PSR Offers Up Annual Report and Regulatory Roadmap

The latest annual report by the Payments System Regulator, which oversees the British payments industry, debuted Thursday – and gives a nod to the competitiveness of the industry as a whole and the ways in which FinTech is changing the very nature of competition.

The PSR says that its longer-term goals are to understand how the industry might change going forward, which in turn might shape the way the agency approaches regulation and market access.

Amid the overarching concerns, noted the regulator: “It’s important that we understand how our future regulatory decisions could affect the ability to innovate, and we want to avoid inadvertently creating barriers to innovation and technological developments.”

Drilling down a bit, the PSR said that among the innovations it will mull will include evolving payment services that link banks and consumers; indirect access to interbank payments; and how acquirer services may change going forward.    

The PSR also said the cost of direct access is dropping, with what it called “new joiners” telling the regulators that it cost them £1.2 million to £2.5 million, compared with £2.5 million to £4 million in 2015.  Time to join has also come down, with process to become a direct participant in the system coming in at seven months in 2016, versus 12 months to 18 months two years ago.

It may come as no surprise that the PSR is also looking with renewed vigor into what banks should do combat fraud that targets money transfers via debit and credit cards.

As has been reported, the PSR said last month that it is ordering a competitive process to take shape as Bacs, Link and Faster Payments, which are the biggest retail payment systems in the country and which are being consolidated into a single operator to open up the processes by which it buys infrastructure services, which should let new entrants come into the market with greater ease.

That move ostensibly will allow third-party (and private) firms to offer payments infrastructure services on a national scale.

And, with a nod to Vocalink, the PSR has said that it remained “satisfied that … [the] acquisition … will address the competition around ownership issues that we initially identified, and have decided not to impose a divestment remedy.”

Looking forward, the PSR said it has identified “three key areas” in payments to focus on in the year moving forward, including consumer protection issues, the ways in which payments data are used and competitive dynamics, with an eye on PSD2 and other EU-related initiatives.