Government announces modernisation of payment services regulation
The UK government has declared its intention to modernise payment services regulation, updating it to support innovations in money and payments, according to an HM Treasury statement. The move aims to maintain the country's competitive edge in fintech, a sector that has grown to become a cornerstone of the British economy. As part of the announcement, the Treasury will publish a consultation inviting feedback from the payments sector to shape future regulatory frameworks.
Lucy Rigby, economic secretary to the HM Treasury, stated: “Fintech is a true British success story, and we are backing the industry to maintain its competitive edge and go even further and faster in driving growth.” Rigby is attending events during Fintech Week in London to promote the government’s efforts in maintaining the UK as the leading destination for fintechs to start, scale and succeed.
“Today’s package is our latest stake in the ground as we build a payments ecosystem that is secure, competitive and fully equipped to harness the opportunities created by rapid technological change,” Rigby added.
UK fintech sector at a glance
Britain is a world-leading destination for fintech, second only to the US in global fintech investment rankings. More than 3,000 fintech firms operate in the country, accounting for tens of thousands of jobs. Among them, Revolut, a UK-headquartered fintech firm, reported a £23 billion value jump last year, bringing the company to £57 billion. The digital bank has since been called Britain’s “leading technology company” by industry analyst Chris Skinner. However, in 2025, fintech investment in the UK fell to its lowest level since 2020, prompting the government to take action.
The government has committed to spending an additional £1 million to fund the Centre for Finance, Innovation and Technology (CFIT) from April to continue the centre’s work facilitating collaboration across the fintech sector. This investment is part of a broader strategy to foster innovation and ensure the UK remains attractive to both startups and established players.
Key elements of the new plan
The announced plan includes several regulatory changes designed to keep pace with technological progress and protect consumers. Firstly, the government will bring the Payment Systems Regulator (PSR) into the Financial Conduct Authority (FCA), streamlining oversight of payment systems. Secondly, it will lay out a single framework for both traditional and tokenised payments, aiming to create a level playing field for new digital assets. Thirdly, guidelines will be set on how payment service regulation should respond to AI agents conducting purchases for customers and businesses. Finally, the government will regulate stablecoin use while cutting administrative burdens for companies that want to provide stablecoin payments.
These measures reflect the growing importance of digital currencies and artificial intelligence in financial services. Stablecoins, in particular, have become a focal point for regulators worldwide as they offer the potential for faster and cheaper transactions but also pose risks to financial stability. By providing clarity and reducing red tape, the UK hopes to encourage innovation while maintaining robust consumer protections.
Appointment of Chris Woolard as wholesale digital markets champion
Alongside the regulatory package, the government is appointing Chris Woolard CBE as wholesale digital market’s champion. Woolard will work to make the country’s financial sector more competitive, particularly in the area of tokenised wholesale markets. He praised British investment in the sector, noting that the country offers “a thriving startup ecosystem, global banks and insurers, and leading universities,” as well as regulators who keep up with innovation to let firms “test, learn and scale responsibly.”
Woolard called for open dialogue between the private and public sectors to create a tokenised wholesale financial markets ecosystem. To improve communication, the government will publish a consultation asking the payment sector for feedback. This initiative builds on previous steps, including the establishment of a financial service regulatory regime for crypto assets and the FCA’s open finance plan for 2030, which aims to give consumers and businesses more control over their financial data.
Industry reactions and future outlook
Industry leaders have responded positively to the government’s announcements. Philip Belamant, co-founder and CEO of Zilch, said: “The UK has a real opportunity to lead globally in enabling agentic finance, helping consumers benefit from smarter, more efficient ways to manage their money.” The focus on AI agents, in particular, reflects a growing trend towards automation and machine learning in financial services, where algorithms can execute transactions on behalf of users with minimal human intervention.
The UK’s fintech ecosystem has long been a source of national pride and economic growth. From early successes like TransferWise (now Wise) and Monzo to the recent rise of Revolut, British startups have consistently punched above their weight. However, declining investment figures in 2025 underscore the need for proactive government support. The new package aims to address this by reducing regulatory uncertainty and encouraging long-term investment.
Looking ahead, the success of these measures will depend on their implementation and the ability of regulators to adapt to rapidly evolving technologies. The integration of the PSR into the FCA, for instance, could streamline oversight but also raise concerns about concentration of power. Similarly, the regulation of stablecoins will need to strike a delicate balance between fostering innovation and preventing systemic risk. The government’s commitment to open consultations suggests a willingness to listen to industry feedback, which may help fine-tune the final rules.
In the broader context, the UK faces stiff competition from other financial hubs such as Singapore, the European Union, and the United States. Each of these regions has its own regulatory initiatives aimed at attracting fintech talent and capital. By acting now, the UK hopes to maintain its position as a global leader in fintech, building on a legacy of innovation that has already delivered significant economic benefits.
Source: ComputerWeekly.com News