Mark Falcon's speech at the Association of Foreign Banks International Banking Conference


Speech by Mark Falcon, head of regulatory policy and strategy at the PSR, at the Association of Foreign Banks International Banking Conference on 12 May 2015 in London.

This is the text of the speech as drafted and may differ from the delivered version.

Hello. Thank you for inviting me here today. It is a pleasure to be here.

You have asked me to tell you about the new UK Payment Systems Regulator: what type of regulator we are, what our objectives are and how we’re planning to carry them out.

I'd also like to say something about what it means for you specifically. Foreign banks make a significant contribution to London’s standing as a major global financial centre and are an important user of UK payment systems. So we recognise that you have a strong interest in understanding of how we will regulate, especially how we will make payment systems more open, helping new players to challenge the market.

In short: the Payments Systems Regulator, the PSR, is the new independent economic regulator for UK payment systems. We’ve been building the PSR behind the scenes for the last year, but came into formally into operation at the beginning of April.

And we’re the first dedicated payments regulator in the world. Nobody else has done what we are doing so far, which is why we know there's a lot of interest.

I joined the PSR from the largest foreign investor into the UK, Hutchison Whampoa – present across multiple regulated industries – so I know the importance of  good regulation for supporting inward investment, and with that, competition, innovation and economic growth.

So what is economic regulation, how does it differ from other regulators, and what does it mean for payment systems?

The Government recently set out its principles of economic regulation. These highlight that in certain sectors of the economy, network effects or other economies of scale can lead to market power and monopoly. This creates large barriers to entry and limits effective competition. In these sectors, economic regulation is needed to protect consumers while at the same time creating incentives to invest and innovate in reliable and sustainable services.

Primarily, the job of economic regulators is to promote effective competition where this is possible, and where it’s not, to provide a proxy for competition, with protection of  consumers’ interests at its heart.

For example, in the traditional utilities, such as energy and water, regulation caps the prices that dominant companies can charge, in order to promote efficiency and fairness, while providing firms with a fair return on their assets and investments. In doing so, this regulation has delivered significant benefits to consumers and the economy.

So what about payment systems? Payment systems have been around since economic activity began. Ancient Turkey was the first