HM Treasury has launched a consultation on plans to overhaul the way payment services and electronic money are regulated in the UK.
The proposals could lead to one of the biggest changes to the framework since the Payment Services Regulations 2017 (PSRs) and Electronic Money Regulations 2011 (EMRs) were introduced. Nearly 1,200 firms are currently authorised or registered under the two regimes.
At the heart of the consultation is a move towards a more flexible regulatory model. Rather than keeping detailed requirements in legislation, the Government is considering giving the FCA greater responsibility for setting rules.
The aim is to create a framework that can respond more quickly to changes in the payments market, while maintaining consumer protection and regulatory certainty.
The consultation was published on 14th July 2026 and will close on the 6th October 2026.
Moving Payments Regulation into the FSMA Framework
The current payments framework is unusual compared with much of UK financial services regulation. Many of the detailed requirements applying to payment and e-money firms are set directly in the PSRs and EMRs.
HM Treasury is considering changing that approach. Under the proposals, more detailed and technical requirements could instead be set by the FCA, bringing payments closer to the model used under the Financial Services and Markets Act 2000 (FSMA).
Some important provisions would remain in legislation. HM Treasury expects these to include the regulatory perimeter and key definitions, such as the definition of electronic money. Certain rights and consumer protections may also remain on the statute book where greater certainty is needed.
Other requirements could move into the FCA Handbook. Where this happens, the existing provisions would be removed from legislation and the FCA would be given powers to replace them with its own rules.
This is more than an administrative change. FCA rules can generally be reviewed and amended more readily than legislation. For firms, that could mean a payments regime which changes more frequently in response to developments in the market.
Modernising The PSRs And EMRs
HM Treasury is also using the consultation to consider whether the existing rules remain appropriate.
The PSRs and EMRs currently cover a wide range of requirements, from the scope of regulated activities and authorisation to safeguarding, capital requirements, customer information, and the execution of payments. They also establish important rights and obligations between payment service providers and their customers.
The Government is asking which of these requirements should remain in legislation and which should be delegated to the FCA. It is also asking whether provisions that remain in legislation need to be updated.
This creates an opportunity for a broader review of a framework which has developed through successive amendments. The Government says it wants the eventual regime to be clear, predictable, and proportionate, while supporting competition and innovation.
The changes also sit within a wider restructuring of UK payments regulation. The Government is already working to consolidate the Payment Systems Regulator (PSR) into the FCA, while separate work is under way to renew the UK’s retail payments infrastructure.
Preparing For The Future Of Payments
Technology is another major focus of the consultation.
HM Treasury wants the regulatory framework to accommodate new forms of payment without having to rely on repeated changes to legislation. This includes tokenised deposits and stablecoins, as well as developments in Open Banking.
The Government says tokenised payments could reduce costs and improve settlement processes. Its proposed approach is broadly based on achieving the same regulatory outcome where a tokenised product presents the same risks as its traditional equivalent.
Open Banking is also central to the reforms. The Government wants account-to-account payments, sometimes described as “pay by bank”, to develop as a stronger alternative to card payments. It is separately working towards a long-term regulatory framework for Open Banking under the Data (Use and Access) Act 2025.
The consultation also looks further ahead. HM Treasury highlights the emergence of “agentic payments”, where artificial intelligence agents could find products, compare options and complete transactions on behalf of consumers or businesses.
These developments remain at different stages of maturity. But taken together, they illustrate the difficulty of regulating a rapidly changing payments market through detailed requirements fixed in legislation.
What Firms Should Do Next
Payment institutions and electronic money institutions should review the consultation against their existing regulatory obligations.
Firms should also consider the longer-term implications of the proposed model. Greater reliance on FCA rules could create a more responsive regime, but it could also require firms to monitor and implement regulatory change more frequently.
Businesses involved in Open Banking, tokenised payments or other emerging payment models should review the proposals affecting those activities closely.
If you have questions about how the proposals could affect your business, or would like support in preparing a consultation response, please contact an API Compliance consultant using the form below.
