H2 2026 combines regulatory reform with changes to the economics of accepting payments. HM Treasury’s consultation could reshape authentication, stablecoin payments and open banking, while interchange and scheme fees remain a material cost issue without a regulatory deadline to trigger action. Commercial VRP is widening the options for recurring payments, while EU and infrastructure reforms will largely reach UK merchants through their payment providers.
Developments covered
Card scheme and interchange fees
Interchange, scheme and processing fees remain a significant source of pressure on merchants’ payment acceptance costs.
UK-EEA consumer card-not-present interchange remains a significant merchant cost issue. Following Brexit, Mastercard and Visa increased debit interchange from 0.2% to 1.15% and credit interchange from 0.3% to 1.5%. The PSR estimates the increases cost UK businesses an additional £150 million to £200 million a year. Separately, Mastercard and Visa increased core scheme and processing fees to acquirers by at least 25% between 2017 and 2023, adding at least £170 million a year to merchant costs. The PSR concluded that competition was not providing an effective constraint in either market. It decided in October 2025 not to proceed with an interim cross-border interchange cap while litigation over its powers continues, and is instead developing the methodology for a potential longer-term cap. Scheme and processing fee remedies are also progressing separately.
Key dates
- 15 January 2026: the High Court dismisses the schemes' challenge to the PSR's power to cap cross-border interchange. The interim cap was dropped and the lasting cap awaits a methodology, so no rate or commencement date is set.
- 2017 to 2023: scheme and processing fees up at least 25% in real terms, costing acquirers and merchants at least £170 million a year.
- No date set: two domestic fee remedies in implementation, with a third consulted on through CP26/1, requiring detailed UK financial reporting by segment.
Legal issue/risk
- No compliance trigger, so cost moves without prompting a review. It lands in margin.
- Consumer debit and credit interchange is capped at 0.2% and 0.3% respectively. Commercial-card interchange is generally outside those consumer-card caps and varies by scheme and product.
- Cross-border UK to EEA card-not-present stays roughly fivefold higher. No cap rate, no date.
- PSR transparency remedies bind the schemes, not your acquirer. Check your contract for pass-through.
- Scheme and processing fees remain uncapped and rising. No remedy touches them.
Next steps
- Break interchange, scheme and processing fees out separately in your acquiring statements to see where the cost is actually growing.
- Assess your exposure to uncapped commercial card interchange on B2B flows.
- Track the PSR domestic fee remedies as the milestones firm up.
Source
Modernising payments law and the PSR to FCA consolidation
A major reform of UK payments regulation is under consultation, alongside plans to consolidate the PSR’s functions within the FCA.
HM Treasury is consulting on major reform of UK payment services regulation, including moving more detailed requirements from legislation into FCA rules. The Government has also decided to consolidate the PSR’s functions into the FCA, but the detailed timetable depends on legislation and subsequent FCA rulemaking. For merchants, the most relevant areas include strong customer authentication, stablecoin payments, open banking and agentic payments. The consultation specifically considers how consent and liability should operate where an AI agent initiates a payment on a customer’s behalf. Most eventual obligations will sit with regulated payment firms, but the resulting rules could affect authentication journeys, checkout design and contractual allocation of liability.
Key dates
- 21 April 2026: HM Treasury consultation response confirms the PSR consolidation into the FCA.
- 14 July 2026: consultation on modernising payment services regulation published.
- 6 October 2026: consultation closes.
- 2027 to 2028: FCA consultations and the HM Treasury statutory instrument.
Legal issue/risk
- The existing regulatory framework largely remains in force while legislation and FCA rules are developed. Do not assume a fixed commencement date until the legislative and rulemaking timetable is confirmed.
- Strong customer authentication moves from legislation to FCA rules. Checkout friction becomes faster to change, and less predictable.
- The rewrite fixes the perimeter for open banking access and stablecoin payments. Later consultations inherit it.
- Consultation closes 6 October 2026. Perimeter questions are decided once.
- Nothing to comply with. The risk is absence from the process.
Next steps
- Respond by 11:59 pm on 6 October 2026, directly or through TPA, on authentication, stablecoin payments, open banking access and agentic payments. Responses go to Modernisingpaymentservices@hmtreasury.gov.uk.
