How UK Payment Regulations Are Changing in 2025

The Financial Conduct Authority (FCA) and the Payment Systems Regulator (PSR) are leading a series of reforms aimed at strengthening consumer protection, enhancing transparency, and fostering innovation across payment services. These updates touch every corner of the ecosystem—from how money moves between accounts, to the way service providers handle open banking transactions and recurring payments.
At the heart of these changes is a renewed focus on regulatory consultation, with the government and industry stakeholders working together to shape the future of payment systems in the UK.

Major Regulatory Changes to Watch

From safeguarding overhauls to mandatory fraud reimbursements and open banking expansion, regulators are introducing sweeping changes aimed at strengthening consumer protection, enhancing operational resilience, and fostering innovation.

What will happen?

One of the most significant regulatory shifts in 2025 is the proposed transformation of the safeguarding regime for payment and e-money service providers. The FCA’s consultation paper CP24/20 outlines a move away from the current framework under the Payment Services Regulations (PSRs) and Electronic Money Regulations (EMRs) toward a more robust, trust-based model inspired by the Client Assets Sourcebook (CASS).
This change aims to ensure that money held by providers on behalf of customers is better protected, especially in the event of insolvency. The goal is to minimize shortfalls in safeguarded funds and ensure faster, more cost-effective returns payments to consumers.

The Payment Systems Regulator (PSR) has introduced new rules requiring mandatory reimbursement for victims of Authorised Push Payment (APP) fraud—a growing threat in the UK’s digital payments ecosystem. Under this regulation, service providers must ensure that consumers who are tricked into transferring money to fraudsters are compensated promptly and fairly.

The UK is also expanding its open banking framework, with the FCA taking on a more prominent regulatory role. New legislation grants HM Treasury the authority to shape the future of open financial services, including how account data is shared and how third-party providers access banking infrastructure.
This evolution is expected to lead to a broader open finance model, where not just payments, but also savings, credit, and investment data can be securely accessed and used to deliver more personalized services.

While the EU moves forward with its PSD3 directive, the UK is charting its own course. Although many of the goals—such as improving consumer protection and enhancing competition—are shared, the UK’s approach is more flexible and tailored to domestic market needs.
This divergence means that payment service providers operating across borders must now navigate two distinct regulatory environments. For UK-based platforms, this could be an opportunity to innovate more freely, but it also requires careful alignment with both UK and EU regulatory expectations.

Strategic Implications for Software Providers

For software vendors and financial service platforms, these regulatory changes are more than just compliance checkboxes—they’re strategic inflection points.

  • Product teams must adapt their roadmaps to support new safeguarding models and fraud reimbursement workflows.
  • Engineering teams need to ensure that systems are secure, auditable, and capable of handling evolving account access and payment authorization protocols.
  • Compliance officers must stay informed through ongoing consultation updates and regulatory guidance from the FCA and PSR.
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Preparing for What’s Next

To stay ahead, your business should:

The UK’s regulatory environment is in flux. In March 2025, the government announced plans to consolidate the Payment Systems Regulator (PSR) into the Financial Conduct Authority (FCA), streamlining oversight and simplifying the regulatory structure for payments. This consolidation means that updates, consultations, and enforcement actions will increasingly come from a single source—making it even more critical for businesses to stay informed.

Regulators are actively seeking industry input. For example, the PSR’s 2025 consultation CP25/1 on card scheme and processing fees invites feedback from stakeholders to shape future remedies. Participating in these consultations allows companies to:
  • Influence the direction of new rules
  • Ensure that operational realities are reflected in policy
  • Build credibility and relationships with regulators

With regulations evolving rapidly, rigid systems can become liabilities. Instead, organizations should prioritize:
  • Modular architectures
  • API-first designs
  • Configurable compliance layers
This flexibility is essential for adapting to changes in safeguarding, fraud reimbursement, and account access protocols.

Regulatory compliance is no longer the sole responsibility of legal or risk departments. Cross-functional collaboration ensures that compliance is embedded into the product lifecycle—from ideation to deployment—and that all teams are aligned on risk, responsibility, and regulatory expectations.

From stronger payments safeguarding rules to mandatory fraud reimbursement and the expansion of open banking, the regulatory environment is becoming more complex—but also more opportunity-rich.
For providers, the message is clear: compliance is no longer just about avoiding penalties. It’s about building trust, enabling innovation, and delivering services that meet the highest standards of security and transparency.

FAQ

Need to learn more?

Regulation protects businesses and consumers from abuse, fraud, and financial risks, while ensuring market transparency and stability.

Key regulations include GDPR (data protection), the AML Directive (anti-money laundering), and PSD2 for payment security.

By implementing strict internal compliance processes, training employees on regulatory requirements, and using technology solutions to automate monitoring and audits.

Companies face substantial fines, criminal penalties, reputational damage, and potential restrictions on their business operations.

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