Deregulation in some areas is just a bad idea!
The UK government’s drive to reduce regulatory burdens includes plans to abolish the Payment Systems Regulator (PSR), raising concerns about the future of consumer protection in the payment sector. While the PSR’s functions will transfer to the Financial Conduct Authority (FCA), critics warn that this merger may weaken oversight just as APP scam reimbursement rules are starting to show strong early results. An independent review of the current £85,000 reimbursement cap is planned for October 2025, amid pressure from fintech firms to lower it further
On March 12, 2025, the UK’s Payment Systems Regulator (PSR) appeared before the Parliamentary Treasury Committee, one day after the UK government’s bombshell announcement to abolish the regulator. The move, framed as a step to cut bureaucracy and stimulate economic growth, has sparked concern over its impact on consumer protection, especially in light of increasing payment fraud and APP scams.
PSR to be Merged into FCA: What’s Changing?
In testimony to MPs, PSR Interim CEO David Geale and Board Chair Aidene Walsh clarified:
The PSR employs 185 staff.
Abolition requires new legislation, expected to take up to 18 months.
Regulatory functions will be transferred to the Financial Conduct Authority (FCA), which has over 5,000 employees.
Despite the dramatic headlines, the PSR leadership emphasized that no major layoffs are anticipated. Instead, the goal is to reduce duplicative regulation between the PSR and FCA.
Consumer Protection and APP Scam Reimbursement Under Threat?
MPs voiced concern about the long-term impact on consumer protection. The PSR currently handles:
Payment infrastructure (Faster Payments, card networks)
Payments innovation
Reimbursement for APP scams
Consumer advocacy in financial services
By contrast, the FCA oversees fraud controls at financial institutions, but does not directly manage payment schemes.
Critics, including MPs and fraud prevention advocates, warn that merging the regulators could dilute accountability. A quote from the government’s press release caused particular concern: “Regulation will be cut back… to put more money in working people’s pockets.”
Preliminary Results: APP Scam Reimbursement Program
A central concern is the fate of the UK’s new APP scam reimbursement regulation, which began October 7, 2024. David Geale shared early performance data:
44,000 claims submitted (17% of 2023 volume)
£49 million reimbursed in 4 months
<1% of cases denied due to customer negligence
21% of claimants identified as vulnerable customers, fully reimbursed
96% reimbursement rate for valid claims
Only 79 claims exceeded £85,000, with £6.2 million reimbursed in high-value cases
These figures suggest that mandatory reimbursement has reduced consumer losses while minimizing false claims.
Why the £85,000 Reimbursement Cap?
In 2024, the reimbursement cap was reduced from £415,000 to £85,000, a move justified as follows:
Covers 99% of claim volume and 90% of total losses
Only 411 cases out of 250,000 in 2023 exceeded £85,000
Designed to protect investment in the fintech sector, which opposed the higher limit
Fintech firms now argue for a £30,000 limit, but consumers can still escalate cases beyond the cap to the Financial Ombudsman Service (FOS), which may grant up to £415,000 in compensation.
An independent review of the £85,000 cap is scheduled for October 2025, with a public consultation to follow if changes are proposed.
FCA Enhancements and Digital Platform Oversight
The FCA has introduced controls to delay suspicious payments, giving consumers time to reconsider potentially fraudulent transfers. Geale noted that many payments are canceled after a pause.
As for tech platforms, the FCA has worked with Google to curb fraudulent ads—but, as Geale admitted, this is often done via informal persuasion, not binding regulation.
The PSR has referred platform-related fraud issues to the UK Fraud Taskforce, led by Lord Hanson.
Future of UK Fraud Prevention: Reforms or Risks?
David Geale concluded with a firm call to action: “We need to stop banking fraudsters.” He emphasized that receiving banks—which often house the fraudsters’ accounts—must take more financial responsibility for scam losses.
Final Thoughts: More Deregulation, Less Protection?
While the UK government touts these reforms as pro-growth, the merger of the PSR into the FCA raises serious questions about the future of fraud regulation, APP scam protections, and digital payments oversight.
With consumer fraud still rising, dismantling a dedicated regulator like the PSR—without clear accountability guarantees—could have lasting consequences for UK. payment security
