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Payment Matters 20: UK

Payment Matters 20: UK
  • United Kingdom
  • Financial services - Payment services


In this issue:

The Payment Card Interchange Fee Regulations 2015

On 17 November 2015, the Payment Card Interchange Fee Regulations 2015 were laid before UK Parliament. This Statutory Instrument (SI) implements parts of the EU regulation on interchange fees for card-based payment transactions (the Interchange Fee Regulation). The Interchange Fee Regulation is directly applicable in the UK; this SI has been made to comply with the obligations under articles 13 to 15 of the EU regulation (the designation of competent authorities to ensure enforcement, rules on penalties, and settlement of disputes).

What this means for you

These regulations appoint competent authorities to monitor and enforce compliance with the Interchange Fee Regulation, and it enables non-compliance to be penalised. It also exercises options available to the UK on some of the requirements of the Interchange Fee Regulation:

  • the option in article 1(5) to exempt any domestic transactions under a payment card scheme meeting the requirements in article 1(5) from fee caps until 9 December 2018
  • the option in article 3(3) to allow the interchange fee cap to be calculated on a weighted average basis for domestic debit card transactions until 9 December 2020

The Payment Card Interchange Fee Regulations come into force on 9 December 2015. View the corresponding Explanatory Notes.

The Treasury publishes responses to its consultation on implementing the Payment Accounts Directive

On 16 November 2015, the UK government outlined responses to its consultation on the UK's obligation to transpose Directive 2014/92 (the Payment Accounts Directive). It has also issued final draft regulations and an impact assessment document.

What this means for you

Please see our spotlight section for further details.

Payments UK launches code of conduct on providing indirect access to UK payment systems for PSPs

On 1 September 2015, Payments UK published a code of conduct covering indirect access to UK payment systems for payment service providers (PSPs). The aim of the code is to set out the responsibilities of indirect access providers in order to improve the experience of indirect payment service providers.

What this means for you

PSPs can either contract with the operator of the payment system directly or indirectly by contracting with another PSP that has direct or indirect access to the system. The ability to have access is increasingly crucial for a number of PSPs, particularly those that are not direct participants of the UK’s payments systems.

Payments Strategy Forum publishes key strategic documents

On 2 October 2015, the Payment Systems Regulator published draft terms of reference setting out the objectives, scope and role of the Payments Strategy Forum, names and biographies of the forum members and an agenda for the first meeting.

What this means for you

The PSR established the Payments Strategy Forum to provide co-ordination where collective action can promote innovation or competition in the interests of payment service users, which is contrasted with unilateral innovation as a source of competitive advantage. Now the Forum has been established it will lead an ongoing process to identify, prioritise and develop strategic initiatives for the industry.

Spotlight on the Payment Accounts Directive

The Payment Accounts Directive (PAD) was published in the Official Journal on 28 August 2014 and it must be transposed into the law of member states by 18 September 2016. It aims to increase competition within the financial industry and provide consumers with greater choice and flexibility. As a result, a package of measures has been created to facilitate (for all EU consumers):

  • greater comparability and transparency of fees
  • easier account switching
  • access to basic bank accounts

The nature of the accounts which PAD will apply to is still open to a certain amount of uncertainty and may be left to individual member states to decide how clear they want to be in this area. This is because the directive does not automatically apply to accounts which are not current accounts save where other accounts are (i) used for day-to-day payment transactions and (ii) have the functionality for customers to place funds, withdraw cash and execute and receive payment transactions to and from third parties, including the execution of credit transfers. This potentially also brings in instant access savings accounts and member states also have the ability to apply the directive to other accounts if they wish to do so.

Chapter II of PAD aims to standardise the most relevant fee terminology at member state level and EU level. It also provides for the creation of templates for the presentation of certain fee information (the fee information document and the statement of fees), which will be used by payment service providers. Chapter III of PAD establishes a harmonised system for account switching. It looks to create a level playing field for the opening of payment accounts across the EU. Chapter IV of the PAD aims to ensure that payment accounts with basic features are available to all consumers in the EU.

From a UK perspective, the government has been consulting on the implementation of the directive for some time and published a consultation document on 23 June 2015. It has now completed that consultation process and published its response on 16 November 2015. In terms of the three key areas highlighted above, the UK has already taken action in these areas, including by:

  • a series of measures delivered through government agreement with the banking industry to improve transparency of fees and charges, including annual statements and text message alerts for unarranged overdraft fees
  • the creation of the 7-day Current Account Switch Service (CASS) which was launched in the UK in September 2013
  • improving UK banks’ existing basic bank account offer, alongside their other retail current accounts

Alongside the consultation, the UK government also published a final version of the corresponding legislation - the Payment Accounts Regulations 2015. After being laid in Parliament, the regulations will be scheduled to come into effect from September 2016. After the regulations have been finalised, the Financial Conduct Authority will consult on any rule changes it considers necessary to give effect to them, and the Payment Systems Regulator will consider the appropriate designation and monitoring process and will provide further information on this in due course.

On the issue of scope of the directive mentioned above, the UK has commented that the requirements will apply to current accounts and accounts that have functionalities directly comparable to those of current accounts. It will be for individual firms to decide whether their products fall into the scope of the regulations. We can provide help with this analysis if required.