The industry-led UK Payments Council is to lose its powers following the debacle last year when it had to reverse the planned elimination of cheques in the face of fierce opposition from pensioner groups, small businesses and some politicians.
Paid for by its member banks, the UK Payments Council outlines the strategy for payments in the country and coordinates projects such as the near real-time Faster Payments Service (FPS) which did away with the scandalous three-day clearing wait that used to apply in Britain and was brought about – like the Council itself – after pressure from the Office of Fair Trading. The Council is also involved in the development of the centralised peer-to-peer (P2P) mobile payments platform that is being rolled out for retail bank customers in the UK, which will use VocaLink’s automated clearing house (ACH) infrastructure.
The possible disbanding of the Payments Council is outlined in a consultation paper from the government’s treasury department entitled ‘Setting the Strategy for UK Payments’. Interested parties have until 10 October to respond.
The government is proposing a new body called the Payments Strategy Board (PSB) should replace the Payments Council, although two other options are also on the table, including a reformed Council or a brand new powerful regulator with no industry involvement whatsoever – effectively a body such as the utility regulators that have the power to set fees and control the entirety of the market.
The former PSB strategy is thought to be the clear governmental favourite option. The PSB will still include payment processors and bank industry figures alongside independent non-industry directors, much like the Council does today, but it will report directly to the new Financial Conduct Authority (FCA) when it comes into force as the replacement for the discredited Financial Services Authority (FSA). This will increase the regulatory oversight of the UK payment sector but not by as much as a fully independent ‘of-pay’ utility type regulator would.
According to Mark Hoban, Financial Secretary to the Treasury, the reform is necessary because: "We need a payments system that responds to the needs of customers and is not just run for the banks. The package of measures is another step by the UK government to make sure that the financial sector provides an effective and competitive service to the real economy."
The chief executive of the Payments Council, Adrian Kamellard, welcomed the consultation but argued that measures have already been introduced to improve the running of the organisation after the cheque debacle, stating that "whatever the consultation outcome, the Payments Council is uniquely placed to listen and respond to the needs of customers and businesses who rely on payments in their everyday lives."
The treasury consultation argues that the proposed reforms would deliver a "fresh start", making the payments sector in the UK more responsive to end user demands and improving transparency in the wake of the cheque replacement furore. Banks would still, however, effectively be in charge of the segment.
This is not necessarily a bad thing as for all its faults the Payments Council did ensure that any new UK payments initiatives were introduced en masse and innovative new payment infrastructures, such as the mobile P2P platform, are at last beginning to come through. There are certainly other sectors of the UK financial services scene that are more deserving of reform than this one. The UK has a modern, functioning payments landscape that has received considerable investment over recent years so moving the chairs around on the oversight of the sector does not seem such a crucial reform as reining in the investment banks. Change of one sort or another is coming, however, and you can expect to see the PSB rubberstamped at the end of the consultation in October 2012.