New UK payments watchdog proposes tough regime

New UK payments watchdog proposes tough regime

The UK's new Payment Systems Regulator (PSR) has set out its plans to regulate the £75 trillion industry via a package of measures intended to promote innovation and competition and provide fairer access to payment systems.

The PSR says it intends to create a Payment Strategy Forum with broad stakeholder representation to chart the future direction of new payments initiatives. It will also undertake two market reviews to assess the ownership and competitiveness of the current infrastructure and look at how indirect access is provided.

Hannah Nixon, managing director of the PSR, says: "The systems we have today have been developed incrementally over time by the major banks. So while they are relatively resilient, they are often treated as back office functions. Competition is limited, decision making opaque, and this is stifling innovation. This has to change."

The PSR will will regulate the largest and most important payment systems when its opens for business in April 2015. HM Treasury is currently consulting which systems to include and has proposed the main interbank payment systems: Bacs, Chaps, Faster Payments, Link, Cheque and Credit Clearing, Northern Ireland Cheque Clearing, and the two largest card systems in the UK, MasterCard and Visa.

The watchdog will have the power to carry out enforcement investigations, issue penalties and censures, and compel operators to take remedial action. The PSR will also handle commercial disputes regarding access to payment systems or fees and charges relating to services provided by them. It also has the power to force a firm to sell its interests in an operator.

Open for consultation until 12 January 2015, the full package of measures proposed by the regulator can be found here.

Comments: (6)

A Finextra member
A Finextra member 13 November, 2014, 13:38Be the first to give this comment the thumbs up 0 likes

Interesting to see how the authorities think that they can enforce innovation and competition by restricting businesses from earning revenue from their investments and take away the advantage of unique selling points created by such businesses. On the contrary the effect will be to push away investment capital from innovations in this area since the message reads: If you achieve something good and valuable, we will take it away from you and hand it over to all the copy cats in the world...

Alex Letts
Alex Letts - U - Sheffield 13 November, 2014, 14:14Be the first to give this comment the thumbs up 0 likes

Looks a long hard road for the PSR

A Finextra member
A Finextra member 13 November, 2014, 16:28Be the first to give this comment the thumbs up 0 likes

The mvoes outllined by the PSR in the report linked to in the article come as no suprise. The seeds of change were sown as far back as 2000, in the Cruickshank report that has promoted a series of industry-wide initiatives that have been directed with only a light touch from the regulator or the government. These initiatives have evidently not gone far enough to address the original concerns regarding the creation of an open marketplace, a world class infrastructure and a competitive landscape spanning retail and corporate banking.

Initiatives to date have been a bank/ industry reponse but have not been regulation-driven. While the Payments Council can be proud of what is has achieved against a backdrop of changes affecting payments in the SEPA area at a great cost to the banks, the effectiveness of a body governed by the same entities (banks) that both govern the affected schemes and own the affected infrastructure in creating real change has been proven to be insufficient to meet the aspirations of a government pulling the economy out of a banking-led recession. A stronger hand is perhaps needed to bring objectivity to the cause of creating a fertile competitive market for payments within the £75 trillion financial services indsutry in the UK.

A Finextra member
A Finextra member 14 November, 2014, 08:15Be the first to give this comment the thumbs up 0 likes

Most recent UK Bankig innovation has been initiated by the UK Government driving the banks to do things that were not necessarily or clearly seen as being in the Banks best interest - Faster Payments, CASS and Mobile Cheque Imaging being the most prominant of these. Paym is a useful add on too!     The ECB/EC drove SEPA, requiring banks to innovate a (complex) single payment mechanism across europe (reluctantly and slowly) - but to be fair - uniting the EU's domestic payments system was a job without a business case due to low volumes and the EU communities complex payments systems and history....   

If you wait for the market where there is no market nothing will happen. Even where there IS a market, sometimes the market is too slow (See the USA and EMV for details)  if you are driven by central government you get clumsy innovation -  by opening up the market to competition  and creating a market similar to the Energy industry,  Hannah Nixon and the PSR should be able to find the middle way. Meaning Government dont have to constantly crack the whip....and we dont rely on Banks to innovate alone, the market can now help them to do that....  Positive change is good - this is not change for change's sake.

Jim Molloy
Jim Molloy - Self-employed - Dublin 14 November, 2014, 10:57Be the first to give this comment the thumbs up 0 likes

I think a key development is that Mastercard and Visa have been included within the PSR regulatory remit, which was not case with the Payments Council

A Finextra member
A Finextra member 14 November, 2014, 16:05Be the first to give this comment the thumbs up 0 likes

PSR - we need digital ID/KYC or you will be attempting to build a new landscape -  upon sand.