The Payment Systems Regulator (PSR) is to be abolished under new plans by the Government to cut back regulation and “reduce red tape”.

The Government has confirmed that the PSR, the economic regulator for the £81trn payment systems industry in the UK, will mainly be consolidated into the Financial Conduct Authority (FCA).

Chancellor, Rachel Reeves, last month said she would tell cabinet ministers to conduct a “full audit” of the UK’s regulators – which total over 130 and include several watchdogs in the finance sector – to ensure they are working to boost growth.

While the PSR, which looks after payment systems including Faster Payments and Mastercard, is a fully independent subsidiary of the FCA, it shares some operational services with the broader financial services body.

The decision on the PSR 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 regulatory system has become burdensome to the point of choking off innovation, investment and growth,” Reeves said. “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.

“Today’s announcement 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 the FCA will work closely to deliver a smooth transition of responsibilities to ensure the market remains competitive.”

The PSR has since published a statement, with the regulator saying it recognised the Government’s decision as a “pragmatic next step in simplifying and clarifying payments regulation”.

“We’re committed to working with government and the FCA as decisions are taken on the transfer of regulatory responsibilities and, when they are, help ensure the process is smooth,” the PSR statement went on to say.

“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 more closely together.

“Ahead of legislation, the Government has been clear the PSR continues to be the independent regulator of UK payment systems, and its vital these continue to be effectively regulated.”

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