The UK’s payments landscape is about to have a new centre of authority. HM Treasury published a consultation on 14 July 2026 proposing to fold the Payment Systems Regulator (PSR) into the Financial Conduct Authority, shift Open Banking from a Competition and Markets Authority order onto a statutory footing, and establish a regulatory foundation for AI-enabled and tokenised payments. The consultation closes on 6 October 2026. The direction, once confirmed, will be the most significant rebalancing of the UK’s payments-regulatory architecture since the PSR took up its powers in 2015.
The PSR: built for a different era
The PSR was established under the Financial Services (Banking Reform) Act 2013 and became operational in April 2015, bringing competition-law thinking to payment systems. At the time the design made sense: retail banking was concentrated, scheme rules were opaque, and Mastercard and Visa charged what markets would bear. The PSR’s consumer-protection achievements, from capping interchange fees to mandating Confirmation of Payee and Faster Payments access, are real.
A decade on, the payments market is structurally different. The firms that need supervising are no longer primarily the four clearing banks. They include the full range of FCA-authorised payment institutions: fintechs, e-money institutions, Buy Now Pay Later providers, and the coming wave of cryptoasset payment services. The PSR’s competition mandate sits awkwardly alongside the FCA’s authorisation, conduct and market-integrity remit. Running both regulators in parallel has produced duplicated consultations, divergent policy timelines and friction for firms operating across both regimes.
What HMT is proposing
The consultation sets out three interlocking changes.
First, the PSR’s payment-systems oversight functions would transfer to the FCA, with the FCA taking on responsibility for scheme rules, interchange, and systemic payment-systems policy. The PSR would be wound down. The FCA’s existing access to consumer-protection, competition, and market-integrity tools would extend across the payments landscape without the need for a separate statutory body.
Second, Open Banking would move from the CMA’s 2017 Retail Banking Market Investigation Order to a statutory framework. The Open Banking Implementation Entity (now rebranded as Open Banking Limited) has managed the technical standards and onboarding process under that order since 2018. Putting the framework on a statutory footing means the FCA would own the Variable Recurring Payments (VRP) commercial framework, data-sharing standards and third-party provider rules. Firms building on Open Banking rails would deal with a single regulator rather than navigating CMA and FCA concurrently.
Third, HMT proposes a regulatory foundation for AI-enabled and tokenised payments. The consultation covers the regime needed to support real-time tokenised payment rails, AI-driven payment initiation (including variable recurring payments driven by predictive models), and the intersection of the Electronic Money Institution and Payment Institution authorisation frameworks with cryptoasset payment services. The regime that will govern a tokenised Faster Payments system and an AI-curated direct-debit replacement needs to be set now if infrastructure investment is to proceed with legal certainty.
What this means for UK finance
For regulated firms, the FCA’s move to the centre of payments governance is largely clarifying. The FCA’s authorisation and supervisory infrastructure already reaches the overwhelming majority of payment institutions. Bringing scheme oversight in-house means the FCA can calibrate competition and consumer protection in a single regulatory posture rather than requiring firms to track two regulators with different enforcement cultures and timelines.
For Open Banking, the statutory footing matters more than any specific rule change. The commercial framework for variable recurring payments, in particular, has stalled partly because the CMA order’s legal basis was ambiguous about monetisation and commercial terms. A statutory FCA framework provides the certainty that banks and third-party providers need before committing to infrastructure spend.
For AI-enabled payments, the consultation is deliberately early-stage. HMT is not legislating the technical standards for tokenised payment rails in this document. What it is doing is establishing that the FCA, rather than the PSR or the CMA, will own the regulatory space when those standards are ready. That sequencing decision affects which industry bodies lead the standards work, which regulatory sandboxes are relevant, and how firms structure their compliance architecture for the next generation of payment services.
The PSR’s supporters will argue that a standalone competition regulator, ring-fenced from the FCA’s authorisation culture, provides a structural check on scheme fees and access terms that cannot be replicated inside a conduct regulator. HMT will need to address that argument in the policy statement that follows the October consultation close. The FCA’s track record on competition enforcement in financial services is patchy, and the PSR has been willing to act on interchange and scheme access in ways the FCA historically has not.
The consultation closes on 6 October 2026. The FCA is expected to publish draft rules in 2027, with the new framework in force ahead of the 2028 tokenised-payment-infrastructure build-out.
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