UK Government unveils payments innovation package to futureproof UK fintech

Source: HM Treasury

The UK’s payments sector is to be equipped for the future of rapid financial innovation through a new package announced during Fintech Week in London.

The measures will help the UK remain at the cutting edge by promoting innovation and trust within the payments sector to drive growth. This means delivering a more agile and streamlined regulatory framework and ensuring regulation can keep pace with rapid technological change whilst maintaining strong consumer protections.

City Minister Lucy Rigby continues to amplify the government’s efforts in maintaining the UK as the leading destination for fintechs to start, scale and succeed.

The government has set out further detail on how it intends to modernise payment services regulation to support innovation in money and payments, ahead of a forthcoming consultation with the sector.

At the core is a move to integrate payment services and electronic money into the UK’s broader financial services framework, creating a single, coherent approach across traditional and tokenised payments.

Key measures include:

• Integrating payment services and electronic money into the UK’s core regulatory framework, covering traditional payments, tokenised payments, stablecoins and tokenised deposits
• Regulating stablecoins used in payments where issued under the UK’s forthcoming regulated activity for stablecoin issuance
• Exploring how regulation should adapt to payments conducted by AI agents
• Granting the Financial Conduct Authority (FCA) new powers to oversee the future of Open Banking, including enabling new payment solutions within commercial schemes
• Introducing legislation to reduce administrative burdens for firms providing stablecoin payment services, while maintaining safeguards

Alongside this:

• Chris Woolard CBE has been appointed as wholesale digital markets champion to lead work on a tokenised wholesale financial markets system
• An additional £1 million will be provided to the Centre for Finance, Innovation and Technology (CFIT) from April to support collaboration and address key fintech challenges

The government has also responded to its consultation on bringing the Payments Systems Regulator into the FCA , as part of efforts to streamline regulation and reduce complexity.

Economic secretary to the Treasury, Lucy Rigby, said: “Fintech is true British success story, and we are backing the industry to maintain its competitive edge and go even further and faster in driving growth.

“This 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.

“I also welcome our new wholesale digital markets champion, Chris Woolard CBE, who will help the government drive tokenisation in our markets – a critical shift for the next “digital big bang” for the UK sector.”

Chris Woolard CBE, wholesale digital markets champion, said: “It’s an honour to be appointed digital markets champion for the UK’s Wholesale Financial Markets Digital Strategy. As financial markets increasingly move away from manual processes to digital, tokenised systems, collaboration and an open two-way dialogue between the private and public sectors will best support the Strategy’s success, and will ultimately enhance the UK’s global competitiveness as a leader in digital markets.

“UK fintech benefits from Britain’s world leading financial services sector offering a thriving start-up ecosystem, global banks and insurers, leading universities, and a regulator that engages with innovation early so firms can test, learn and scale responsibly.”

Over 3,000 fintech firms support tens of thousands of skilled jobs across the country, attracting over £2.6 billion in investment last year that is second only to the United States.

The government recognises the transformative potential of digital assets and blockchain technologies. These developments have the potential to fundamentally reshape how consumers and businesses interact with financial services, and the UK is well placed to be at the forefront of that transformation.

A consultation is set to be introduced on reforms to the regulation of payment services and electronic money, ensuring the framework is ready to support tokenised payments such as stablecoins, unlock the full potential of Open Banking, and explore how to enable the safe adoption of AI agents to conduct payments on behalf of consumers and businesses.

Through the Financial Services Growth and Competitiveness Strategy, known as the Leeds Reforms, announced last summer as part of the Chancellor’s Mansion House speech, the government set out its ten-year plan for the UK to be the world’s centre of choice for financial services investment over the next ten years. These reforms included measures to streamline the regulatory environment and make the UK the best place for fintechs to start, scale, list, and stay.

Stakeholder quotes

Janine Hirt, chief executive officer, Innovate Finance said: “The UK has all the ingredients to be a global superpower in fintech, payments and capital markets by leading in Open Banking, digital assets and stablecoin, and agentic AI.

“Unleashing innovators and championing transformation in markets is critical. We look forward to mobilising industry to work with Chris Woolard, Government and regulators to drive this strategic ambition and deliver at pace.”

Philip Belamant, co-founder and chief executive officer, Zilch said: “AI will fundamentally change how people interact with money, shifting payments from something consumers actively manage to something that is intelligently managed and optimised in the background. As this becomes a reality, it’s critical that regulation evolves to support innovation while maintaining strong consumer protections.

“We welcome the government’s focus on adapting payment regulation for AI-driven transactions. 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.”

Further reading: UK Government unveils Smart Data Strategy 2035, setting out vision for 20+ interoperable schemes