Try Googling “Payments Council”, at least from Australia, and the first entry you get is the UK Payments Council home page, trumpeting its Faster Payments service, its mobile to mobile payments facility “Paym” and its automated account switching service. The next four entries relate to the joint RBA/APCA consultation on, and establishment of, an Australian Payments Council, which is approaching completion with an inaugural meeting later this year. One might be forgiven for assuming that Australia is in the process of establishing the same kind of body that already exists, and appears to be doing quite a good job, in the UK.
Now try Googling “Payment Systems Regulator”. The first four entries relate to the UK development of a new regulator with extensive powers over retail payment systems. The fifth entry is the home page of RBA’s Payments System Board, established more than 15 years ago with (rather less extensive) powers to regulate Australian payment systems. Again, one might be forgiven for assuming that the UK was in the process of establishing a regulatory framework on the long-standing and, according to the Financial System Inquiry (FSI), successful Australian model.
Both these assumptions would be wrong. Beware the besetting sin of an information-rich age: analysis by search engine.
To be blunt, the UK Payments Council is putting a brave face on a very difficult time. Back in October 2013, HM Treasury cited the Government’s “considerable concerns” about lack of competition, lack of innovation and lack of consumer responsiveness in UK payments as the rationale for imposing a new regulator, although of course it is far from clear how to regulate for innovation. There is a hard edge to the Government’s action which contrasts with the explicit Australian philosophy of encouraging collective action and using regulatory force as a last resort. The future role of the UK Payments Council is unclear, but the chief executive has stepped down and there have been unconfirmed reports of “merger” discussions with the British Bankers Association. And all this despite what looks like a respectable record of collaborative achievement to improve the UK payments system.
So what is Australia doing adopting a model that seems to be struggling in the UK? We are not, of course. The logic of our Council rests on a mutual desire for the most effective possible two-way consultation between the industry and its regulator, the Payments System Board (PSB). It is being set up a time when there is large-scale, and very promising, industry collaboration on payment systems enhancement which has been explicitly blessed by the PSB. If one views the interim report of the FSI as a yardstick, there is no sense of “considerable concern” about competition, innovation or consumer responsiveness – quite the reverse, in fact. We are trying to make a reasonably effective system work better.
So let me express a personal view: in Australia, 15 plus years of formal payments regulation has taught the Government regulator AND the industry that “guided collaboration” works a lot better than black-letter law. In the UK, it rather looks as if the lesson is yet to be learned, although there is still time. Much now turns on how the new Payment System Regulator sets its initial course, and how the British industry responds. Having extensive regulatory powers does not mean the best thing to do is use them a lot – on the contrary, such powers work best when used seldom. And by the way, bodies like the UK Payments Council remain vital to the long term health of any payments system – in networks, there simply is no substitute for cooperation.
We will watch, and learn.
