UK payments regulator calls for 'pipes and wires' innovation

UK payments regulator calls for 'pipes and wires' innovation

The managing director of Britain's new Payments Systems Regulator has bemoaned a lack of innovation in the back-end infrastructure of payments, and warned that she will step in if industry does not up its game.

Speaking at a conference in London, Hannah Nixon cited Paym, Apple Pay and Barclaycard's new bPay as examples of innovations that are making payments quicker and simpler for consumers and merchants.

However, while acknowledging the introduction of Faster Payments, the PSR chief told her audience that "little innovation is happening around the underlying infrastructure. Few new and viable alternatives to the status quo have emerged."

Nixon argues that this is partly because of the network effects in payment systems and also because the big high street banks own both the schemes and infrastructure. And, she warns, if these issues mean that innovation cannot be delivered commercially, the PSR "will need to intervene directly".

The PSR is already investigating the market for sponsor banks providing indirect access to payment systems for smaller players, as well as the competitiveness and market structure of the payments pipes and wires. "Depending on what we find, we may need to take action to change market dynamics and remove barriers," says Nixon.

Less tangible issues will be addressed by the new Payment Strategy Forum, which will bring together stakeholders to develop a long-term strategic vision for payments under an independent chair.

Comments: (6)

A Finextra member
A Finextra member 29 June, 2015, 16:571 like 1 like Well what a surprise! Excuse me for my "told-you-so" smugness, but just seems to support what Chasm Management Limited has been saying all along. Let's separate the business of banking, which banks and their regulators, overseers and compliance checkers do reasonably well, from the IT provision, here conflated To ".infrastructure" which banks patently cannot control operationally. Let the IT service suppliers do that - they have done safely and reliably for years. Maybe the IT service suppliers need an equal voice on the Payments a Council,or is that the kind of change that financial institutions see as a risk?
Alexander Mifsud
Alexander Mifsud - - London 29 June, 2015, 22:51Be the first to give this comment the thumbs up 0 likes

I welcome Hannah Nixon’s comments and share the view that more needs to be done to create the environment for payments innovation. As a technology provider to banks and financial institutions, my company Ixaris has a direct role to play in enabling that change. A few weeks ago, I shared a platform with leading payments industry experts at PayExpo in London, where the audience’s appetite for open payments access was unequivocal, but there was no clear view on how this might come about.

That thinking is, in part, why Ixaris has launched the ‘Open Payments Ecosystem’ project, with funding from the EU. The project will deliver the technology platform that allows banks to collaborate with developers, small and large, to provide access to their infrastructure in a safe environment to enable an explosion in the development of payment applications addressing the diversity of customer needs.

We believe such a platform, an exchange in essence, is fundamental to the success of open payments.


A Finextra member
A Finextra member 30 June, 2015, 05:17Be the first to give this comment the thumbs up 0 likes

Modernising the 'pipes and wires' and opening payment systems to competition isn't just about banks and technology.  When a networked payment system comes under stress, those weaker institutions with less access to liquidity and credit become a source of systemic risk and contagion of instability.  Managing liquidity and credit across the payment system, in good times and under stress, is the big challenge.

Bill Trueman
Bill Trueman - - London 30 June, 2015, 07:50Be the first to give this comment the thumbs up 0 likes I am not a vendor with a technology solution to sell; so whilst I agree that the sentiment expressed by the PSR MD is laudable, it is no less valuable than othe 'broad' and pointless statements such as "we should have fewer wars" or "children should not go hungry". What exactly does she mean and how should this be effected? There are no "pipes and wires" like she had and saw in her last role as a regulator, and one has to bear in mind that the infrastructure is safer, more secure, trusted and used as the backbone for £billions of payments every day with complete confidence across the world. Whatever is done needs to take full cognisance of the needs of other legislation and standards that is more critical and must be high on the agenda like AML, PoTA, DTR, Data Protection, PCI DSS, encryption etc. Let's have a little more clarity, some clear visibility on what is needed and some plans rather than these open-ended ideals that nobody can do anything with.
Raymond Lee
Raymond Lee - PHOS - London 30 June, 2015, 11:36Be the first to give this comment the thumbs up 0 likes

It's not really clear just part of payments Ms Nixon is referring to here. With so many different strands, from credit card payments, bank payments and within those two segements many different areas, where are her comments aimed? 

It seems to be forgotten that the general public want payments to be safe and fast. Pretty much most of the time they are. But to make that happen takes huge investment and surely it's only fair for those making that investment to get a return. More clarity is needed from the PSR with regard to this statement and just what and where she wants changes made. 

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 30 June, 2015, 12:15Be the first to give this comment the thumbs up 0 likes

As a technology marketer, I do have a vested interest in pushing technology but I still agree with @BillT and @RaymondL.

  • Faster Payments is underlying infrastructure. It happened in 2008. Most countries, including USA, don't have anything similar, even seven years later. So, what more innovation does the PSR MD want in infra?
  • TELCOs tried carrier billing as an alternative rail although it never went mainstream, with some startups who began as pure-play carrier billing providers later adopting card rails in order to ensure their own survival. Are banks to be blamed for that?
  • In a larger context, if nonbanks don't have what it takes to build a viable alternative to banking rails, what can banks do about that?

Can the PSR outline what innovation it wants to drive by its warning to "intervene directly"?