New Payment Systems Regulator puts customers and payments users at the heart of the £75 trillion UK payment systems industry
The Payment Systems Regulator (PSR), the new economic regulator for payment systems, today confirmed how it will regulate the industry from 1 April 2015. It has also published a policy work programme setting out priorities for the year ahead.
The PSR’s aim is to make payment systems work well for the people and organisations that use them, and deliver greater choice, innovation and competition.
Payment systems let people pay a deposit on a house, withdraw money from a cash machine, transfer money via smartphone, receive salaries into bank accounts, and much more. They are vital to the UK’s financial system and process in the region of 21 billion transactions worth around £75 trillion a year.
Hannah Nixon, managing director of the PSR, said:
“Today marks a new start for payment systems. Our approach will bring change to the industry, injecting competition and innovation where it is needed most, and will put the interests of the people and businesses that use payment systems front and centre.
“True, long lasting change will be difficult, but we have the powers and the people to make it happen. Our challenge now - the challenge we share with industry - is to work together to deliver it.”
Today’s publication confirms the three ‘pillars’ of the new PSR’s work:
- A new and inclusive strategy setting process that really involves users of these systems for the first time. This will be done by setting up a Payments Strategy Forum to develop a long term vision for how payment systems should develop and identify priority areas for the industry to work together where appropriate to deliver this vision;
- Increasing transparency around how decisions are made, and who is making them. We will shine a light on the control and governance of payment systems, challenge payment system operators to explain how they have listened to people and organisations that use payment systems, and check that operators are really taking payment systems in a direction that meets people’s needs; and
- Improving the way people and businesses gain access to a payment system - whether directly or indirectly – to be clearer and fairer and in a way that fosters innovative and competitive solutions for customers using payment systems.
As well as confirming its final policy, the PSR has published draft terms of reference for two market reviews and announced a card payment systems programme of work. The two market reviews will look at ownership and competitiveness of infrastructure provision; and the supply of indirect access to payment systems. This work will help the PSR gather important evidence to help it make robust decisions that make a real difference to those who use payment systems.
Speaking about the PSR’s approach and powers, Hannah Nixon continued:
“Payment systems underpin almost every financial transaction we make. I want to see a culture where the industry recognises the importance of delivering good outcomes for the people and organisations it services.
“Parliament has given us very strong powers. From our extensive engagement over the last 12 months I am confident that the industry understands what we are trying to achieve. But if firms do not step up to the mark we will use those powers to issue directions, impose fines and impose obligations that will force individual players to act differently.”
The PSR’s agenda complements work by the Financial Conduct Authority and the Competition and Markets Authority to deliver a more competitive banking industry in the best interests of consumers and the economy.
Notes to Editors
1. The Policy Statement.
2. We have published draft Terms of Reference for two market reviews. These were first announced in the November consultation paper. In summary:
- For the market review into the ownership and competitiveness of infrastructure provision, we will focus on the infrastructure provided by Vocalink to Bacs, Faster Payments Service, and LINK. We will explore whether status quo hampers innovation, is susceptible to conflicts of interest, or acts as a barrier to entry for new providers attempting to break into the market.
- Many organisations gain access to a payment system indirectly, using a ‘sponsor bank’ that has direct access. Currently the four primary sponsor banks are Barclays, HSBC, Lloyds and RBS, yet there are other payment service providers with direct access. Our market review into the supply of indirect access to payment systems will explore the structure of the market, what may be limiting others with direct access from becoming a sponsor bank, and consider what a more competitive indirect access model might look like.
3. As well as the measures set out above and the two market reviews, in 2015/16 the PSR will also:
- carry out further work to assess card payment systems, reflecting that they operate differently to the interbank payment systems and may need a distinct regulatory approach;
- monitor developments in Europe around interchange fees regulation and assess what, if any, changes will be required in the UK;
- examine in more detail concerns about ATM interchange fees to identify whether we need to consider any regulatory action; and
- monitor the implementation of the cheque imaging project to ensure that it aligns with our objectives.
5. The PSR was incorporated on 1 April 2014 and becomes fully operational on 1 April 2015. It is operationally separate to the Financial Conduct Authority, with its own managing director and Board.
6. In early 2015 the PSR announced three new senior hires to help lead the organisation.
7. The PSR has three objectives: to promote effective competition in the markets for payment systems and for services provided by those systems, including between operators, payment service providers and also infrastructure providers, in the interest of service-users; to promote the development of innovation in payment systems, in particular the infrastructure used to operate payment systems, in the interest of service-users; and to ensure that payment systems are operated and developed in a way that considers and promotes the interests of service-users
8. Once fully operational, the PSR will be responsible for the regulation of designated payment systems and all participants in those payment systems (payment service providers, operators and infrastructure providers to those payment systems).