Government proposes consolidating PSR functions within FCA

HM Treasury has published its consultation paper proposing to absorb the functions of the Payment Systems Regulator (PSR) into the remit of the Financial Conduct Authority (FCA).

The Proposal

In a move that was formally announced in March 2025 as part of the government’s Regulatory Action Plan, HM Treasury has proposed that the PSR, which oversees payment systems, be abolished. The FCA would inherit the PSR’s responsibilities, including the promotion of competition and innovation in relation to payment systems and protection of the interests of payment systems service users. The proposal is intended to streamline the approach to payment systems regulation.

HM Treasury intends to integrate the PSR’s functions within the current framework contained in the Financial Services and Markets Act 2000 ("FSMA"). Where this is not possible, these functions will be set out in a new part of FSMA. 

Importantly, HM Treasury does not propose to increase the scope of existing payment systems regulation, nor to introduce new regulated activities under FSMA in respect of payment systems. The FCA’s powers are proposed to be broadly equivalent in scope and substance to those currently exercised by the PSR.

Co-ordinating the Transition

HM Treasury notes in the consultation paper that the PSR and FCA are already co-ordinating in respect of the transition. This includes creating a new executive role for Payments and Digital Finance, updating the memorandum of understanding between the PSR, FCA, Bank of England, and Prudential Regulation Authority, and continuing to work with the Bank of England and HM Treasury via the Payments Vision Delivery Committee.

Next Steps

The consultation closes on 20 October 2025. After considering the responses HM Treasury intends to bring forward legislation to implement the final policy when possible.

Written by Jamie Howarth