The UK government is preparing to bring in a utility-style regulator for retail payment systems, putting an end to the current practice of industry self-policing.
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.
At the time, the government said that it was in favour of the FCA-overseen PSB option; a middle-way between self- and government-oversight made up of industry representatives, people from outside the business such as consumer bodies and independent directors.
However, responses to this consultation argued that the PSB would need full regulatory powers if it was to be effective, something that the government is not willing to give a body that would still be heavily under the industry's influence.
The treasury has therefore decided to put its weight behind a full utility-style regulator which will work to break down barriers to competition and insure that the best interests of all stakeholders, including customers, are taken into account.
The watchdog - which will be either the FCA or an existing economic regulator - will have powers over payment systems and their direct members, initially covering the cheque clearing systems, automated payments systems, the Link ATM network, and three and four-party card schemes.
Operators of payments systems and their direct members will be required under statute to get a license committing them to efficient and transparent pricing, non-discriminatory access, good governance, maintenance and development of the payment systems, and co-operation.
To enforce compliance, the regulator will have information gathering powers and the ability to issue enforcement orders and impose fines.
Ultimately, if all else failed, the new body would even have the "power to take steps that would result in the divesting from the banks of their stakes in the payment systems".
The Treasury is opening up its new plans to consultation, inviting interested parties to respond by 25 June.
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