Paul Smith's speech at the Building Societies Association


Speech by Paul Smith, head of policy at the PSR, at the Building Societies Association (BSA) seminar on 7 April 2016, London.

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

Thank you for the opportunity to speak with you today. I have only been with the PSR for just over two months, so I am particularly keen at this time to meet with and hear from as many of our stakeholders as possible, of which the BSA and its members, are clearly an important stakeholder.


When you take a new job like I have recently your friends and family inevitably ask you what you do. I find that, with rare exceptions, they usually ignore the substantive policy or regulatory component of the role.

What does policy or regulation mean to most people?  Instead they focus on the sector or industry you mention. I find that means you are often expected to be an expert on service offerings or able to solve complaints or gripes. In my last role in the Australian energy sector I was often asked about why prices were increasing, and for advice on which retailer to switch to.

Since taking the PSR role I have been pleasantly surprised by the amount of complements rather than gripes I get. “It is easier.” “Contactless is great.” “I don’t carry a purse or wallet anymore, I just take my phone.”

Perhaps the exception to that sentiment has been those who are more worried by the potential for fraud and cautious generally about change. “If it ain’t broken why fix it.”

My speech today is very much focused on the issues like access to payment systems that help deliver outcomes for consumers, but I think it is important to remember that we are here ultimately to improve outcomes for final consumers – your customers.

The contrast I made earlier between the favourable comments I hear about innovation and improvements in payment options and the caution about change illustrates the important challenge we all have. How can we deliver the PSR’s duties to promote competition and innovation and the interests of service users from this perspective, while not undermining what service users value about payment options today – particularly reliability and security.

In the remainder of my speech I am going to cover three main areas. First, I am going to reflect on the first year of the PSR. Second, I will discuss in some detail the findings of the interim report for the PSR’s Indirect Access Market Review. We are very keen to get feedback from the BSA and its members on this report, so I will try and highlight some particular areas where your input would be valued. Third, I will provide an update on the work of the Payments Strategy Forum.

We already have some great participation from BSA members in the work of the Forum, but I will further encourage you to continue to participate in this important work.

The first year of the PSR

The PSR has just turned one year old. We consider that we have achieved a lot in a relatively short period of time. In particular, we have seen, and are continuing to see, real improvements in the ability to gain direct and indirect access to the payment systems.

Our report on access and governance that was published in December 2015, showed that there are:

  • clearer and fairer requirements for direct access to payment systems;
  • faster times for securing access - FPS has said it is significantly reducing its ‘onboarding’ time for new direct members;
  • greater transparency on how boards of payment system operators make decisions; and
  • better representation of the payment systems users’ views during decision making.

Just last week, Faster Payments announced that two FinTechs had gained accreditation to supply access, with four more soon to follow. And we are aware of a number of others that are planning to start offering indirect access or expand their current services.

As I mentioned earlier the speed of innovation in the payment services sector is increasing – ApplePay, AndroidPay, Pingit, more ubiquitous Contactless. There appear to be a range of drivers of this change including consumer demand, what technology allows, which continues to change, but also Government and regulatory impetus.

We have published interim findings for two market reviews: one on the underlying infrastructure used by many payment systems, the other – which I will talk about in more detail shortly – on indirect access to payment systems.

I was not planning to talk in detail about the Infrastructure Market Review today, but as I am sure many of you will be aware, it found that there was not effective competition in the provision of the infrastructure services that underpin the payment systems, and made a number of proposals intended to improve competition in the provision of infrastructure.

I am happy to take questions at the end on this review, but I would also encourage the BSA and its members to respond to the consultation we are holding on the interim report.

So in summary, what we are seeing is that we are not the only ones taking steps. On access, the industry has upped its game.

While we consider that much has been achieved in the last year, we are also conscious that much remains to be done. This includes completing the two market reviews, but also the work of the Forum, that I will talk about shortly.

Indirect Access Market Review

We are conducting the indirect access market review to develop a deeper understanding of the supply of indirect access and to determine whether competition is working well for those who use payment systems – or whether we need to take further action to make it more effective. Our aim is that building societies and other payment providers can access payment systems without facing anti-competitive barriers or unnecessary burdens.

We published an interim report on 10th March.  Although competition in the supply of indirect access is producing some good outcomes for indirect payment service providers, we have specific concerns about choice, service quality and the ability to switch indirect access providers.

We had a good response to our September survey from Building Societies.  These were an important part of the evidence base for our interim report.

We identified some good outcomes through our review

Large IPSPs have a number of options to access payment systems. Our work to improve direct access to interbank payment systems means this is becoming a realistic option for larger building societies. Developments in direct technical acces