Regulatory changes impacting the payments market

In this article we take a quick look at some recent key regulatory developments impacting the UK payments market.

PSR to be abolished

In line with the Government’s ambition to reduce complexity in payments regulation (as set out in last year’s National Payments Vision), it has been announced that the Payment Systems Regulator (PSR) will be abolished.

There’ll be no immediate changes to the PSR’s ongoing programme of work, however over time its remit will be primarily absorbed by the Financial Conduct Authority (FCA). Both regulators have commented that they will continue to work collaboratively in the interim alongside the Bank of England to ensure a smooth transition.

A consultation on the move is scheduled to take place during this summer, although timeframes for necessary legislative changes are currently unknown.

Once we have further details on the mechanics and scale of the proposed overhaul, we can better assess the potential impact. However, these changes raise question marks over the extent to which the PSR’s current strategy (as updated in January of this year) covering key focus areas (such as the fight against APP fraud, payments infrastructure upgrades and the reform of Pay.UK) will be followed during and following the transition.

We’ll continue to keep an eye on developments as they unfold.

FCA seeks views on changing contactless limits

The FCA has issued an Engagement Paper to support its review of the current limits for contactless transactions in the UK.

Currently, under the regulatory technical standards on strong customer authentication (SCA) and common and secure methods of communication (SCA-RTS), consumers can make a single contactless payment via a physical card of up to £100 until they reach the cumulative threshold of £300 or make five contactless payments in a row – at which point they must satisfy the SCA two factor authentication standard.

The limits were last raised in 2021 and contactless payments have continued to grow ever since, complemented by the popularity of mobile digital wallets (which enable two factor authentication via fingerprint or facial recognition technology). The FCA is reviewing contactless limits due to several factors including changing consumer payment behaviours, technological advancements, the increased use of digital wallets and inflation (since 2021), and recommendations flowing from the Future of Payments Review and Government's National Payments Vision.

Options being considered by the FCA include:

1. Giving payment service providers (PSPs) greater flexibility via a risk-based exemption for in-person transactions based on their own ability to achieve low fraud rates. Similar to the existing transaction risk analysis exemption for remote payments, PSPs could exempt higher value payments from SCA where they can demonstrate low rates of fraud;

2. Amending or removing the current contactless limits;

3. Harnessing the obligations on PSPs under the Consumer Duty rather than setting specific contactless limits.

The consultation closed on 9 May and we expect the FCA to publish its findings over the coming months.  We will continue tracking developments and it will be interesting to see how the industry helps to shape the final approach, which is likely to be more flexible and risk-based, supporting higher contactless limits while maintaining appropriate security measures.

How TLT can help

TLT’s Payments team includes industry specialists covering all contractual, data protection, regulatory, technology and other legal  issues impacting businesses, including both customers and suppliers of payment services.  If you need any legal or regulatory support in this space, please do get in touch.

Written by Alex Williamson with contributions by Ed Jeffrey and Francesca Jack

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at June 2025. Specific advice should be sought for specific cases. For more information see our terms & conditions.