Speech by Hannah Nixon, managing director of the PSR, at the Payments Strategy Forum Payments Community Event on 17 September 2015 in London.
This is the text of the speech as drafted and may differ from the delivered version.
Good morning and thank you all for coming today.
This event comes at a really dynamic time in payments. There’s hardly a week that goes by without the announcement of another new development.
Whether that’s the buzz around Bitcoin; new ways to pay with your phone or watch; or contactless limits moving up to £30. It’s all certainly keeping us excited at the PSR.
So what is the Payment Systems Regulator trying to achieve amongst all this excitement?
For those of you who aren’t familiar with the PSR, we launched six months ago as the newest of the UK’s economic regulators.
That puts us in the same category as OfGem, Ofcom and Ofwat.
In the same way these regulators oversee the pipes and wires underpinning our utilities, we regulate the systems underpinning the various ways we pay in the UK.
And we have been given three core objectives to do the job which revolve around promoting innovation; competition and the interests of service-users.
The first two of these objectives are driven by the last.
What we want is innovation in payment systems that drives better outcomes for service-users – that is, the people and organisations that use payments systems – through new products, greater choice, lower prices, higher quality.
And competition between market participants that delivers the same results.
The Payments Strategy Forum, which we will be discussing today, is an essential part of that.
And it’s a new way of doing things - a new approach for a regulator.
The importance of innovation
Innovation is not well trodden ground for financial regulators. So you may ask why we’re getting involved when, at the customer end, as I mentioned, innovations do seem to be happening.
Our concern is to ensure that the appropriate innovations are being made at the systems level of payments – at the level of the different central systems powering payments (from cheques to direct debits).
It’s innovation at this level that can make all the difference. Just look at Faster Payments – the system we all use to make payments online.
When it was launched in 2008, Faster Payments was the first new payments system to be introduced in the UK for more than 20 years.
Now it plays an important role in our day to day lives, with almost all online banking payments processed using the system and – if it wasn’t around – people would miss the near-instant bank transfers we’ve become accustomed to.
And Chip and Pin – an innovation that made key advances in the security of customer transactions.
What links these two developments is how they were achieved.
They both needed the industry to work together towards a goal which was difficult to achieve, but delivered a great net benefit in the end.
Why were these initiatives difficult to achieve?
One central reason is the high benchmarks for security and resilience that must be reached, or even surpassed in payments. This is as it should be.
Another reason is that development of payment systems requires collective action of many different participants, whose incentives to support such action can be weak.
This may be because the costs and benefits are unequally distributed; because participating in collective action may benefit a participant’s competitors; or because investments impact on existing product offerings, or ultimately profit.
So we’ve seen that while initiatives like Faster Payments and Chip and Pin, demonstrate that the industry can get these things done; it often takes time and external pressure to get things off the ground.
This collective action problem is what we’re addressing now as an economic regulator. We’ve established the Forum to help overcome these difficulties.
What we’re trying to achieve is a Forum which has the expertise and support necessary to drive collaborative innovations forwards.
We want the Forum to empower the payments sector and remove obstacles to collaborative change; to provide the breathing space and encouragement to innovate for the good of all.
Since we set out our policy statement and work programme we’ve made a lot of progress together, establishing this Forum.
A year ago the Forum didn’t exist – now it has terms of reference, a new chair in Ruth Evans and its 22 members.
Many of you here today have been involved in the steps to get here so thank you.
What we’re doing today
Now we’ve established the Forum, today is about putting the people and organisations that use payment systems – the Payments Community, at the beginning of the strategy setting process.
We want the process to be shaped and guided by a clear set of priorities, which we want you to help define.
The engagement we’ve had with you so far and your contributions in today’s sessions will be the starting point for the work of the Payments Strategy Forum – creating a constructive and collaborative relationship which we hope will lead to the needs of service-users being met in all areas of payments.
And it won’t be the last. It’s really important to us that the Forum has a continuous emphasis on engaging and listening to the wider payments community. We’ll be supporting the Forum as much as we can to engage; whether through events or publications.
Your input will be central to the success of the Forum.
So I’m really pleased to welcome you to what I hope you’ll find an interesting and interactive event. It’s the first event the PSR has held since we became operational in April, and a chance for us to hear first-hand what you have to say.
What happens next
Without saying too much about the content of the day, which I will leave to our other speakers – once we have gathered your views and input today, we will ensure that it is fed directly into the Forum’s first meeting on the 8 October.
We will expect your input to fundamentally shape what the Forum discusses and play a major part in deciding its work plan.
Transparency of the Forum’s work will be key, so we will support the Forum to open up channels of engagement which we hope you will all interact with so that the conversations of today can continue in an ongoing process.
I’ll now pass you to Ruth, who will say a few words about her role