A question of regulation and security



Because of the complexity of payments, it makes sense that education and communication is undertaken on a collaborative basis across the industry. Every payment intrinsically involves two parties, and customers want and expect flexibility, reliability, security and consistency. They expect this regardless of the channel and the service.

What goes on behind the scenes will have to match these expectations. This is why it is so important that we, as an industry, provide consistency and common standards across the board.

A collaborative approach helps prevent payments strategies developing in silos and enables solutions to be considered that could potentially address two or more problems simultaneously, benefiting customers as well as creating easier access for new providers.

Prime examples are the design and delivery of innovative industry services for customers, such as the Current Account Switch Service, the new Code of Best Practice on Misdirected Payments, and our mobile payments service Paym.

Each of these customer-focused projects required co-ordination across more than one scheme or payment type, to not only safeguard customers’ needs, but to ensure each of the finished products adhered to high security standards, and was delivered to reduce costs for banks and new entrants.

Our buzzword for 2014 is collaboration – on all levels, to ensure the integrity of payments in the UK, but also continue to ensure that payments meet the needs of all those using them.



Payment systems enable a huge number of vital activities in our lives, from receiving our salaries, to writing cheques to charities, to putting in place the deposit on a new home.

Given their central place in our everyday lives, it is essential that our payment systems deliver the level of service consumers expect. And, given the importance of payment systems for banking, it is essential that they are open to new banks and challengers who want to offer something new and distinctive for their customers.

The government has taken action by creating a new Payment Systems Regulator, under the Financial Conduct Authority (FCA), on April 1 this year.

The new regulator has a strong remit to promote competition and innovation, for the benefit of British consumers and businesses. The regulator will become fully operational next spring, but we are not waiting until then to deliver benefits for consumers.

The work the Treasury is doing on cheque imaging will allow customers to have the option of depositing a cheque by photographing it on their smartphone, rather than having to queue at a branch.

And the FCA has committed to a full review of the costs and benefits of account number portability as part of its review of the seven-day Current Account Switching Service, beginning in September.



As new forms of electronic payments come to the fore, the different entities providing these services must isolate their specific and shared roles in educating customers.

Many consumers remain anxious about the security credentials of new payment mechanisms, despite the apparently obvious upsides in terms of convenience.

At the same time, the field of innovation is widening, with banks, mobile operators and technology specialists all staking a claim to new payment solutions. This in turn raises the prospect of further customer confusion.

New services that allow money to be transferred via smartphones will require participating banks to reassure their end-users, while industry consortiums must clearly communicate the benefits of new nationwide mobile payments schemes.

Furthermore, new payment mechanisms, such as mobile payments at the retail point of sale, will require service providers from a variety of backgrounds to educate merchants as well as consumers. In such scenarios, appropriate guidance must address the privacy of customer data as innovations in location-sensitive marketing are combined with new ways of paying.

Looking ahead, the emergence of new organisations providing payments will challenge existing definitions of financial institutions, putting policy-makers under greater pressure to communicate changing regulatory frameworks.



With many areas of banking now being subject to ever-increasing levels of regulation, it is not only nice to know what is coming down the pike, but rather essential to the survival of the business.

We have seen significant developments across Europe over the last seven years and the speed of change is now faster than ever before.

From an increased focus on conduct of business and consumer protection, regulations now move towards the objective of more competition in the payments value chain.

Non-bank payment service providers (PSPs) have already become increasingly important players in the European payments market and the European Commission, chiefly responsible for proposing financial services legislation in Europe, is striving to provide more opportunities for these players to offer ancillary services in the payment value chain.

All providers, banks, non-bank PSPs, infrastructures, IT providers and payment schemes will need to stay close to the ever-changing regulatory agenda and, most importantly, will have to ensure they play a role helping to shape the rules of the 21st century together with policy-makers.

The alternative, to wait and see, and then comply, is likely to lead to sub-optimal policy outcomes where a lack of technical and structural understanding of policy-makers, combined with political and media-effective ambitions, risk creating unbalanced and often unintended outcomes.