UK prime Minister, Keir Starmer has announced that the Payment Systems Regulator (PSR) will be abolished and its functions absorbed by the Financial Conduct Authority (FCA), as part of a wider strategy to reduce regulatory burdens on businesses.
The decision, intended to streamline regulation and foster economic growth, will simplify the regulatory framework for payment system firms. The merger of the PSR into the FCA will create a single point of contact for businesses involved in payment systems, which currently interact with multiple regulators.
The changes are expected to be implemented once the necessary legislation passes through Parliament, but for now, the PSR will retain its regulatory powers.
Prime Minister Keir Starmer didn’t mince words: “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’s been working people who pay the price of this stagnation.”
According to him, streamlining rules will kickstart economic growth, which he sees as the ticket to higher wages and more cash in your pocket by month’s end. It’s a bold claim, and one we’ll circle back to later.
The PSR isn’t a household name, but it’s a big deal behind the scenes. It oversees systems that handled £102 trillion in transactions in 2023 alone, think 43 billion payments, from your rent to that online shopping spree.
It’s been a champion of competition, making sure smaller players get a shot at the game, and it’s pushed innovations like open banking, where you can share bank data with apps to manage your money better.
It’s also tackled fraud, like those nasty scams where crooks trick you into sending them cash.
So why scrap it? The government says businesses, especially small and medium-sized ones (SMEs), are fed up with the hassle of dealing with multiple watchdogs.
A 2022 study from the Federation of Small Businesses found that SMEs spend an average of 33 hours a month on compliance, costing them £16.8 billion a year across the UK. If merging the PSR into the FCA cuts that burden, it could free up cash for hiring or investing, key drivers of growth.
But here’s the flip side: payment systems are the backbone of the economy, and the PSR’s laser focus on them has kept things humming. Folding it into the FCA, which juggles everything from payday loans to pension funds, might dilute that attention.
Could this mean less innovation or weaker fraud protections? That’s what some experts are worried about.
The PSR’s budget this year is £28 million, with about 160 staff keeping tabs on eight major payment systems. The FCA, meanwhile, is a giant, its budget runs into the hundreds of millions, and it’s got thousands of employees.
Swallowing the PSR sounds doable on paper, but experts mote that adding payments could stretch them thin unless they beef up their team and expertise.
Then there’s fraud, a growing challenge. In 2023, Authorized Push Payment (APP) fraud, where victims get tricked into sending money, hit £485 million, per UK Finance data.
The PSR’s been pushing banks to refund victims, but a recent U-turn on compensation caps sparked controversy.
If the FCA takes over and drops the ball, could fraud victims lose out? It’s a question mark hanging over this move.
This isn’t just about regulators shuffling desks, it’s part of Starmer’s “Plan for Change” to juice up the economy. The UK’s growth has been sluggish, GDP grew just 0.6% in 2024, per the Office for National Statistics, lagging behind the US (2.5%) and even the Eurozone (0.9%).
Cutting regulation is a classic playbook move to spark activity, and the government’s promising more steps soon to trim the rulebook further.
But will it work? Research from the OECD suggests easing regulatory burdens can boost productivity, countries like Denmark saw a 1.5% GDP bump after similar reforms.
If oversight weakens and payment systems stumble, consumer trust could take a hit, slowing things down instead.
For now, the PSR keeps doing its thing, making sure your payments go through and scams get tackled, while the FCA gears up to take over. Parliament will debate this in the coming months, and we’ll see how the details shake out.
Will the FCA rise to the challenge, or will businesses and consumers feel the pinch? One thing’s clear: this is a gamble on growth, and the stakes are high.
As Starmer put it, “This is about making regulation work for the UK, not against it.” Whether that vision pays off could shape how you pay, save, and spend for years to come. Watch this space.
