The government has confirmed that the Payment Systems Regulator (PSR) will be abolished "as part of an efficiency drive", with "further steps to reduce red tape" set to be announced in the coming days.
The PSR – which looks after payment systems like Faster Payments and Mastercard – will mainly be consolidated into the FCA, which the government says will make it easier for firms to deal with one port of call.
It 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.
Today’s announcement, first reported last month, does not result in any immediate changes to the PSR’s remit or ongoing programme of work. The regulator will continue to have access to its statutory powers until legislation is passed by Parliament to enact these changes.
In the interim period, the PSR and FCA will "work closely to deliver a smooth transition of responsibilities to ensure the market remains competitive".
The government said that "the entire regulatory landscape will continue to be reviewed and finessed... to kickstart economic growth and make regulators work for the country, rather than block progress".
Prime Minister, Keir Starmer, said: "For too long, the previous Government hid behind regulators – deferring decisions and allowing regulations to bloat and block meaningful growth in this country.
"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."
Chancellor, Rachel Reeves, commented: "The regulatory system has become burdensome to the point of choking off innovation, investment and growth. We will free businesses from that stranglehold, delivering on our Plan for Change to kickstart economic growth and put more money into working people’s pockets."
Nikhil Rathi, chief executive of the FCA, added: "PSR colleagues have made payment systems safer, more competitive and increasingly innovative. They should be proud of the huge amount achieved.
"With a changed payments landscape, now is the right time to put in place a more streamlined regulatory framework. Doing so is a natural next step following recent work to improve co-ordination and clarity on regulatory responsibilities.
"We will work closely with government, the Bank of England and the payment sector as the details of this change are decided and to ensure the transfer of any powers is smooth. In the meantime, we will drive forward with change, including welcoming the deep expertise of PSR colleagues within the FCA."
In a statement, the PSR responded: "Today’s announcement is 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.
"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. Colleagues should rightly be proud of all they have achieved.
"We’re 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. We have, for example, already joined the managing director of the PSR role with that of executive director of payments and digital finance at the FCA.
"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."
