In a landmark decision aimed at reducing regulatory complexity, Prime Minister Sir Keir Starmer has announced the abolition of the Payment Systems Regulator (PSR).
UK abolishes the Payment Systems Regulator
The move is part of a broader effort to streamline oversight and promote economic growth by consolidating the PSR’s functions under the Financial Conduct Authority (FCA).
This shift is expected to enhance efficiency and reduce compliance burdens for businesses, particularly in the payments sector.
Regulatory Overlap
The UK government has long faced criticism over the fragmented financial regulatory environment, where firms must engage with multiple oversight bodies, increasing administrative costs and inefficiencies.
The decision to merge the PSR into the FCA responds directly to business concerns that excessive regulatory oversight stifles innovation and diverts resources away from growth.
“For too long, regulatory inefficiencies have hindered economic progress,” said Prime Minister Keir Starmer, underscoring the necessity of a more streamlined approach to regulation.
“The time has come to remove unnecessary obstacles and ensure businesses have the freedom to grow without excessive oversight.”
“Our current regulatory framework has reached a point where it stifles rather than supports business growth,” continued Chancellor Rachel Reeves. “By simplifying oversight, we can encourage investment and drive economic expansion.”
The PSR, which oversees critical payment infrastructures , will continue operating under its statutory mandate until formal legislative changes are enacted. During this transition period, the FCA and PSR will work together to ensure an orderly transfer of responsibilities, minimising market disruption.
Implications for the Industry
Reactions to the PSR’s abolition have been divided.
Proponents argue that a centralised regulatory framework under the FCA will lead to a more predictable and less cumbersome environment for payment service providers.
They anticipate that reducing compliance redundancies will encourage greater investment and innovation in financial technology.
However, critics caution that the move could dilute regulatory scrutiny over payment systems, potentially reducing oversight on anti-competitive behaviour and weakening consumer protections.
The effectiveness of the transition will depend on how well the FCA integrates PSR’s functions without compromising market integrity.
The government is set to provide additional details on the transition process in the coming days, including the timeline for formal legislation and the specific responsibilities the FCA will assume.
Until the legislative process is complete, the PSR will remain operational, ensuring continuity in the oversight of the UK’s payments infrastructure.
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