On 3 June, the Payment Systems Regulator’s (“PSR“) Head of Policy, Genevieve Marjoribanks, delivered a speech at PSR’s Payment Systems Innovation and Regulation Summit. She acknowledged the challenges that Covid-19 presents to the payments sector. She discussed the rapid change seen in the last ten weeks, from differences in the way people access and use cash to companion cards, allowing account holders to give others debit cards to make essential purchases on their behalf. One of PSR’s key priorities is, she said, innovation. Specifically, she addressed the following:
New Payments Architecture (“NPA”)
Ms Marjoribanks looked at supporting innovation and greater competition by delivering a resilient, robust architecture. NPA is, she said, one of PSR’s key priorities. She said that by upgrading PSR’s interbank payment services to use to ISO20022 messaging standard and enabling other enhancements from the NPA’s Blueprint, PSR can help to maintain the UK’s position as a payments leader. That said, creating the NPA is a significant change and balance is needed between the speed of realising benefits and managing the costs and risks of the transition.
She also discussed how PSR’s recent Call for Input outlining potential innovation and competition issues is one of the steps the regulator is taking to ensure its regulatory approach will be fit for purpose. Responses received will, she said, feed into PSR’s policymaking.
Ms Marjoribanks recognised that despite the impact of Covid-19, there remains a strong commitment from industry to realise the Payments Strategy Forum’s vision of the NPA. She said that when it becomes operational, PSR will continue its work as the economic regulator focused on the interests of users, promoting access and competition.
Access to cash
Ms Marjoribanks then identified access to cash as another of PSR’s priorities. PSR wants to ensure that innovation in payment systems does not have a detrimental impact on those who want or need to use cash. She said that innovation plays a key role in access to cash and supporting consumers to broaden their choice of payment methods.
PSR’s research, she said, has established that cash will continue to play an important role for years to come.
That said, the gradual shift away from cash to digital payments has been accelerated by Covid-19; there has been a 50% fall in ATM withdrawals and an increase in online shopping. As this has created challenges for cash access, PSR has continued its work via the Joint Authorities Cash Strategy Group, to ensure that cash remains widely accessible.
Ms Marjoribanks went on to say that PSR has also been working with the FCA, other regulators and the University of Bristol to develop a tool to map out access to cash across the country, in order to see any gaps in provision. She explained that this was used to convene an FCA-led group for industry and regulators to coordinate industry response, including working with industry to ensure vulnerable and self-isolating groups could continue to access cash, sharing best practice to help maintain branch access availability for essential services, and working collaboratively as restrictions ease.
PSR will, she said, continue to work with industry to develop this tool further, with a view to publishing a final report sometime this year.
Further, Ms Marjoribanks recognised that innovation continues to be critical to protecting access to cash, acknowledging how organisations and, more broadly industry, have adapted and transformed existing services and introduced new ones to suit customers’ needs. For example, by increasing the contactless payment limit from £30 to £45 from 1 April.
These measures, she said, provide new services, or innovative use of existing ones, which allow vulnerable consumers access to cash while maintaining their health and the security of their bank accounts. She was clear that PSR will continue to keep working to protect access to cash.
Confirmation of Payee
Ms Marjoribanks said Confirmation of Payee is another significant innovation which helps prevent accidentally misdirected payments and APP fraud.
She said that while PSR’s Specific Direction 10 required directed parties to implement Confirmation of Payee by the end of March 2020, the regulator knows that Covid-19 has had a significant impact on industry. PSR has therefore decided not to take formal action in respect of delays in the period to 30 June 2020, as long as banks continued to take appropriate steps to implement Confirmation of Payee, and customers were not disadvantaged by any delay.
Ms Marjoribanks recognised that, although some banks are still in the implementation process, PSR are starting to see positive signs of Confirmation of Payee’s effectiveness, Given this, PSR wants to see Confirmation of Payee rolled out across industry.
Finally, Ms Marjoribanks explained that now more than ever, payment systems must work in the interests of people who rely on them. She said PSR wants to work with industry to meet the future needs of the UK’s increasingly digital economy.
Lockdown arrangements have, she said, changed the way people make and receive payments, with less cash use, less physical payments and more online activity.
Ms Marjoribanks said that a key thing to consider is whether these new habits will remain once lockdown is over. PSR will need to look beyond lockdown, ensuring it has a good framework for addressing these issues as they come and its workstreams consider the impacts of these trends.
PSR needs to ensure that its work continues to fulfil its objectives and that our approach continues to be fit for purpose in the ‘new normal’.