UK regulator pursues reforms to UK payment systems infrastructure

PSR signals a range of changes to the infrastructure of UK payment systems


As part of its role and plans towards establishing and developing a new regulatory framework for UK payment systems, the UK’s Payment Systems Regulator (PSR) undertook early market review work to look at functional infrastructure and payment systems access issues. This included reporting on its initial interim findings during 2015, and more latterly its final conclusions and intended response plans in mid-July 2016.


This work has concluded that whilst the indirect supply of and access to payment systems is improving in the UK, there remain numerous areas of concern which the PSR intends to monitor and manage going forward as part of ongoing market and technology developments expected to further improve choice and the quality and cost of products and services facilitating payment systems and associated fund transfers.


However, in relation to the hardware, software, communication networks and operating systems which underpin the clearing and settlement of payments in the UK, the PSR has concluded that elements of the overall infrastructure behind the current UK payment systems landscape do require some reform to better address and deliver against customer needs and expectations. But alongside this, there remains a need to more actively encourage and promote levels of market completion. In support of its final review findings and report the PSR has published a separate and accompanying ‘Factsheet’ (No. 16/6) which summaries the findings and potential remedies the PSR intends to progress, including procurement initiatives to facilitate new entrants and more efficient and innovative services, as well as possible steps to disinvest existing controllers and the interests of operators and providers which are not deemed to be conducive to any future vision for a healthy UK payment systems environment.


In terms of a likely future infrastructural reform process, the PSR has concluded there is a need to create more effective competition within and across the UK underpinning three of the core UK payment systems (BACS, Faster Payments Service (FPS) and LINK). For example, common ownership and control issues involving the current landscape of system operators and infrastructure providers continues to raise concerns in respect to robust governance and conflict-management etc. It is therefore hoped that new entrants can be encouraged to successfully enter and join the market which can then help adequately enhance and future-proof UK payment systems in more successfully procuring and delivering service standards, and achieving customer needs and expectations.


The recent PSR annual report also shows how in its first operational year the PSR has taken such review work and steps in support of its statutory objectives to foster and promote industry competition and innovation for the benefit of existing and future participants and users. This has included the establishment of a multi-stakeholder ‘Payments Strategy Forum’ which also issued during mid-July a consultative draft version of its own intended strategy with a final strategy expected to be in place by the end of 2016.