The UK government has finally decided what will replace the industry body, the UK Payments Council, which had some non-banking representatives but was always susceptible to the charge of being too close to the industry. A new fully independent UK payments sector regulator will start late next year.
The new UK payment regulator will be formed by adding amendments to the Banking Reform Bill which is going through Parliament so its exact start date is subject to political forces. The utilities-style payments body is intended to make it simpler for newcomers to take on the established High Street banks in the UK payments sector and to reduce the cost of entry.
The Financial Conduct Authority (FCA) will house the new fully independent regulator, which has yet to be named, as an offshoot indepednent body. Its main remit will be to increase competition in a UK payments sector which handles 17.5bn non-cash transactions per year and will soon see more growth with the planned launch of the shared UK mobile m-payments service.
The botched attempt to end the UK’s cheque clearing system in 2011 is thought to have counted against the continuation of the UK Payments Council and convinced the UK Treasury to go for a full, independent payments regulator. The new body will oversee the same-day UK Faster Payments Service (FPS), operated by the VocaLink back-end technology installed at the time of its launch and the Bacs organisation which aggregates many payments in the UK, staff cheques and runs collective UK systems including the new UK Current Account Switch Service.
The new regulator will have the power to enforce cheaper utilities style fees, enabling smaller banks and building societies to access these shared systems more easily. With the bank banks and their representative bodies no longer in charge and setting the access fees prices are expected to fall. Fines against those deemed to be breaking competition rules can also be expected.
According to the Financial Secretary to the UK Treasury, Sajid Javid: "The reforms we are announcing will encourage innovation, [and] ensure that real benefits are passed on to each and every user of financial services."
Commenting on the announcement Gilles Ubaghs, a senior FS technology analyst, at the Ovum consultancy, said that government procedures could mean it is 2015 before large banks lose their control of the UK payments system and some kick-back might be expected. “The new regulator is being set up to concentrate on the issue,” he said, before reiterating that the current UK payments ownership structure discourages smaller and newer institutions that have to pay their bigger rivals to access it. It appears this will no longer be the case.
By Neil Ainger