- Respond to HM Treasury’s consultation by 6 October 2026, including on how payment regulation should address authentication, consent and liability where AI agents initiate or execute payments.
- Treat the existing PSR obligations on your providers as fully in force until legislation commences.
- Track the drafting for any change to access regimes or the provider perimeter.
Source
Payments Forward Plan and the Financial Services AI Adoption Plan
Variable recurring payments
Commercial VRP is extending account-to-account payments into recurring commercial transactions, with further use cases under development.
Commercial VRP extends open banking payments beyond sweeping into recurring payments for goods and services. The UK Payments Initiative launched in June 2026, with an initial scheme intended to support recurring payment use cases and provide a basis for wider commercial adoption. Commercial VRP is being developed initially around recurring payments for goods and services. Wider use cases may follow, but the scope and timetable of any subsequent expansion are not yet confirmed. Its commercial model remains under development, including transaction fees and purchase protection. Unlike cards, cVRP does not simply replicate the established card chargeback framework, so merchants will need to compare customer protection, disputes, refunds and fraud handling as well as headline transaction costs.
Key dates
- 2 June 2026: UK Payments Initiative launched
Legal issue/risk
- No obligation. Risk is commercial and contractual.
- No chargeback rights. VRP sits outside card scheme dispute machinery and needs its own refund path.
- Your PSP's terms, not scheme rules, decide where a disputed collection lands.
- Wave 2 has no date and no settled fee or protection model. Integration spend commits blind.
- Pilot on Wave 1 collections to price it without exposing checkout volume.
Next steps
- Ask your PSP whether it supports commercial VRP and on what pricing.
- Model VRP against card-on-file for your recurring flows.
- Watch Wave 2 for the e-commerce checkout use case.
Source
EU PSD3 and Payment Services Regulation
The EU is reshaping its payment services framework, principally affecting merchants with EU operations or payment providers.
The EU’s PSD3 and Payment Services Regulation package will replace and update significant parts of PSD2. The reforms cover payment fraud, authentication, open banking, transparency and the regulation and supervision of payment institutions. A provisional political agreement between the Council and European Parliament was reached on 27 November 2025 and confirmed by Coreper in April 2026. The package is therefore significantly advanced, but merchants should distinguish political agreement from final application of the new rules. For UK merchants, the principal exposure is through EU operations, EU customers and EU-regulated payment providers.
Key dates
- 23 April 2026: Council publishes final compromise texts.
- Q2 2026: Official Journal publication expected; every date below runs from whenever it occurs.
- Publication plus 20 days: the regulation enters into force.
- Entry into force plus 21 months, so roughly 2028: rules generally apply.
- Entry into force plus 27 months: payee verification applies (Articles 50 and 57).
Legal issue/risk
- No direct obligation. Exposure runs through your EU providers.
- Payee verification makes name mismatches on refunds, payouts and B2B collections a failure point. Beneficiary data quality matters before the rules apply.
- Wider provider fraud liability will surface as higher EU acquiring costs.
- All dates run from Official Journal publication, which has not happened. Treat them as provisional.
- Working horizon: 2028.
Next steps
- If you sell into the EU, ask your EU providers how they are preparing for payee verification and the fraud-liability shift.
- Treat 2028 as the working horizon and revisit once the Official Journal date is set.
Source
Freshfields on the EU's Payment Services Directive 3 and Payment Services Regulation.
EU Instant Payments Regulation (SEPA Instant)
The Regulation requires relevant PSPs to support instant euro credit transfers according to the statutory timetable and prevents them from charging more than for corresponding regular credit transfers
The EU Instant Payments Regulation requires relevant PSPs to support euro instant credit transfers and introduces requirements including verification of payee and restrictions on pricing instant payments above equivalent standard transfers. Implementation is phased according to the type and location of the PSP. For merchants, this is principally an infrastructure opportunity rather than a direct compliance obligation. Wider availability of instant euro payments could improve account-to-account payment propositions, but the commercial value will depend on PSP support, reconciliation, refunds, fraud controls and customer adoption.
Key dates
- 9 October 2025: in force for euro-area banks, including Verification of Payee.
