The U.K. Payment System Regulator (PSR) is a fundamental piece of the regulatory payment landscape in the U.K. It has powers to set standards, impose requirements regarding system rules, require operators to provide direct access to payment systems and even investigate companies’ practices.
Andrew Self, Senior Policy Manager at the PSR, told PYMNTS in an interview what the regulator’s priorities are, which include monitoring the development of a New Payment Architecture (NPA), continuing looking into card payments, and exploring the role of Big Tech and data in payments.
Open Banking and NPA
One of the priorities for the PSR is to unlock the potential of account-to-account payments, including the use of Open Banking. According to Andrew, “we think account-to-account payments could offer a viable option as an alternative payment method, including payments made in retail, like paying for groceries.”
While the entity in charge of promoting open banking in the U.K. is the Open Banking Implementation Entity (OBIE), the PSR can work with OBIE and other regulators to make sure that the current model and standards can support the growth of open banking. This could include setting certain parameters for APIs and other standards that could facilitate information sharing between financial institutions and third-party providers. “We think Open Banking payments will not thrive unless cooperative agreements and basic standards can be set across participants, so we’re working with other regulators and the government to identify an appropriate regulatory framework,” said Self.
Another important project that will facilitate open banking is the NPA. This new payment system will provide a platform for all the companies in the U.K. interested in providing instant payments. The PSR will monitor Pay.UK, the entity responsible for delivering the NPA, and it will take action where needed to assure that the new platform supports competition and innovation.
Read More: UK’s Payment Regulator Prioritizes Direct Payments in Strategic Plan
The role of Big Tech companies in the payment landscape is rapidly evolving, and data is becoming increasingly important. Apple, Google, Amazon and Tencent (WeChat) have already entered the payment space, and the PSR has engaged with many different groups on the role of data in the payment industry. According to Andrew, “there is agreement that transaction-related data could offer benefits to consumers, businesses and the industry, including the potential for new payment services and measures to prevent and detect economic crime.”
Yet one question remains open: should Big Tech companies have access to data from financial institutions? There isn’t a clear answer yet, but the PSR is exploring several alternatives.
“We’ve heard that it would be useful for more clarity on how data can be processed in line with legislation and legal agreements, and that there is currently a lack of well-defined use cases to justify opening up access to scheme-wide data.”
“We’re keen to explore the viability of opening up access to data in the NPA and will work with Pay.UK on this. We will also assess the potential role of synthetic data, which could allow firms to develop new products that serve consumers’ best interests without the data protection risks that might come with using real data. We will also continue to monitor developments in the payments data space to make sure it is working well for everyone.”
Perhaps the area where the PSR has most focused its investigative efforts in 2020 and 2021 is in card payments, and it may continue in 2022.
The first action was in the card-acquiring services. The PSR conducted a market review of this market in 2021; as a result, it is now trying to inject more competition-proposing remedies that would facilitate merchants to compare and switch payment providers.
This investigation also revealed that scheme fees have increased over the years, as well as cross-border interchange fees. For the PSR, “these developments pose important questions around whether there are sufficient competitive constraints on card schemes.”
These findings led the PSR to investigate the increases in card schemes fees, and the regulator is in the process of collecting information to “help us understand the factors that affect the level and structure of these fees and the reasons behind any changes in them.” It is likely that this investigation continues during 2022, but Self didn´t anticipate any conclusion of the investigation or whether any action will be taken.
Read More: UK Payments Regulator Seeks More Transparency in Card-Acquiring Market
The PSR’s agenda is ambitious, but it may still have space for one thing more: cryptocurrencies. Andrew explained to us that the PSR is providing expert input to the Treasury and other authorities to develop a new regulatory framework for potential new payment systems such as crypto asset-based options.
But the role of the PSR to regulate cryptocurrencies as a method of payment is still limited. “For any system to be regulated by the PSR, it would need to be designated to us for regulation. At that point we would assess whether there are any gaps or issues that we want the system to address – for example, this could include what the system needs to do to protect consumers and businesses.”