What are payment service providers in the UK?
Payment service providers (PSPs) in the UK are FCA-regulated companies that enable businesses and consumers to send, receive, and process payments. They include card acquirers (such as Worldpay and Adyen), e-money institutions (such as Stripe and PayPal), and open banking payment initiators (PISPs such as GoCardless and TrueLayer). All PSPs operating in the UK must be authorised by the FCA under the Payment Services Regulations 2017.
What types of payment service providers exist in the UK?
UK PSPs span several categories: card payment processors (acquiring banks and payment gateways), e-money institutions (digital wallets and payment platforms), bank transfer facilitators (using Faster Payments or CHAPS), direct debit processors, and open banking PISPs. Some firms operate across multiple categories — Stripe, for example, is both a card payment gateway and an open banking-enabled bank transfer provider in the UK.
How does open banking change the payment service provider landscape?
Open banking has enabled a new category of PSP — the PISP — that can initiate payments directly from a consumer’s bank account without using card networks. This reduces costs for merchants (no interchange fees), improves payment speed, and removes the risk of card fraud. PISPs like GoCardless, Yapily, and TrueLayer are expanding rapidly as businesses seek lower-cost alternatives to card processing.
Open Banking in Practice: The PSR (Payment Systems Regulator) oversees payment systems infrastructure in the UK, while the FCA supervises individual PSPs. All PSPs must be listed on the FCA’s Financial Services Register. Open banking has blurred the lines between traditional PSPs and banks, with many fintechs now holding both EMI and PISP licences. Read our guide to the UK payments ecosystem on openfuture.world.
FAQ
Are banks considered payment service providers?
Yes — banks that process payments are also considered payment service providers and are regulated by both the FCA and PRA.
What is the best payment service provider for a small UK business?
It depends on your needs — Stripe and Square suit online and in-person card payments; GoCardless suits recurring bank transfers; Worldpay is suited to higher-volume merchants.
Is PayPal a payment service provider in the UK?
Yes — PayPal (Europe) S.à r.l. is an FCA-authorised e-money institution and payment service provider regulated under the Payment Services Regulations 2017.