- 9 January 2027: banks outside the euro area must receive instant euro payments.
- 9 April 2027: euro-area payment and e-money institutions must send and receive.
- 9 July 2027: providers outside the euro area must send, and Verification of Payee applies to them.
Legal issue/risk
- Nothing binds merchants, but the effects are already live.
- Verification of Payee has applied to euro-area flows since October 2025. Name mismatches are failing payouts now.
- Instant euro collection and refunds are available today at cost parity, guaranteed by regulation.
- Not using instant refunds is a competitive risk in EU markets that already expect them.
- Non-euro-area providers phase in to July 2027, so capability stays uneven.
Next steps
- If you take euro payments through EU providers, confirm they meet the instant-payment and Verification of Payee requirements.
- Clean up beneficiary name data on EU payouts and supplier payments before the 2027 dates widen where Verification of Payee applies.
Source
Consumer Credit Act reform
Reform of UK consumer credit law could affect Section 75 protection and point-of-sale credit arrangements.
The government is progressing reform of the Consumer Credit Act 1974, with the intention of replacing much of the prescriptive statutory framework with a more flexible regime and clearer consumer information. The reform programme has evolved from the original two-phase consultation approach, and legislation will be required to implement the changes. For merchants, relevance depends on whether they provide, broker or distribute regulated credit at the point of sale. The reform is therefore more significant for merchants offering credit products than for payments teams generally, but changes could ultimately affect disclosures and customer journeys where regulated credit is embedded at checkout.
Key dates
- 18 May 2026: HM Treasury publishes its policy statement on reform of the Consumer Credit Act 1974.
- 19 May 2026: the Financial Services and Markets Bill 2026, carrying the reform, introduced to Parliament.
Legal issue/risk
- Binds lenders, not you. Exposure arrives through the credit you distribute.
- Section 75 joint liability is inside the rewrite. Your indemnity position moves with it.
- New cancellation, settlement and termination rights land as lender contract terms.
- Refund and disclosure changes hit checkout on the lender's timetable, not yours.
- Detail shifts from statute to FCA rules: easier to change later, harder to fix in contract now.
Next steps
- Break interchange, scheme and processing fees out separately in your acquiring statements to see where the cost is actually growing.
- Assess your exposure to uncapped commercial card interchange on B2B flows.
- Track the PSR domestic fee remedies as the milestones firm up.
Source
HM Treasury policy statement on reform of the Consumer Credit Act 1974, 18 May 2026.
Payments infrastructure and settlement
Infrastructure reforms could affect payment costs, settlement and the services merchants receive from providers.
The UK’s wholesale payments infrastructure is continuing to evolve. The Bank of England is consulting on extending RTGS and CHAPS settlement hours towards near-24/7 operation, alongside wider work on resilience, APIs and interoperability between different forms of money. CHAPS is already scheduled to open at 01:30 from September 2027, extending the settlement day significantly. Further extensions are expected later. These changes primarily affect banks and payment providers, but could ultimately influence merchant settlement windows, treasury operations and the availability of payment services outside traditional banking hours.
Key dates
- 1 January 2027: Basel 3.1 in force (PRA), reaching merchants indirectly through acquirer pricing.
- September 2027: CHAPS early-morning extension go-live, a 01:30 start.
- 2026: BoE and HM Treasury publish the digital pound blueprint, joint assessment and decision together. No decision to introduce a digital pound has been taken, and primary legislation would be required if one were.
- Not before 2029: weekend RTGS and CHAPS settlement, if it proceeds.
Legal issue/risk
- Ask your acquirer whether Basel 3.1 changes your pricing from January 2027.
- EU-facing merchants: watch whether the digital euro's capped merchant fees survive into the final legislation.
- Otherwise keep the cluster on a watching brief.
Next steps
- • Ask your bank or PSP how planned extensions to RTGS and CHAPS operating hours will affect settlement cut-offs and treasury operations. • Review reconciliation and liquidity processes ahead of the September 2027 early-morning extension. • Monitor the Bank of England’s longer-term work on weekend and near-24x7 settlement.
Source
BoE RTGS and CHAPS settlement hours, PRA Basel 3.1, the digital pound update and the ECB digital euro pilot.