Paul Smith
Head of Policy, Payment Systems Regulator
The Payments Systems Regulator will be responsible for monitoring and enforcing rules covering the treatment of requests by payment service providers to get access to payment systems.
It’s not long until the second EU Payment Services Directive (PSD2) will be effective in the UK and we know that organisations are gearing up for the new requirements and opportunities it will bring.
From 13 January 2018, the Payments Systems Regulator will be responsible for monitoring and enforcing rules covering the treatment of requests by payment service providers (PSPs – such as banks, building societies or electronic money issuers) to get access to payment systems (which enable payments to be made between people using their bank accounts and by using their debit and credit cards) and, jointly with the FCA, PSPs’ requests for bank accounts.
This could help, for example, a new challenger bank that wants to become a member of a card scheme, or a small money remittance business that needs an account with one of the large banks in order to make payments for its customers.
It will force banks to treat access requests in a proportionate, objective and non-discriminatory way: POND.
The access provisions in the new regulations will largely replace our existing powers to mandate access for a PSP. For schemes covered by the new regulations, we will enforce the requirements on the schemes and banks to treat PSPs’ access requests in a proportionate, objective and non-discriminatory way (POND), and not to restrict access any more than necessary to safeguard against risks to the scheme/bank or the financial system. Payment system operators and banks can still choose which organisations they will provide access to, but they must consider each request on its own merits. If a bank which provides indirect access to payment systems (an indirect access provider) decides not to give a PSP access, or withdraws access, it must tell the PSP why.
Access to payment systems is essential to create effective competition and innovation in payment services, and retail banking services. These changes build on the work that PSR has done to create an environment in which small and new financial institutions (such as new banks, payment service providers or fintechs) have greater opportunities to obtain access.
Game-changers in the banking industry
The banking and payments industry has seen some groundbreaking milestones in recent months which will enhance choice for payment system users. For instance Raphaels Bank, Metro Bank, Starling Bank, ClearBank and Monzo became the first new joiners to Faster Payments since it launched in 2008. A number of banks have announced plans to become new indirect access providers.
With fresh ideas to make payment systems evolve, and which could make our everyday lives easier to make payments, the scale and pace of change makes this an exciting time for the payments industry.
We have also seen how the payment systems operators have improved their processes to reduce the time and complexity of joining. Encouragingly, the cost of getting direct access appears to be reducing. In 2015, payment service providers (PSPs) projected the upfront cost of access could be in the range of £2.5 to £4 million. Recent joiners have indicated that upfront costs for accessing the interbank payment systems are in the region of £1.2 to £2.5 million.
We have made great progress with improving access choice and quality in the UK. The relevant PSD2 provisions help to reinforce the approach we have taken to date, and emphasise the value of having clear provisions in place requiring a POND approach to access decisions going forward.
With fresh ideas to make payment systems evolve and which could make our everyday lives easier to make payments, the scale and pace of change makes this an exciting time for the payments industry. But to help ensure we can all benefit from opportunities, the new regulations will help to ensure there remains a level playing field.