The future of payments – UK/EU legal outlook for 2025
2025 promises another busy year for the payments sector. The compliance landscape looks increasingly complex. Demands from regulators and customers are going up. So too are cost pressures, driven by competition and innovation. In our Payments Outlook 2025 we explore the key financial regulatory developments, focusing on the EU and UK payments industries.
Payment services regulation
The European Commission’s proposal for a revised Payment Services Directive and new Payment Services Regulation will be debated by the EU’s legislators later in 2025. In the meantime, firms have an upcoming deadline under the EU Accessibility Act to ensure wide access to their payment services.
Banks in the eurozone are implementing the Instant Payments Regulation. From 9 October 2025 they must be ready to send, as well as receive, instant payment credit transfers in euro. They also need to conduct verification of payee for these payments.
Managing operational incidents
Payment firms will embed new operational resilience standards. Firms in the EU must comply with the Digital Operational Resilience Act (DORA). Firms must update contracts with ICT providers and prepare for new incident reporting and data-sharing requirements.
From 31 March 2025, UK firms must stay within impact tolerances during severe disruptions. The UK regulators are now developing an incident regime and new rules for reporting a register of material third party arrangements.
Future of retail payments
The future of retail payments in the UK and EU is currently open to a diverse landscape of payment methods. In the UK the National Payments Vision aims to promote account-to-account payments via Open Banking. Meanwhile, the EU is using regulation to drive innovation, for example via the Instant Payments Regulation.
Both regions are updating their regulatory regimes to accommodate stablecoins. The EU is continuing to implement the Markets in Crypto-Assets Regulation (MICAR) and the UK plans to develop its own cryptoasset regulation. Alongside these innovations in the private sector, central banks are exploring central bank digital currencies (CBDCs). Both the Bank of England and the European Central Bank aim to balance innovation with financial stability.
A North Star for UK payments
The UK Government’s National Payments Vision outlines a future where the UK has a trusted, world-leading payments ecosystem supported by next-generation technology. The vision aims to update payments infrastructure, reduce regulatory overlaps, unlock Open Banking and protect against fraud.
A new Payments Vision Delivery Committee will suggest upgrades to the Faster Payments System. The Financial Conduct Authority (FCA) will lead on payments-related matters, including Open Banking and fraud prevention.
Rewriting the UK safeguarding regime
The FCA will introduce new safeguarding rules to set higher standards for how payment firms handle customer money. Interim rules, likely effective from autumn 2025, will overlay existing requirements and include measures like reconciliations, external audits, and monthly regulatory returns.
These rules will evolve into a more prescriptive regime, with customer money to be held on trust in designated accounts. The FCA plans further consultations on aspects of its proposed safeguarding regime. Meanwhile, a review of the special administration regime for payments is also underway.
Tackling authorised push payment scams
Authorised push payment fraud remains a significant issue in the UK, with payment service providers now required to reimburse victims in certain situations. The Payment Systems Regulator (PSR) will launch a review of this policy in 2025.
In related developments, the FCA will assess how firms use new powers to delay suspicious payments and the UK government will encourage tech and telecoms providers to evidence what they are doing to reduce fraud levels.
Improving Consumer Duty compliance
The FCA’s Consumer Duty, fully operational in 2024, aims to enhance consumer protection in UK financial services. Firms must improve data quality, evidence compliance in reports, and demonstrate adequate consideration and challenge at board level.
Last year the FCA found that only half of payment firms comply satisfactorily with the Duty. As firms continue to embed the Duty into their day-to-day processes, the areas of focus for FCA supervision will include transparency of FX pricing.
