By Huw Jones
LONDON (Reuters) – Britain’s payments regulator said on Wednesday the sector faces “targeted intervention” to increase competition and remove barriers to innovation and “pockets of market power” that leave customers picking up the bill.
Financial regulators in Britain face pressure to make it easier for start-ups to enter sectors like payments, a magnet for fintechs, to boost economic growth.
The Payment Systems Regulator (PSR) has consulted on expanding the use of “open banking” or third party payment firms being given access to bank accounts, with a customer’s permission, to offer rival services.
It wants “swift action” to roll out the ability of customers to connect payment providers to their bank account for agreed, “low risk” recurring payments, such as to local councils or utilities.
PSR Managing Director Chris Hemsley said he has “heard loud and clear” from the consultation that some market participants feel the PSR is proposing to intervene too much, particularly in controlling some prices, but he indicated some mandatory changes were likely.
“We are exploring the need for targeted regulatory intervention to make this work, like mandating the participation of sending firms,” Hemsley told industry body the Payments Association’s Pay360 conference.
“Creating new markets sometimes required targeted regulation to support rule-making and control pockets of market power.”
He drew parallels with the telecoms market, where he said intervention unlocked competition. “That is, essentially, my starting point when approaching open banking payments,” he said.
Hemsley said much has been achieved in improving payments over the past 15 years, with Britain comparing well with other countries regarding speed and security of payments.
“Have we completed that journey? In short, no,” Hemsley said, adding there were no “price signals” to push customers to switch to better value service providers.
“They ultimately pick up the cost of payments faced by merchants. They do not see this cost, of course, as it is buried in the price of goods and services,” he said.
In practice, retailers have to accept both Mastercard and Visa, the American duo that dominate cross-border payments, Hemsley said. The PSR has proposed a cap on cross-border interchange fees on retailers charged by Mastercard and Visa.
(Reporting by Huw Jones; editing by David Evans)
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