Last year, HM Treasury announced that the Financial Conduct Authority would set up the UK Payment Systems Regulator (PSR). Following the announcement, the FCA published a “call for inputs” consultation in March this year and organised a stakeholder conference. The EMA contributed to the consultation to assist the Payment Systems Regulator develop its regulatory approach and identify early priorities.
Collaborative arrangements for the industry
There are common issues for the payments industry such as governance and fighting fraud. The EMA’s view is that these should be dealt with within an open and collaborative structure. Representatives of all payment service providers should be part of this structure, whatever their market share.
The same applies to the organisation of the strategic decision-making process. Governance of bodies such as the Payments Council has been predicated on payment volumes, which means excluding most new payment service providers. The EMA stresses that this exclusion of new entrants should be stopped as it creates barriers to the growth of innovative payment products and services.
Importance of unmediated access on fair conditions
The EMA outlined in its response that over time the innovative payments industry has found new opportunities in the payment value chain, and has innovated to create business models that work. Participation in the UK payment system as a whole, however, continues to be limited by the existing governance structures.
At present, innovative payment providers interact with the payment system as users rather than as payment service providers. The only alternative is to establish agency agreements with banks. Access to such arrangements is, however, hard to come by and where it is offered, it is offered at unrealistic terms. Enabling unmediated access to payment systems is therefore key to achieving further efficency, innovation and benefits to users.
The working principle should be that access is provided on the basis of the provider having the requisite regulatory permission to offer the service. Quasi-regulatory scheme-based requirements that limit access should be eliminated.
In this respect, the current revision of the Payment Services Directive (PSD) may provide an opportunity to change access rules at EU level. If this requires financial institutions to be included in the Settlement Finality Directive, then the PSR should consider and pursue this.
In the year ahead, the PSR will further detail and consult on its regulatory approach, fees and rulebook. It will establish priorities and work on the issues identified from the call for inputs and publish feedback statements. In April 2015 the PSR will become fully operational after a Treasury announcement that designates the payment systems to be regulated.