On October 9, HM Treasury announced that the Financial Conduct Authority will become the competition regulator for the payments industry. The reforms, which will be implemented via amendments to the Banking Reform Bill, seek to ensure that new players can access payment systems in a fair and transparent way, competing with them on a more level playing field.
The decision follows the consultation; Opening up UK payments, the results of which were published as well. Whereas the consultation still mentioned outright regulation of all parties involved in the payments value chain, the responses convinced the government to choose to use a system of designation instead.
Designation
Under this approach, HM Treasury will designate a payment system when it is satisfied that any deficiencies in the design of the system, or any disruption in its operation, would be likely to have serious consequences for those who use, or are likely to use, the services provided by the system. In considering whether to designate a system, the Treasury may take advice from the Payment Systems Regulator, the FCA, the PRA and the Bank of England.
Once a system is designated, this will bring the payment scheme company and the system participants (e.g. members, card issuers and merchant acquirers, and the system infrastructure providers) within the scope of the Regulator’s powers. Coming into scope will not necessarily entail regulatory action or new obligations on those brought within scope. Designation will mean that the Payment Systems Regulator is then in a position to potentially exercise certain powers in respect of those persons, if there is a case for regulatory action.
Implementation
The reforms will be implemented via amendments to the Banking Reform Bill which is due to enter into force early 2014. It is expected that initially only the main inter-bank schemes and international card schemes will be designated.