UK government to abolish the PSR in push to cut “unnecessary regulation” and drive economic growth

The UK government has officially announced plans to scrap the Payment Systems Regulator (PSR) as an independent body, in a move aimed at cutting back regulation and “reducing the burdens on business”.

UK government says the PSR will be abolished

A statement released by the Prime Minister’s Office on Tuesday states that the regulator will be “abolished” and will “mainly be consolidated into the Financial Conduct Authority (FCA), making it easier for firms to deal with one port of call”.

The statement claims that the decision “follows complaints from businesses that the regulatory environment was too complex – with payment system firms having to engage with three different regulators, costing them time, money and resource”.

“The Prime Minister wants to make regulation work for the UK – and this is the latest step in his drive to create an environment that will kickstart economic growth,” the statement continues. “It is only by creating growth that people will see a genuine increase in their living standards – with higher wages and more money in their pocket at the end of the month.”

No immediate changes will be made to the PSR’s remit or work programme, with the regulator to retain its statutory powers until the legislation has officially been passed by parliament. The government has not yet outlined a timeline detailing when this will happen.

During the interim period, the PSR and FCA will “work closely to deliver a smooth transition of responsibilities to ensure the market remains competitive”, the statement adds, with the government to “set out further steps to reduce red tape in the coming days”.

“The entire regulatory landscape will continue to be reviewed and finessed as part of a wider government effort to kickstart economic growth and make regulators work for the country, rather than block progress,” the statement continues.

The decision confirms earlier reports by Sky News last month that the PSR’s status as an independent body was nearing its end under the government’s continued audit of UK regulators.

“For too long, the previous government hid behind regulators – deferring decisions and allowing regulations to bloat and block meaningful growth in this country,” comments UK Prime Minister Keir Starmer. “And it has been working people who pay the price of this stagnation.”

“This is the latest step in our efforts to kickstart economic growth, which is the only way we can fundamentally drive-up living standards and get more money in people’s pockets. That’s why it is the priority in the Plan for Change, and it’s why I’m not letting anything get in its way.”

‘Maintaining effective regulation’

In a statement responding to the decision, the PSR describes the move as “a pragmatic next step in simplifying and clarifying payments regulation”.

“We welcome the government’s commitment to maintaining effective regulation of payment systems, which was a gap before the PSR was set up,” the PSR says.

“Since then, the payments sector has dramatically changed, particularly over recent years. The PSR has played a central role, supporting open banking and innovation, opening up access to payment systems, promoting competition, and introducing world leading protections for victims of fraud.”

The regulator states that it is “committed to working with government, the FCA and the Bank of England as decisions are taken on the transfer of regulatory responsibilities and, when they are, help ensure the process is smooth”.

“Legislation will take time, but we do not need to wait to realise the benefits of an even more streamlined regulatory approach. Doing so builds on recent work bringing the PSR and FCA closer together.”

It points to its initiative of merging the role of manging director of the PSR, held by David Geale since June, with that of executive director of payments and digital finance at the FCA as an example of this increased closeness.

“In the meantime, as the government has been clear, there is an important role still to do on ensuring payment systems are competitive, innovative and safe,” the PSR’s statement concludes.