Payment systems are an essential part of the UK economy; they drive its competitiveness, they underpin its commerce and they stimulate its growth.
The government announced its intention to bring ‘payment systems into a competition-focused regulatory regime’ with specific emphasis on allowing ‘challenger banks’ to compete on a level playing field by requiring fair and transparent access to payments infrastructure.
The nature and scope of the new regulatory regime will now be subject to a short consultation process. Subject to the outcome of this consultation, the Government further announces its intention to legislate for the new regime in the Financial Services (Banking Reform) Bill.
In deciding to proceed with the establishment of a new statutory regulator, the Government has now accepted that the inherent implications and costs of achieving it are outweighed by the expect benefits. The detail will now need to be outlined in the forthcoming consultation, which will have to consider a number of issues including how:
- it will define its scope – card, electronic transfers, cheque payments, cash payments etc;
- user requirements are determined, prioritised and implemented;
- the strategic direction of payments, clearing and settlement will be set to add the most value to ‘UK PLC’;
- the balance between safety and efficiency will be determined and conflicts resolved;
- the relationship between schemes and infrastructure will be developed;
- maintenance and development funding arrangements for new developments;
- research will be undertaken and shared;
- collaborative solutions and concepts will be explored, defined and agreed; and
- market level incidents will be managed, etc.
Mark Hale, Head of Payments at KPMG, said:
“Impacted organisations need to decide how they want to engage with and to respond to the consultation. This will be mean deploying scarce skills that are currently engaged in addressing a range of mandatory requirements. Data may be hard to obtain at short notice but will be vitally important to support more qualitative argument.
“Payments are not the same as telephone calls. It doesn’t really matter when calls ‘drop off’, but it is critical that payments complete first time and every time. Payments are not the same as a product system. If a product system fails then its implications are usually isolated. If a payment system fails then it transmits risk throughout the economy and can have systemic and market threatening implications.
It is therefore essential that the government’s proposals are well thought through, which means that everyone impacted needs to organise to properly consider them and to inform them.”
Notes to editors
Today payment systems are largely self-regulated by the UK Payments Council. Oversight of ‘designated’ systems is undertaken by the Bank of England, Her Majesty’s Treasury is the UK’s ‘competent authority’ for payment systems and payment system related competition issues are addressed by the Office of Fair Trading. The FSA is specifically the ‘competent authority’ for authorised and small Payment Institutions.
The outcome of this will impact a large number of organisations:
- The Payments Council;
- The payment scheme companies;
- The existing market infrastructures;
- Recognised Payment Service Providers;
- Authorised Payment Institutions; and
- The existing organisations involved in oversight, designation, authorisation, competition, conduct and prudential matters.
KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and operates from 22 offices across the UK with over 12,000 partners and staff. The UK firm recorded a turnover of £1.8 billion in the year ended September 2012. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. We operate in 156 countries and have 152,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. KPMG International provides no client services.