Two Years Later: Has the 2023 PSR Regulation delivered on its promises?
The payments landscape for UK merchants was set to change significantly with the introduction of the Payment Systems Regulator (PSR) reforms in June 2023. The reforms aimed to ensure merchants felt more confident and knowledgeable to switch providers, providing a more dynamic and competitive payments landscape.
In our research conducted with SMB merchants between 2023 and 2025, the findings reveal surprising insights about whether these regulations have achieved their intended impact and the effectiveness of these regulatory changes.
The Promise of the PSR Regulations
When the PSR implemented its latest round of regulatory changes two years ago, the goal was clear: increase competition in the payment processing market, empower SMBs, and ultimately create a more dynamic marketplace where merchants felt confident to switch providers for better deals.
The regulations aimed to:
- Make pricing more transparent
- Simplify the switching process
- Give merchants more control over their choice of payment processing by capping all contract lengths at 18 months
- Increase competitive pressure on payment providers
But as our new 2025 merchant survey data reveals, the results might not be as transformative as regulators had hoped.
Merchant switching behaviour
One of the aims of the PSR's regulation was to create a market where merchants were able to switch providers more seamlessly, removing the experience of many merchants who had been put on rolling contracts for months without awareness that they could switch to a better suited provider, and often, make a saving.
Through the PSR's regulatory impact to make merchants more knowledgeable of potential savings, and capping contract lengths at 18 months, we'd expected to see an uptick in planned switching activity from merchants.
However, our data tells a different story:
While there has been a slight increase in short-term switching intentions (particularly in the 3-6 month timeframe), there's also been a 5% decrease in those not planning to switch at all. Aside from that, the overall pattern remains remarkably similar between the 2023 and 2025 data. Looking at the total percentage of merchants planning to switch within the next 24 months, we see only a minor increase from 44% in 2023 to 49% in 2025.
SME Perceptions of Control
Another surprising finding is that SMBs report feeling just as much in control of their payment provider relationships as they did two years ago - no more, no less.
This lack of change in perceived control suggests that despite regulatory efforts to empower merchants, the fundamental power dynamics between payment providers and businesses haven't shifted significantly. The technical or contractual barriers that previously might have discouraged switching don't appear to have been substantially reduced in the eyes of merchants.
However, merchants are feeling more confident in their payments providers compared to 2023. This suggests that the PSR's remedies have had some positive impacts on merchants' confidence in providers since 2023. Whilst merchants' feelings of control and intention to switch haven't been impacted, their confidence in providers has, supporting the notion that having a regulated environment does have its benefits.
What does this mean for the UK payments market?
The data raises questions about the effectiveness of the PSR regulations:
1. Regulatory impact vs Market inertia
The minimal change in switching intentions suggests that regulatory interventions alone may not be sufficient to overcome market inertia. Merchants exhibit a strong tendency to stick with their current providers, which could be driven by factors beyond the scope of current regulations:
- Perceived switching effort: Even when actual switching barriers are removed, the perceived effort could still be deterring merchants from looking at other providers
- Lack of awareness of savings: Merchants may be unaware of potential savings available to them through switching providers
- Status quo bias: Behavioural economics shows that the majority of people are satisfied sticking with the status quo, unless they're given a compelling reason to make a change
2. The Satisfaction Paradox
Our results show that over half of merchants are 'happy and not intending to switch' (51% in 2025). This data point could indicate two potential conclusions within the SMB market:
- Merchants are genuinely satisfied with their current providers, indicating a well-functioning market
- Merchants remain unaware of potentially better options or are resigned to current conditions due to perceived switching difficulties
Our research suggests the answer likely lies somewhere in between. While genuine satisfaction exists for many merchants, others are unaware of the better deals or setups that could be better suited to their unique business needs and requirements.
3. Industry-Specific Responses
Whilst the survey results seemed fairly consistent amongst industries, there was one particular outlier. 43% of F&B merchants surveyed stated they were not happy with their provider, and are looking to switch, the largest percentage out of all industries surveyed.
Merchants in the F&B industry were also the only industry to state that their perception of their fees was that they were 'too high', suggesting that restaurants, cafes, and other F&B businesses are unsatisfied with their current providers, and are looking to switch in order to get better rates for their business.
These findings demonstrate a need for targeted, industry-specific provisions from the PSR that can address the nuanced challenges unique to different business sectors.
Where do we go from here?
The PSR regulatory acts in 2023 were a positive step in creating a more regulatory payments market. However, the similarities in merchant behaviour from 2023 to now suggests that there’s further work to be done:
Merchant education and awareness
The lack of merchant intent in switching and perception of control in their relationship with payments provider indicates more needs to be done to educate merchants on:
- Their rights under the 2023 PSR regulations
- The methods available to compare providers more effectively
- The potential savings they could make through switching
The savings available
Many merchants hold the belief that the switching process from one provider to the next is a complex process, and without a compelling incentive, aren't willing to go through the process.
The PSR stated that over 89% of merchants could make a saving if they switched providers, and many of these savings are substantive enough to make a real difference to a business's margins.
Through shopping around and comparing quotes from different providers, merchants can better understand whether the rates they're currently paying are the best for their business.
Competitive innovation
The relatively static switching intentions shows that payment providers aren't yet competing aggressively enough on factors that would motivate merchants to switch.
Encouraging innovation in service quality, pricing models, and merchant-focused features could create more compelling differentiation in the market.
Summary:
The 2023 PSR regulations are one step in the necessity to create a more dynamic payments market in the UK. While there are modest signs of increased switching intentions, the fundamental dynamics remain largely unchanged two years after implementation.
The payments market requires a more comprehensive approach, combining regulatory frameworks with education, practical support, and competitive landscape from acquirers in order to best provide for the needs of SMB merchants.
This blog post is based on research conducted in early 2025 comparing merchant attitudes and behaviors with similar research from 2023. The survey included 500 merchants across multiple industry sectors.