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. It is also set to publish a consultation inviting feedback from the payments sector. This announcement comes during UK Fintech Week, a key event showcasing the country's leadership in financial technology.

Lucy Rigby, economic secretary to the HM Treasury, said: “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 will attend 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, said the Treasury.

“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,” added Rigby. The UK 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. However, in 2025, fintech investment in the UK fell to its lowest level since 2020, prompting renewed government action.

Key Components of the Government’s Fintech Plan

The plan includes several major initiatives. First, bringing the Payment Systems Regulator (PSR) into the Financial Conduct Authority (FCA) to streamline oversight and reduce regulatory fragmentation. Second, laying out a single framework for both traditional and tokenised payment methods, ensuring consistency as digital assets become more mainstream. Third, setting guidelines on how payment service regulation should respond to AI agents conducting purchases for customers and businesses. Fourth, regulating stablecoin use while cutting administrative burdens for companies that want to provide stablecoin payments.

Additionally, the government has committed to spending an extra £1 million to fund the Centre for Finance, Innovation and Technology (CFIT) from April to continue its work facilitating collaboration across the fintech sector. This investment is intended to help bridge gaps between startups, incumbents, and regulators.

Appointment of Wholesale Digital Market’s Champion

The government is appointing Chris Woolard CBE as wholesale digital market’s champion in a bid to make the country’s financial sector more competitive. Woolard praised British investment in the sector, noting that the UK offers “a thriving startup ecosystem, global banks and insurers, and leading universities,” as well as regulators that 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.

Context and Previous Government Actions

This is not the first step in Britain’s path to fintech leadership. A few months earlier, the government decided to establish itself as globally competitive by creating a financial service regulatory regime for crypto assets. Recently, the FCA outlined its open finance plan for 2030, setting a roadmap aimed at giving consumers and businesses more control over their financial data. These measures reflect a broader strategy to maintain the UK’s edge as a hub for innovation.

The fintech sector in the UK has produced notable success stories. Revolut, a UK-headquartered fintech firm, reported a £23 billion value jump last year, bringing the company to £57 billion. Chris Skinner, CEO of The Finanser, called Revolut Britain’s “leading technology company.” However, the broader investment landscape has faced headwinds, with 2025 seeing a significant decline in fintech funding globally.

Industry Reactions and Future Outlook

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.” His comment underscores the excitement around AI-driven financial services, which the government’s new guidelines aim to support.

The government’s package addresses both opportunities and risks. Merging the PSR into the FCA could improve regulatory coherence, but some critics worry it may reduce the PSR’s focused oversight of payment systems. The single framework for tokenised payments aims to provide legal certainty for businesses experimenting with blockchain-based solutions, while the stablecoin regulation is designed to protect consumers without stifling innovation.

AI agents represent a growing frontier in fintech. These software programs can autonomously conduct transactions, manage portfolios, or negotiate prices on behalf of users. Without clear regulatory guidance, firms have been hesitant to deploy them at scale. The government’s proposed guidelines could unlock new efficiencies in e‑commerce and financial planning.

Beyond regulation, the government continues to invest in talent and infrastructure. The additional CFIT funding will support pilot projects and industry collaboration, especially in areas like open banking and data sharing. The wholesale market champion role, held by Chris Woolard, will drive efforts to tokenise bonds, equities, and other assets traded between financial institutions.

Challenges and Competition

Despite its strengths, the UK faces stiff competition from other financial hubs. The European Union is advancing its own digital finance package, and Singapore has aggressively courted fintech startups with tax incentives and sandbox environments. The UK’s departure from the EU has also introduced regulatory divergence, requiring UK fintechs to comply with two sets of rules if they operate across the channel.

Furthermore, the decline in fintech investment in 2025 highlights a need for sustained policy support. Venture capital funding for fintech globally dropped last year due to macroeconomic uncertainty and a shift in investor focus toward artificial intelligence and clean tech. The UK government’s proactive stance aims to reverse this trend by creating a more predictable and supportive regulatory environment.

The announcement during Fintech Week also signals a commitment to stakeholder engagement. The consultation on payment services will seek input from fintech firms, traditional banks, consumer groups, and technology providers. The results will shape final regulations expected later this year.

Economic Secretary Lucy Rigby emphasised that the package is designed to maintain the UK’s competitive advantage. With more than 60,000 people employed directly in fintech and millions more using digital financial services, the stakes are high. The government’s measures aim to ensure that the UK remains a top destination for fintech innovation, even as global competition intensifies.

In summary, the UK government’s fintech plan represents a comprehensive effort to modernise payment regulation, integrate AI and tokenisation, and strengthen regulatory coordination. By acting now, the government hopes to secure the sector’s long-term growth and maintain Britain’s position as a global fintech leader.

Source: ComputerWeekly.com News