Payment systems – the back office stuff that allows you to do everything from withdrawing money from a cash machine or paying a bill to receiving your pension or making interbank payments – are about to become a lot more transparent.
The Payment Systems Regulator (PSR) comes into force in April 2015, and has just launched a consultation on its proposals for how the £75 trillion industry should be managed.
The PSR is apparently a fan of the power of three: it has three principles - to be open and cooperative with regulators; to be compliant; to manage business and financial risks so as not to jeopardise the smooth running of the system – and three objectives - to promote competition, to promote innovation and to ensure systems are developed and operated in the interests of service users.
How will it get there? The proposals include forcing banks to publish all board minutes and votes taken over payment systems, and making operators provide “objective, risk-based, fair and open” access to the systems.
“This will mean that, in the future, banks and innovative payment service providers will be able to gain direct access to payment systems on fair terms,” the Payment Systems Regulator said in its proposal. “The application process should be quicker, simpler and not distort competition.”
Where firms fail to meet those expectations, the PSR will carry out enforcement investigations, issue penalties and censures, and compel them to take remedial action.
The PSR will also handle commercial disputes regarding access to payment systems or fees and charges relating to services provided by them. It also has the power to force a firm to sell its interests in an operator.
Who does it affect?
The Treasury is currently consulting on which systems to include, but the proposed interbank systems include Bacs, Chaps, Faster Payments, Link Cheque and Credit Clearing, Northern Ireland Cheque Clearing, and the two largest card systems in the UK, MasterCard and Visa. The consultation is open until January 12.
PSR managing director Hannah Nixon said: “Last year more than 21 billion financial transactions were made possible by payment systems... It’s vital, therefore, for the UK to have world class payment systems."
The systems we have today have been developed incrementally over time by the major banks. So while they are relatively resilient, they are often treated as back office functions. Competition is limited, decision making opaque, and this is stifling innovation. This has to change.I want to see an industry that is responsive to, and focused on, the needs of those using payment services. This will be an industry that encourages and enables competition and innovation, provides value for money, while maintaining reliability and security. In short: a UK payments industry that is world class. I am confident that our proposed package of measures will make this possible.
Andrea Leadsom MP, economic secretary to the Treasury, added: “I’m pleased the PSR’s consultation sets out, for the first time, the detailed measures it is proposing to achieve these important goals, as well as the strong powers it will consider using if these measures don’t prove sufficient.