Belfast Telegraph

New regulator for payments planned

A tough new regulator will shake up the UK's payments system and encourage more innovation to help consumers as it eases the hold of the big banks on the industry, the Government has announced.

The new body, which is provisionally called the Payment Systems Regulator, will be up and running by spring 2015 and has a specific goal to promote competition in the sector.

It will sit under City regulator the Financial Conduct Authority (FCA) and will work to prevent a repeat of debacles such as the Payments Council's previous decision to scrap cheques, which was later reversed after a public outcry.

The new body will be tasked with ensuring that the needs of consumers are fully taken on board and it will have powers to order changes to how payment systems operate and impose fines when rules are broken.

The changes will make it cheaper for smaller banks to access payment systems to break the dominance of the big banks. At present, smaller firms have to pay the big players to access key services and the incumbents have the power to block access or charge unfair fees to smaller competitors, the Treasury said.

Some 17.5 billion non-cash transactions were made in the UK last year.

It is hoped that consumers will see more competition and innovation as a result of new players being able to access payment systems more easily.

The Treasury said that for example, consumers in Sweden are generally able to split the bill in a restaurant more easily than people in the UK as they can pay them back by text message, without having to know their account details.

The Swish app was launched by Sweden's major banks last year and money which is transferred in this way shows up in people's accounts immediately.

In this country, Barclays has been pioneering a scheme to make sending payments as easy as texting with its Pingit mobile payments service. It is hoped that this type of innovation will become more widespread under the new payments regulator as more competition is injected into the industry.

The plans follow concerns that the payments industry has not always responded effectively to consumers' needs.

The Payments Council, which sets out the strategy for the payments industry in the UK, suggested in 2009 that cheques should be phased out by banks and building societies from 2018. It later performed a U-turn following widespread pressure from MPs and consumer groups.

Which? executive director, Richard Lloyd, said; " It's ludicrous that this vital part of the banking system has been self-regulated up to now, especially because the big banks own the infrastructure and therefore have an unhealthy advantage in the market.

"The FCA must create a more level playing field for new and smaller banks to help increase competition and deliver real choice for consumers."

The reforms will be implemented via amendments to the Banking Reform Bill, which is due to receive Royal Assent next year.

Financial Secretary to the Treasury Sajid Javid said: "The Government is determined to open up competition in the banking sector so that it serves the needs of the British economy, businesses and customers.

"An open and transparent payments system is crucial to give new players freedom to challenge the big banks without unfair barriers.

"The reforms we are announcing today will encourage innovation, ensuring that real benefits are passed on to each and every user of financial services."

Your Comments

COMMENT RULES: Comments that are judged to be defamatory, abusive or in bad taste are not acceptable and contributors who consistently fall below certain criteria will be permanently blacklisted. The moderator will not enter into debate with individual contributors and the moderator’s decision is final. It is Belfast Telegraph policy to close comments on court cases, tribunals and active legal investigations. We may also close comments on articles which are being targeted for abuse. Problems with commenting? customercare@belfasttelegraph.co.uk

Popular