The UK Government has published its National Payments Vision, an initiative spearheaded by the Chancellor to streamline and modernize the payments landscape. Below is a summary of its key points, structured for clarity and analysis.
1. Regulatory Coordination Between the FCA and PSR
Currently, payments oversight is shared between the Financial Conduct Authority (FCA) and the Payment Systems Regulator (PSR). The consultation process revealed significant overlap and a lack of coordination between these regulators. To address this, the FCA will assume primary responsibility for regulatory decisions that fall within its scope, including areas that intersect with the PSR’s mandate.
2. Modernizing Payments Infrastructure
The report highlighted inefficiencies in the pace of infrastructure upgrades within the payments sector. To accelerate reform, a new committee will replace the existing structure, which heavily relied on banking and consultancy representatives. This change aims to deliver faster, more streamlined improvements to the payments ecosystem.
3. Focus on Open Banking and Fraud
Open Banking: Oversight of Open Banking, previously managed by the Open Banking Implementation Entity (OBIE, now Open Banking Ltd), will transition to the FCA. This shift is designed to ensure stronger regulatory leadership in this evolving area.
Fraud Prevention: The FCA will also lead fraud-related initiatives, taking over from the PSR. This decision is noteworthy given the PSR’s recent introduction of new rules targeting Authorized Push Payment (APP) fraud. Effective October 7, 2024, these rules mandate reimbursement for APP fraud victims, although the maximum compensation amount was controversially reduced from an initial proposal of £415,000 to £85,000 to align with the Financial Services Compensation Scheme (FSCS).
This consolidation of regulatory responsibilities under the FCA raises questions about the PSR’s future role in the payments sector.
4. Digital Identity Developments
The vision includes provisions for digital identity, reflecting discussions in prior policy papers. The Government has committed to introducing measures to establish a statutory basis for digital verification services. However, it emphasized that these measures will not create a mandatory digital identity system.
5. Digital Currencies
As expected, digital currencies feature in the vision. However, the Government’s approach remains exploratory, relying on committees and working groups to investigate possibilities without committing to specific actions or decisions.
6. National Payments Vision and Strategy Committee
To implement the National Payments Vision and Strategy (NPVS), the Government will form a dedicated committee. Details on the composition and leadership of this committee remain unclear, leaving stakeholders uncertain about its direction and influence.
Observations
While the National Payments Vision addresses critical areas such as regulatory efficiency, infrastructure modernization, and digital innovation, it has been criticized for lacking a cohesive, actionable strategy. The reliance on committees and exploratory approaches suggests a cautious, incremental approach rather than a decisive overhaul of the payments landscape.
The consolidation of responsibilities under the FCA marks a significant shift in the regulatory framework, but the redundancy of the PSR in this context raises questions about the long-term effectiveness of dual oversight in payments.
In conclusion, while the National Payments Vision sets out an ambitious framework, its reliance on further deliberation and stakeholder input may delay tangible progress.
