The UK’s Payment Systems Regulator (PSR) has entered 2025 amid a confluence of regulatory upheaval, market scrutiny, and structural transformation.
PSR’s pivotal year
As its tenth anniversary approaches, the PSR finds itself both driving and undergoing fundamental change, with implications reverberating across the card payments landscape, merchant costs, and the broader regulatory ecosystem.
Established under the Financial Services (Banking Reform) Act 2013 and operational since April 2015, the PSR was designed to ensure that payment systems serve their users fairly, promote competition, and safeguard trust and resilience.
Its regulatory reach extends to critical infrastructure including Bacs, CHAPS, cheque clearing, Faster Payments, LINK, and the major international card networks Mastercard and Visa, among others.
Scheme and Processing Fees
This year, one of the PSR’s headline initiatives is its decisive intervention into card scheme and processing fees.
With card payments now accounting for 61% of all UK payment transactions and 86% of retail transaction value, the PSR’s final report published in March raised serious concerns about fee transparency and market competitiveness.
It found that current pricing structures within card schemes and processing arrangements risk stifling innovation and placing undue pressure on merchants.
In response, the regulator launched a public consultation, proposing a suite of potential remedies.
These include greater disclosure obligations, publication of detailed scheme information, restrictions on fee increases, and even the possibility of regulatory fee caps.
The consultation remains open until 28 May 2025, with a follow-up consultation anticipated if the PSR proceeds with implementation.
Cross-Border Interchange
Cross-border interchange fees have also come under scrutiny.
Following the UK’s exit from the European Union, fees on UK-to-EEA card transactions have surged, with the PSR estimating a £150–200 million annual cost burden on merchants due to weakened competition.
In a bid to remedy this, the PSR is considering a two-phase price cap model, starting with temporary caps to be followed by longer-term regulatory ceilings.
If adopted, this framework would represent a material shift in how cross-border fees are governed in the UK’s post-Brexit payments landscape.
Dissolution of the PSR
Arguably the most consequential development came on 11 March, when the UK Prime Minister announced the Government’s intention to dissolve the PSR and integrate its functions into the Financial Conduct Authority (FCA).
This consolidation is framed as a move toward regulatory simplification, aimed at reducing duplication, aligning oversight, and creating a more navigable system for regulated entities.
Yet the proposed merger raises important questions: will it streamline regulatory processes or merely concentrate risk and delay innovation?
HM Treasury will consult on the structural overhaul in summer 2025, with enabling legislation to follow.
Until then, the PSR continues to operate independently, albeit in close cooperation with the FCA to facilitate a smooth handover.
Businesses and market participants would do well to remain actively engaged in these consultations.
The reforms now underway – both in market conduct and institutional architecture – could reshape the UK’s payments environment for a generation.
What emerges may be a more consolidated and efficient system – or one that trades independence for complexity.
The post PSR’s pivotal year: Reforms, interchange caps, and a future under the FCA appeared first on Payments Cards & Mobile.