.
1. Continue following current PSR and FCA requirements
The legal transfer has not happened, so existing rules, directions, reporting obligations and regulatory contacts remain in force.
2. Map your regulatory relationships
Record which parts of your business are supervised by the FCA, affected by PSR directions or connected to a designated payment system, so you can spot where the transition may change ownership or communications.
3. Track the Bill and regulator updates
Monitor the legislation, implementation timetable and any transitional guidance rather than planning around an assumed 2026 completion date.
4. Keep governance and compliance teams informed
Make sure senior managers understand that operational integration is underway but legal responsibilities have not yet transferred.
5. Ask early if responsibility is unclear
If you are unsure whether the PSR or FCA is dealing with a live matter, seek confirmation and retain a clear audit trail of the response.
The structure of UK payments regulation is changing, but the rules have not disappeared. Payment firms should use this period to understand their current obligations, monitor the transition and make sure responsibility for regulatory engagement is clear internally.
If you need help understanding what the PSR and FCA merger means for your business, or support with wider payments regulation, get in touch with the Founders Law team.
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