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Catch up on some of the stories our payments compliance analysts have covered lately, and stay up-to-date on the latest news.

Lawmakers Warn UK’s AI Oversight in Financial Services is Too Passive

The Treasury Select Committee’s report highlights gaps in accountability, stress testing and third-party controls, signalling that financial institutions should prepare for clearer rules and increased supervisory expectations.

The that the UK’s current regulatory approach to the use of AI by financial institutions creates significant risks to consumers and financial stability, potentially undermining the benefits the technology is intended to deliver.

It noted that 75 percent of UK financial services firms already use AI, with adoption highest among insurers and internationally active banks, underscoring the systemic relevance of the issue.

The UK government and much of the financial services industry argue that AI offers significant benefits, including faster customer service and enhanced cyber-defences, particularly in support of financial stability.

The committee does not dispute these benefits, but questions whether the current regulatory framework is sufficient to manage the associated risks.

Its findings were informed by 84 written submissions, correspondence from six major AI and cloud providers and four oral evidence sessions.

To date, UK regulators have focused on monitoring AI adoption, including tracking complaints and social media comments and engaging regularly with market participants.

However, the committee warned that this approach is creating regulatory uncertainty and identified several key areas of risk:

• Lack of transparency in AI-driven credit and insurance decision-making.
• AI-enabled product tailoring and automated decisions risk increasing financial exclusion, particularly for vulnerable consumers.
• Unregulated financial advice generated by AI tools risks misleading or misinforming consumers.
• Wider use of AI may increase fraud risks

The committee also highlighted the need for greater clarity on accountability when AI-related failures occur, noting that although the Bank of England and the Financial Conduct Authority (FCA) conduct cyber stress testing, neither undertakes AI-specific cyber or market stress testing.

The report also criticised the UK’s slow progress in implementing the (CTP) regime, with HM Treasury yet to designate its initial list despite financial institutions’ reliance on a small number of AI and cloud providers.

On publication, the committee warned that, “By adopting a wait-and-see approach, the major public financial institutions, which are responsible for protecting consumers and maintaining stability in the UK economy, are not doing enough to manage the risks presented by the increased use of AI in the financial services sector.”

UK High Court Ruling on Cross-Border Interchange Fees Paves the Way for Price Regulation

The decision rejecting Visa, Mastercard and Revolut’s challenge clears the way for the Payment Systems Regulator (PSR) to cap interchange fees on outbound card-not-present (CNP) transactions involving UK merchants and European Economic Area (EEA) issuers.

In an published in mid-January 2026, Justice John Cavanagh ruled that the PSR has the authority to cap interchange fees on these transactions.

The ruling thereby removes a major legal obstacle to one of the PSR’s most high-profile post-Brexit interventions in the payments market.

The case concerned outbound EEA–UK CNP consumer transactions, meaning transactions where a UK merchant accepts a Visa or Mastercard card issued by a bank in the EEA.

In these transactions, the merchant and acquirer are in the UK, and the interchange fee flows from the UK acquirer to the EEA issuer.

In December 2020, when the Brexit transition period came to an end, EU interchange fee caps ceased to apply to these transactions.

Visa and Mastercard subsequently increased their default outbound CNP interchange fees on EEA-issued cards from the pre-Brexit levels of 0.2% (debit) and 0.3% (credit) to 1.15% and 1.5% respectively.

Following a , the PSR concluded that these increases were not constrained by effective competition and were costing UK merchants between £150m and £200m per year.

In December 2024, the regulator therefore announced a decision in principle to cap those default interchange fees, using a general direction under Section 54 of the (FSBRA).

Visa, Mastercard and Revolut did not challenge the PSR’s economic analysis or the merits of the proposed caps. Instead, they argued that the regulator lacked the legal power to impose price caps using Section 54.

Their core argument was that Section 54 allows the PSR to regulate how payment systems “operate”, but it does not authorise price regulation.

If Parliament had intended to give the PSR a power to cap interchange fees, the claimants argued, it would have done so explicitly.

Mastercard and Revolut also argued that, even if Section 54 allows price caps in principle, Section 108 of the FSBRA prevents the PSR from using that power where rules affect access to, or participation in, a payment system.

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Delay to CLARITY Act Prolongs Uncertainty in US Digital Asset Sector

By putting the Digital Asset Market Clarity Act of 2025 (CLARITY Act) on hold, lawmakers have reinforced the constraints on traditional financial institutions’ participation in the crypto-asset space.

Although the passed the House of Representatives with bipartisan support in July 2025, its path through the Senate has encountered several significant obstacles.

A major point of contention involves an amendment to the related of 2025 (GENIUS Act) that would prohibit platforms from paying interest to stablecoin holders.

Traditional banks are concerned that stablecoin yields could cause deposits to leave the banking system, creating systemic risk. Conversely, crypto firms argue that such limitations would make US companies less competitive globally.

More fundamentally, the dispute reflects an unresolved policy question over where yield-bearing stablecoins should sit on the spectrum between payment instruments and investment products.

In addition, lawmakers are split on whether the bill should include specific language addressing official conflicts of interest, particularly those perceived to relate to President Trump’s family’s ties to the crypto sector.

Although not central to the bill’s substance, these concerns have complicated coalition-building and increased amendment pressure.

Most recently, a scheduled for January 14, 2026, was postponed because lawmakers had introduced more than 100 proposed amendments.

Senator Tim Scott (R-SC), chair of the Senate Banking Committee, opted to postpone the vote rather than risk the bill’s failure due to the contentious nature of these additions.

As a result, and amid a shift in legislative focus towards housing, further markup in the Senate Banking Committee is unlikely before late February or March 2026.

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