The Payment Systems Regulator (PSR) has announced its strategy to regulate the £75 trillion payments industry when it becomes fully operational on 1 April 2015.
The proposal is structured to further the PSR’s three main objectives; promoting competition, promoting innovation and ensuring systems are developed and operated in the interests of service users.
Measures are geared towards a more competitive banking industry, and the plans are open for consultation until 12 January 2015.
Payments services enable spending and the transferring of money, and underpin the UK’s everyday financial activity.
Hannah Nixon, managing director of PSR said: “Last year more than 21 billion financial transactions were made possible by payment systems, “ said Hannah Nixon, managing director of PSR.
“It’s vital, therefore, for the UK to have world class payment systems. 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 strategy consists of five core proposals. The PSR will introduce a new approach to setting strategies within the industry, creating a forum with capabilities to further represent market service users.
Payments companies will be required to publish board meeting minutes and votes, and to identify and address any conflict of interest. From 30 September 2015, they will also have to submit an annual report on how they have improved.
In a drive towards fair and open direct access to payment system operators, payments companies must not disclose access requirements, and must confirm that applications do not distort competition.
The industry will develop a code of conduct, subject to PSR approval, geared towards greater transparency and establishing criteria for indirect access and processes. Finally, PSR plans to establish high-level behavioural expectations through three key principles: being open and cooperative; remaining compliant; and managing business and risks to ensure smooth operations.
On top of these directives, there will be two market reviews in April 2015. One will assess the ownership and competitiveness of infrastructure, models and ownership structures, while another will assess how indirect access is provided.
Andrea Leadsom, economic secretary to the treasury, said: “We want to ensure payment systems foster competition and innovation in the interests of customers. In particular, we want to ensure that where smaller firms want direct access to the payment systems, they can get it on a fair and transparent basis.”
“I’m pleased the PSR’s consultation sets out, for the first time, the detailed measures it is proposing to achieve these important goals, as well as the strong powers it will consider using if these measures don’t prove sufficient.”
If firms do not comply, PSR will have power to conduct enforcement investigations, ultimately issuing penalties and censures, and potentially compelling firms to take remedial action.
PSR will also handle commercial disputes regarding access and fees services, and has the power to force firms to sell their interests in an operator.
The Payments Council responded to the PSR’s announcement yesterday, saying that the new regulations are in line with its own plans and responsibilities.
Maurice Cleaves, interim chief executive of the Payments Council, said: “We welcome the consultation and look forward to taking part in the process. We are already committed as an industry to maintaining our world-class payments systems for customers whilst ensuring new providers enjoy a level playing field.”
The Payments council is also in the process of developing a system to help the regulator to meet its strategic responsibilities and work towards efficient and organised interface with the PSR.
“The UK is globally renowned for delivering payments innovations. UK customers already enjoy contactless technology and chip and PIN on their cards, internet and phone payments at the touch of a button, PAYM on their mobile phones; and they can move account more quickly and easily than ever before thanks to the current account switch service. These services match or beat what customers enjoy elsewhere in the world.”
“We will press on with all this work whilst continuing to engage with the PSR to ensure that all those that access and use payment services on a daily basis are the winners.”
