On 14 October 2014, HM Treasury published its list of 8 payment systems which it believes ought to be "designated" for regulation by the new Payment Systems Regulator ("PSR"). The list does not contain many surprises, but there are some interesting omissions. John Worthy, Partner, and Clare Burman, Director, consider why this matters and how interested parties can make their views known.
The new regulator and the designation process
Slated to become fully operational in April 2015, the PSR will be charged with promoting competition, innovation and the interests of end-users of payment systems. The PSR's statutory regime will apply to payment systems designated by HM Treasury.
A system may be designated if HM Treasury is satisfied that deficiencies in the design of the system, or disruption of its operation, would be likely to have serious consequences for those who use, or are likely to use the services provided by the system. HM Treasury must consider 4 criteria:
the number and value of the transactions that the system presently processes or is likely to process in the future the nature of the transactions that the system presently processes or is likely to process in the future whether those transactions or their equivalent could be handled by other payment systems the relationship between the system and other payment systems. Which systems are proposed for designation?
HM Treasury proposes to designate 8 payment systems: Bacs, CHAPS, Faster Payments, LINK, Cheque & Credit, Northern Ireland Clearing, Visa and Mastercard. These are not particularly controversial – 7 were flagged as likely candidates for designation in the Government's March 2013 consultation and Northern Ireland Clearing (which was not) is geographically complementary to Cheque & Credit.
It is interesting though to note which payment systems are not proposed for designation: HM Treasury does not currently believe that the number and value of transactions processed by American Express, Diners Club and PayPal are significant enough to merit their inclusion in the list. Other systems – such as Paym, Zapp, M-Pesa or Google Wallet are also currently too small or not operational in the UK.
Between them, Visa and Mastercard process 92% of the credit and charge card transactions made in the UK each year. However, will excluding players the size of Amex and Diners Club from the PSR's regulatory net inhibit the promotion of competition, innovation and the interests of end-users...