UK Abolishes Payment Systems Regulator to Streamline Regs

Finance & Banking
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Fraud Management & Cybercrime
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Industry Specific

Move to Fold PSR Into Financial Conduct Authority Could Affect Fraud Victims

Suparna Goswami (gsuparna) •
March 12, 2025    

See Also: New Attacks. Skyrocketing Costs. The True Cost of a Security Breach.

The PSR, which oversees payment systems including Faster Payments and Mastercard, will be consolidated into the Financial Conduct Authority, making it easier for firms to deal with one regulatory body. This, according to Prime Minister Keir Starmer, will “reduce complexity in Britain’s regulatory system and stop it acting as a block on innovation, investment and growth.”

On the heels of criticism from the payment industry, the head of the payment regulator, Chris Hemsley, quit in June 2024, soon after the U.K. elections that resulted in a Labour Party victory.

Established in 2013 to foster innovation in the payments sector, PSR faced significant backlash over its approach to introducing a mandatory refund system for payment fraud last year. The regulator initially proposed that banks reimburse victims for losses of up to 415,000 pounds. However, intense lobbying led to lowering the compensation cap to 85,000 pounds just days before the reimbursement regulations went into effect.

“The initial amount of 415,000 pounds upset the payment industry. The group lobbied heavily and won the reduction. I reckon there will be more lobbying this year to lower the limit to 30,000 pounds,” said Ken Palla, retired director of MUFG Bank.

The reimbursement plan is scheduled for review in October 2025, one year after it went into effect.

During that time, the PSR and the Financial Conduct Authority will collaborate to ensure a seamless transition of responsibilities while maintaining market competitiveness. The FCA will retain the payments agency’s powers after the merger, the government said.

The Labour government has been on a deregulatory spree since it took control of Parliament in 2024. 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.

For Jonathan Frost, a board member at Stop Scams Alliance, the reorganization appears to be a “branding exercise” only. “As a subsidiary of the FCA, sharing both office space and personnel, its functions are already deeply integrated. Beyond dropping a logo, it’s unclear what, if anything, will materially change,” Frost said.

It makes sense for a single agency to ensure financial institutions adhere to the expectations set out in the FCA’s consumer responsibilities, Frost said.

The Right Approach for Victims?

The United Kingdom has been praised for tackling authorized push payment fraud and ensuring customer reimbursement, but banks have pushed back against high compensation. The Payments Association warned the government that the changes could threaten smaller payment firms, while City Minister Bim Afolami criticized the rules, citing “significant problems.” U.K. Finance also opposed the proposals, arguing they might encourage “complicit fraud” by incentivizing fraudsters to pose as victims.

Some experts argue that a more effective approach to tackling scams and APP fraud is the Australian model, which prioritizes preventive measures over customer reimbursement. Rather than focusing solely on financial institutions, Australia’s scams framework brings together banks, telecom providers and internet companies to strengthen protections for potential victims.

“Scams are not just a banking problem. It’s a shared responsibility across banks, telecom providers and internet companies. The Australian model does a better job of holding everyone accountable rather than putting the full burden on banks,” said Karen Boyer, senior vice president at M&T Bank.