Britain is quietly rewiring who watches its payment systems. The Payment Systems Regulator, the specialist body that has policed the plumbing behind card networks, Faster Payments and interbank transfers since 2015, is being wound into the Financial Conduct Authority. The change is a matter of supervisory architecture rather than a new rulebook, but the timing means the merged supervisor will inherit an awkward first question: after a scam, who should bear the loss, the bank that sent the money or the one that received it?
That question is not hypothetical. The mandatory reimbursement regime for authorised push payment (APP) fraud, the scams in which victims are tricked into authorising a payment themselves, went live on 7 October 2024, and it is now reaching its first formal review at almost the same moment the regulator that built it disappears.
Where abolition actually stands
For all the talk of the PSR being “scrapped”, it has not gone anywhere yet. The government confirmed the direction in its April 2026 response to the consultation “A Streamlined Approach to Payment Systems Regulation”, and the mechanism arrived on 19 May 2026, when the Financial Services and Markets Bill 2026–27 was introduced in the House of Lords. The Bill provides for abolishing the PSR and transferring its functions to the FCA.
Until that Bill receives Royal Assent, the PSR remains a live regulator with its full statutory powers. A complete transition during 2026 is not expected; the Treasury has said it will legislate as parliamentary time allows. So the honest description of today’s position is a body legislated out of existence but still operating, running an active fraud-policy programme it may not survive to finish.
Under the Bill the FCA gains new payment systems objectives (competition, innovation and the interests of those who use payment services) and powers described as broadly equivalent to the PSR’s: rulemaking and directions for participants, the ability to regulate fees and charges including maximum fees, access directions, and powers to vary agreements and require disposals. The intent is a single regulator for payments oversight rather than a diminished one.
Three rulebooks, one supervisor
The consolidation matters because UK payments have long answered to three masters. The PSR has overseen the competition and access rules for payment systems. The FCA authorises and supervises payment and e-money firms under the conduct regime. And the Bank of England superintends the systemically important interbank systems that settle the largest flows. Folding the PSR into the FCA does not touch the Bank’s role, but it collapses two of the three rulebooks into one, the direction of travel the Treasury set out in its National Payments Vision in November 2024.
For firms, a single conduct-and-competition supervisor should mean fewer overlapping consultations and one front door. The test is whether “broadly equivalent” powers, exercised inside the FCA’s existing Financial Services and Markets Act framework, preserve the sharper, systems-level focus the PSR was created to provide, or dilute it into a much larger agency’s in-tray.
The fraud regime lands on the new desk
The APP reimbursement rules are where the abstract question of institutional design becomes a concrete question of money. The scheme caps reimbursement for Faster Payments scams at £85,000 per claim and splits the cost 50/50 between the sending and receiving payment firms, with a limited exception where a customer has acted without due caution.
On the evidence so far, it is working. An independent evaluation by Frontier Economics, published for the PSR on 1 July 2026, estimated that in-scope APP scam losses over Faster Payments fell by roughly 21% in the scheme’s first year: about £73m, and nearly 35,000 fewer scams. Overall reimbursement rates rose from 54% to 65%, and for in-scope claims reached about 97%. “The evidence is clear: APP reimbursement is working,” said David Geale, the PSR’s managing director. “Payment fraud losses are down, more victims are being reimbursed, and firms are investing in prevention.”
The £85,000 cap itself rarely bites: Frontier found that more than 99% of reimbursable claims, and more than 95% of reimbursable value, sit below it. The contested design choice is not the ceiling but the 50/50 split, the mechanism that decides how loss is shared between the bank a customer trusted and the bank that unwittingly banked a fraudster.
Why the sequencing is the story
That is precisely what is now up for recalibration. The PSR’s roadmap puts the cap, the 50/50 split and the consumer-caution exception on the agenda for a consultation before the end of 2026, aimed at improving consistency in how the policy is applied. On current timing, that consultation will run into (or beyond) the point at which the PSR’s payments functions transfer to the FCA.
The result is a genuine handover test. Consolidation is sold as simpler oversight; the first real proof will be whether a single merged supervisor reaches the same conclusion the specialist regulator would have on who pays for fraud. Receiving banks have long argued the split over-weights them; consumer advocates want the safety net widened, not trimmed. Whichever way the answer lands, it will now be decided inside the FCA, and it will show, early, whether one regulator changes the economics of fraud loss between Britain’s banks.
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