The Payment Systems Regulator (PSR), the UK’s new independent economic regulator of payment systems, formally launched on 1 April 2015. But it has been fully up and running far longer, and, as Hannah Nixon (PSR MD) pointed out in a recent speech, is the first dedicated direct regulator of payment systems in the world.
Much reference has been made to the Payments Strategy Forum, and the PSR has confirmed the 14 industry and service-user experts who will help develop the “strategic priorities for the industry“.
As expected, the PSR has published guidance on its regulatory framework and approach in the form of a series of directions that can be found on its website. These govern the participants’ relationship with the PSR and contain the minimum compliance requirements for payment service providers. The PSR Policy Statement contains the PSR’s regulatory approach and the principles and policies under which it will operate.
One of the PSR’s functions is to keep payment systems and services markets under review and, to this end, two such reviews are under way:
PSR MR15/2 Market review into the ownership and competitiveness of infrastructure provision
Currently, a small number of banks jointly own the Bacs, Faster Payments Service and LINK payment systems as well as the infrastructure for those systems (i.e. VocaLink). The PSR acknowledges that this may have helped contribute to keep costs down and develop payment systems that are relatively robust and resilient. The review is intended to investigate whether payments infrastructure works in the interests of users of the payment systems and to consider whether or not current infrastructure ownership arrangements and market structure restrict competition or innovation.
PSR MR15/1 Market review into the supply of Indirect Access to payment systems
According to the PSR some banks and PSPs have raised concerns relating to the limited choice of indirect access providers (sponsor banks) and a lack of information about the indirect access services that sponsor banks offer. The purpose of this market review is to answer a number of questions in response:
- what are the competition implications of the current indirect access market structure?
- what factors may limit how many sponsor banks offer indirect access to payment systems?
- what might a competitive indirect access offering look like?
For both reviews, the PSR is finalising the terms of reference and anticipates publishing a more detailed timetable towards the end of May. It estimates that it will take around 12 months to complete each review and report on the findings.