The direction of travel is towards a more agile framework: technical and firm-facing requirements would move from legislation into FCA rules, while core consumer protections and perimeter provisions stay in statute. The consultation also considers how the framework should evolve to accommodate tokenised payments, new open banking use cases and agentic payments. The consultation will remain open for 12 weeks and closes on 6 October 2026.

Key takeaways

• The Payment Services Regulations 2017 (PSRs) and Electronic Money Regulations 2011 (EMRs) are in line for a significant overhaul, with the Government considering which requirements should remain in legislation and which should be delegated to the FCA.
• The Government is proposing a single set of regulated activities covering both fiat and tokenised payment services (including tokenised deposits and UK-issued stablecoins), though currently authorised firms would need a variation of permission to provide tokenised payment services.
• Open banking reforms would establish a long-term statutory and regulatory framework, including the proposed new right of access for variable recurring payments and new FCA powers under the Data (Use and Access) Act 2025.
• The consultation calls for industry feedback on how authentication, consent and liability rules will need to adapt to support the rise of agentic payments.
• The Government is considering enhanced senior manager accountability in payment and e-money institutions to better manage financial crime risk in the sector.

Overhaul of the PSRs and EMRs through secondary legislation

The consultation sets out the Government’s proposed approach to modernisation, which involves identifying which requirements of in-scope legislation (namely, the PSRs, EMRs, Cross Border Payments Regulation, and SEPA Regulation) can be delegated to the FCA (and thereby subject to new FCA rules) and which should be retained in legislation. The Government’s proposed reforms will be implemented through secondary legislation, with further detail on implementation to follow after the consultation.

A key question the consultation asks is how much of the existing framework should remain in statute and how much should be delegated to the FCA. The Government suggests that more detailed and technical provisions could be moved into the FCA’s rulebook to support a more agile and outcomes-focused regime, drawing on the FCA’s supervisory expertise. Certain core provisions would then be retained in legislation, including the payments perimeter, key definitions, and important consumer and firm protections where a stable statutory underpinning is needed.

Some reforms are already committed rather than merely proposed: the Government has confirmed it will revoke the PSRs’ Strong Customer Authentication requirements so the FCA can set more outcomes-focused rules, building on changes already made to allow firms to delay suspected fraudulent payments by up to 72 hours and to require 90 days’ notice before closing a customer’s account.

The consultation also invites views on which international developments—including the EU’s recently agreed Third Payment Services Directive and Payment Services Regulation— the UK should reflect in its own framework.

Tokenised payments

The consultation positions tokenised payments as a major driver of payments reform, which can support programmable finance, increased efficiencies, reduced costs and improved settlement, particularly in wholesale financial services. It therefore intends to use these reforms to regulate tokenised payments, including UK-issued stablecoins and tokenised deposits, for their use in payments.

Tokenised deposits are described as digital forms of bank deposits on a distributed ledger, and the Government’s approach (per the latest updates to the UK financial services regime to introduce a new cryptoasset regulatory regime) is to regulate tokenised versions of financial instruments in the same way as their traditional counterparts where appropriate, based on the principle of “same risk, same regulatory outcome”.

The Government considers that stablecoins have the potential to play a significant role in retail and wholesale payments, but that stablecoins used for payment purposes should be subject to robust standards because of risks including de-pegging, financial stability and consumer confidence.

The consultation proposes that “UK-issued qualifying stablecoins”, and potentially in the future stablecoins issued in overseas jurisdictions where an overseas jurisdiction is ‘recognised’ as providing similar outcomes to the UK’s, can be treated as “money-like” and brought within the UK payments perimeter. Otherwise, overseas-issued stablecoins would not be regulated under the payment services framework and would instead be regulated under the new cryptoasset intermediary activities where those activities apply.

In addition, the Government wants clarity between the payments regime and the new UK cryptoasset regime, including avoiding a scenario where firms need two sets of permissions for the same activity where a UK-issued qualifying stablecoin is being used to make payments. It also intends that safeguarding of UK-issued stablecoins in the course of providing payment services should eventually be regulated under the payments regime, rather than requiring separate cryptoasset safeguarding authorisation for those activities.

To simplify the payment services framework, the Government proposes to merge some of the current regulated payment services activities while splitting others, with all activities capable of being carried out as both fiat and tokenised payments. Firms will however need appropriate permissions or to seek a variation of permission to provide tokenised payments (separate from existing payment services).

The consultation also asks how the framework should adapt to support smart contracts and programmable payments, for example enabling a business to pay a supplier automatically on receipt of goods rather than waiting for an invoice.

Open banking

The Government’s open banking proposals seek to evolve the legislative framework from the current mix of the PSRs and the Competition and Markets Authority’s Retail Banking Market Investigation Order 2017 to a long-term statutory framework supported by FCA powers under the Data (Use and Access) Act 2025. The existing rights of access underpinning open banking would remain in statute and the Government proposes to introduce a new right of access to support variable recurring payments.

The consultation also considers how open banking should be funded and commercialised. The Government is considering whether the FCA should have pricing powers for new open banking products and services, whether access currently provided for free should in some cases move to a commercial basis (such as by allowing account servicing payment service providers (ASPSPs) to charge third-party firms a fair fee for access under certain circumstances), and whether the FCA should have powers to intervene directly in scheme pricing where necessary. The consultation also proposes FCA rule-making powers for ASPSPs, payment initiation service providers and account information service providers, as well as powers to regulate the Future Entity and commercial open banking schemes as interface bodies. Notably, the FCA could also require each open banking scheme to adopt a centralised pricing model, subject to guardrails on fairness and transparency.

Agentic payments

The Government identifies agentic payments as a strategic opportunity for the UK. It describes agentic AI in payments as the use of AI agents to autonomously analyse, initiate, approve and execute payments on behalf of consumers or firms. The Government sees potential benefits for firms in cash flow management, operational efficiency and payment routing, and potential benefits for consumers in reduced friction, optimisation of preferences and cost savings.

The consultation recognises, however, that the PSRs were designed before the development of AI and may not fully facilitate agentic AI use cases. It therefore asks whether the PSRs should be updated in areas such as authentication, consent and liability for unauthorised transactions to support agentic payments safely and at scale. There appears to be strong industry appetite already: the FCA received a record number of applications for the second cohort of its Supercharged Sandbox, which supports firms testing new propositions, including agentic payments.

Financial crime and senior manager accountability

The consultation also reflects the Government’s concern that the payments and e-money sector has grown in scale and complexity since the PSRs and EMRs were introduced. The Government notes that the most recent National Risk Assessment has identified an increased financial crime risk within the sector, linked to rapid sector scaling and increased complexity and diversification of services, including product innovation.

Against that background, the Government is seeking views on whether further accountability mechanisms are needed, including enhanced ongoing responsibilities for senior managers of payment and e-money institutions. The focus is on whether strengthened senior manager accountability would support more effective oversight and risk management, including financial crime risk management, without imposing disproportionate costs or undermining the UK’s international competitiveness. The consultation does not propose a specific mechanism at this stage, instead seeking industry views on whether, and how, enhanced accountability should be introduced.

Next steps

The consultation points to a broad reshaping of the UK payments framework rather than a narrow update to existing rules. Firms should consider how the proposed delegation of requirements to the FCA, the expansion of the payments perimeter to tokenised payments, the open banking reforms, and the focus on agentic payments and financial crime may affect their authorisations, permissions, governance, systems and product strategy. The consultation remains open for 12 weeks and closes on 6 October 2026.