The new UK Payment Systems Regulator (PSR) became operational on 1 April 2015 and as reported in the most recent edition of Payments Monitor (APCA’s quarterly newsletter), released its first major policy statement, entitled “A new regulatory framework for the payment systems in the UK”.
The PSR has laid down a significant agenda. This includes the establishment of the “Payments Strategy Forum” to develop a collaborative industry strategy and effectively replace the UK Payments Council. The payment system is a network and a strong shared vision and collaborative strategy is critical for success. Collaborative bodies, such as Australia’s own Australian Payments Council, recognise the need to have forums that bring industry together. However to be successful, the new Strategy Forum will need active industry participation. If industry is only there to assist in the implementation of public policy, then the new Forum will fall short of expectations.
The other major changes concern governance of and access to systems such as BACS and Faster Payments. In this area, many of the PSR’s reforms appear aimed at enhancing information flows. On the one hand, the information flow enhancements do not appear to be too onerous – as long as they do not become too prescriptive on sponsors and provide other financial institutions with the information they actually need. Overall, the ownership and governance reforms appear to be less dramatic than what was suggested in the November 2014 consultation, though time will tell if the PSR will seek more fundamental ownership changes as a result of its review work. As a result, more significant changes may be down the road.
One likely outcome of the governance changes, in particular having user interests represented at the board level of systems such as BACS and Faster Payments, is that the individual systems will become even more competitive and different from each other. It is increasingly unclear how a coordinated industry response on certain matters can be achieved – particularly with the displacement of the UK Payments Council as a coordinating body.
As I highlighted in my November 2014 blog, the regulator’s concerns over the lack of innovation in payments appear strangely at odds with the reality of significant industry collaboration in the UK over the past decade and the recent emergence of a vibrant “fintech” sector in the UK. Further, the application of utility-style regulation in an industry where the infrastructure has historically been private, rather than historically public, remains an odd fit.
Though not as onerous as previously suggested, the UK reforms appear to be a strange brew of new bodies, tweaked governance and more information in the public domain. If more significant reforms on industry governance and ownership emerge as part of the reviews, a heavy reform agenda may actually divert resources and distract industry away from doing the innovation that the new regulator, and payment users, actually want.
