It’s been almost a year since the United Kingdom ushered in a first of its kind: the launch of a Payment Systems Regulator (PSR). With its purview extending across the nation’s payments infrastructure and also indirect sponsorship that is managed through sponsoring banks, its stated role is to level the playing field in order to give innovation a chance to flourish.
In an interview with MPD CEO Karen Webster, Hannah Nixon, the managing director of the United Kingdom’s PSR, touched base on the trends seen in her 18 months on the job and the 10 months since the PSR launched officially.
With a nod toward keeping innovation alive and well in the U.K., Nixon noted that the payment system anywhere is “really important since, if it doesn’t work well, then it affects the whole economy.” A key mission of the PSR is to “specifically drive competition in payments” and, in particular, to examine whether the payment system, as currently structured, gets in the way of creating a completely competitive U.K. retail banking system. An area of particular interest is determining the extent to which barriers to entry exist and may have stymied the efforts of new entrants, from retail banks to FinTech players interested in breaking into the payments arena.
Nixon says that she’s already seeing changes — not so much given any actions that she and her team have had to take but just given the greater level of scrutiny now marking the payments industry through the PSR. “People,” she says, “are beginning to think more strategically about payments.” Nixon went on to admit that the PSR “has strong powers — in fact, the strongest powers — among U.K. regulators, and that fact that we have those powers and are willing to use them has gotten peoples’ minds to focus.”
But a number of issues remain outstanding, said Nixon. “Some of the stumbling blocks we have seen in the U.K.,” she said, involve firms trying to connect to the payments market in a landscape dominated by larger players. Critics of the current system charge that setup costs that must be incurred by new payments entrants prevent easy access to the system.
But, said Nixon, access to a more level playing field does not mean that banks must offer access at no cost, even in the case of indirect access. Nixon maintained that it is “too early to tell” what the impact of interchange caps are and whether regulatory action is needed, though the mandate for her organization, with oversight and discussion centered on ease of coming to market, does not mean that access must be free of charge.
And what can be learned by those of us outside the U.K.? Nixon said that, even with a relatively advanced payment system in place within the U.K., the PSR has been active in “talking to central banks” and others in the payments arena globally, as “we share similarities” in trying to foster both innovation and access.