Oliver Hanmer, head of the PSR’s Supervision and Compliance Monitoring division, looks at how regulators can support growth, innovation, and competition by balancing oversight and flexibility.

A clear regulatory framework

The future of payments is a hot topic. Businesses and people want payments to be quick, flexible, and safe. Digital payments are increasing while cash and cheques decline, with more than half of UK payments now made via debit card.

The relatively new government in the UK has an unwavering focus on economic growth and innovation, alongside a desire to see the UK offer a more attractive proposition for investment. This points to the need for an economic climate of pace, agility, and freedom to operate. For this to become a reality, we need a regulatory landscape that supports growth and innovation.

Last November, the government issued its National Payments Vision (NPV). This seeks to set the strategic direction for “a trusted, world-leading payments ecosystem delivered on next-generation technology, where consumers and businesses have a choice of payment methods to meet their needs”.

Key to delivering this successfully is a proportionate, clear, and coordinated regulatory framework and a resilient payment infrastructure which supports innovation.

The NPV’s three pillars should shape activity across the payments ecosystem through:

  • Innovation – delivering payments that enhance lives and promote economic growth
  • Competition – providing choice and encouraging innovation
  • Security – ensuring protection for users and building trust domestically and across borders.

The NPV calls for regulators and industry to work together to strengthen the UK payments space globally.

The role of supervision

The payments ecosystem is evolving rapidly thanks to technological advancements, competition, and changing consumer expectations. The PSR aims for thriving, world-leading payment systems that offer accessibility, security, and value for money. One core tenet of our current approach is supervision, currently focused on the UK’s payment system operators (PSOs):

  • Pay.UK – operates Faster Payments, Bacs, and CLS.
  • LINK – operates the UK’s ATM network.
  • Visa and Mastercard – provide card payment networks.
  • Fnality – a new wholesale payment system using distributed ledger technology.

Supervision allows the PSR to assess risks, foster innovation, and encourage timely improvements without frequent formal interventions. It has evolved beyond project-based directives to a more agile and proactive approach, using insights based on data from PSOs, existing risk mitigations, and internal analysis.

The role of regulation in a changing landscape

A thriving UK payments ecosystem requires regulation that is clear, proportionate, coordinated, and responsive. Over-regulation can stifle innovation, while insufficient oversight can expose consumers to risks.

The PSR focuses on fostering competition, which improves services, lowers costs, and encourages innovation. At the same time, security and resilience build trust, essential for long-term growth. Growth is a national priority, and regulators must support it.

New payment technologies, such as central bank digital currencies and real-time payments, require adaptable regulation. Stakeholder engagement is essential to making regulation effective. Regulation should enhance the understanding of the payments ecosystem rather than hinder progress.

Consumer protection and innovation

While fostering innovation, consumer protection remains non-negotiable. The complexity of payments introduces risks, including fraud, cybersecurity threats, and data privacy concerns. The PSR ensures that advancements do not compromise consumer trust.

Our work on tackling authorised push payment (APP) fraud is a priority. Mandatory reimbursement rules now require banks to refund victims up to £85,000 within five business days, with costs shared between the sending and receiving banks. To strengthen fraud prevention, we foster cross-sector collaboration with banks, tech firms, and social media platforms to improve data sharing and identify scams. Systems like Confirmation of Payee, which verifies recipient details, enhance fraud prevention.

Collaboration across authorities

Effective regulation requires coordination between multiple regulatory bodies. A coherent regulatory strategy avoids duplication and enhances oversight. The current review of Pay.UK, raised by the NPV, highlights this need. The Payments Vision Delivery Committee has tasked the Bank of England and PSR to assess and reform UK retail payments infrastructure. This includes:

  • upgrading Faster Payments to meet evolving needs
  • assessing future requirements for retail payments infrastructure
  • determining governance reforms for Pay.UK, drawing on international comparisons.

Lessons from international jurisdictions

The PSR and FCA actively study global regulatory practices. The European Union’s PSD2 directive has promoted open banking and enhanced consumer protections. Singapore’s Payment Services Act employs a risk-based model, ensuring proportional oversight. Australia supports real-time payments while maintaining security standards. These examples highlight the need to balance innovation and consumer protection. The UK continues to learn from international best practices.

Next steps

The UK’s payments ecosystem is at a pivotal moment, and the government’s recent announcement that the PSR is to be consolidated into the FCA is a pragmatic next step in simplifying the regulation of payments, reflecting that the sector has changed significantly.

However, with change come opportunities to drive innovation, competition, and security. Regulators play a vital role in shaping an environment that supports businesses, protects consumers, and embraces technological advancements. Supervision’s objective has always been to increase efficiency of the PSR’s strategic relationships, and we’re clear that this aligns.

The NPV outlines a bold vision, which can be fully realised if innovation, security, and competition remain priorities. Regulators must be agile, adapting their approaches as new challenges and opportunities arise. Collaboration between regulatory bodies ensures a coordinated framework supporting the NPV’s objectives.

By fostering innovation while ensuring security and consumer protection, the UK can cement itself as a global leader in payments. Through proportionate and agile regulation, the UK can support economic growth, ensuring a payments ecosystem that is both innovative and resilient.