UK government creates payments watchdog to boost competition
10 October 2013 | 15011 views | 4
The UK government is setting up a utilities-style payments regulator in a bid to make it easier and cheaper for new entrants to take on the high street banks.
The regulator, which will sit under the Financial Conduct Authority when it assumes it new powers in late 2014, is charged with increasing competition in a payments sector which sees 17.5 billion non-cash transactions a year.
The watchdog will have the power to order changes to how systems such as Faster Payments and Bacs operate and to make it cheaper for small banks to access these systems - currently the big banks own them and charge for access to key services.
It will also be able to investigate market players and impose fines and other sanctions when the rules are broken.
The Treasury decided to end the self-regulatory approach that banks currently enjoy, through the Payments Council, in the wake of 2011's bungled and abandoned attempt to scrap cheques.
Last summer a consultation was published floating three options: a significantly altered Payments Council, the creation of a new body called the Payments Strategy Board (PSB), or a brand new regulator.
Having initially favoured the middle-way PSB option, the government changed its mind after consultation and is now preparing to go for the full regulator, which will be set up via amendments to the Banking Reform Bill.
Financial Secretary to the Treasury, Sajid Javid, says: "The reforms we are announcing today will encourage innovation, ensuring that real benefits are passed onto each and every user of financial services."