Payment Matters 21: UK

• United Kingdom

• Financial services - Payment services

03-02-2016

In this issue:

• FCA extends expiry date of confirmed BCOBS industry guidance to 31 December 2016
• PSR consults on its proposed fees for 2016/17
• PSR report indicates an improvement in access to payments systems and increased competition
• Payments UK launches IBAN-Only directory
• American Express not exempt from Interchange Fee Regulations
• Spotlight on key dates in 2016
• Read Payment Matters 21: Europe and beyond

FCA extends expiry date of confirmed BCOBS industry guidance to 31 December 2016

On 4 January 2016, the FCA updated one of its industry guidance confirmation webpages.

The amendment relates to the recently updated version of the guidance on the Banking Conduct of Business sourcebook (BCOBS), which has been produced by the British Bankers' Association (BBA), the Building Societies Association (BSA) and Payments UK. The expiry date for the FCA's confirmation of this guidance is now 31 December 2016. It was previously scheduled for 31 December 2015.

The trade associations advised when they published an updated version of the guidance in December 2015, that they have agreed with the FCA they will undertake a full review of the form and content of the guidance before the end of 2016. The full review will take account of forthcoming regulatory and legislative changes that are likely to dictate more substantive changes to the guidance as BCOBS is updated.

What this means for you

Since 2007, the FCA has had a policy on recognising industry guidance. If a firm follows confirmed industry guidance correctly, it will be regarded by the FCA as compliant with the underlying requirements. The updated version of the guidance on BCOBS, which has yet to be recognised by the FCA, can be found here: Industry Guidance for FCA Banking Conduct of Business Sourcebook - BBA.

PSR consults on its proposed fees for 2016/17

The Payment Systems Regulator (PSR) is seeking feedback on its proposed approach to the allocation, calculation and collection of PSR regulatory fees for 2016/17 by way of a consultation.

What this means for you

The PSR was introduced in 2015 to independently regulate the payment systems sector. It requires fees to fund its functions and activities under the Financial Services (Banking Reform) Act 2013 and the new EU Interchange Fee Regulation (IFR). The deadline for interested parties to respond to the consultation is 11 February 2016.

PSR report indicates an improvement in access to payments systems and increased competition

The PSR published a report in December 2015, which examines the progress that has been made in terms of increasing direct access to payment systems and making governance arrangements more inclusive and transparent.

The report finds that improvements have been made in terms of increasing direct access to payment systems and that the sector is showing signs of becoming more competitive, although further improvement is still needed, for example, in relation to the streamlining of onboarding processes, which need to be quicker and easier for new members to join.

What this means for you

Promoting access to payment systems and making the governance of payment system operators more inclusive and transparent are key priorities for the PSR, with the PSR noting in the report that “access to payment systems is a vital driver of effective competition and innovation in payments”.

Read our full briefing: The PSR's Direct Access and Governance Report: Will industry rise to the challenge?

Payments UK launches IBAN-Only directory

Payments UK announced on 15 December 2015, that it has launched a directory to help Payment Service Providers (PSPs) send SEPA payments to the UK.

‘SEPA’ is an acronym for Single Euro Payments Area. A ‘SEPA payment’ is a credit transfer or direct debit payment made in euro (€) in any SEPA country. SEPA Regulation states that from 1 February 2016, customers will no longer be required to provide the BIC (Bank Identifier Code) when initiating a cross-border SEPA payment.

The new SEPA IBAN-Only directory launched by Payments UK will help PSPs in SEPA countries to derive the correct BIC from the IBAN (International Bank Account Number), which will still be used behind the scenes to route SEPA payments to the correct recipients within the UK.

What this means for you

Payments UK advise that the directory will help to accurately route SEPA payments to the UK. As such, the launch of the new directory will be of interest to PSPs in both the UK and other SEPA countries.

American Express not exempt from Interchange Fee Regulations

The IFR brings major changes to the way UK card payment systems operate. In particular, it introduces caps on interchange fees on debit and credit card transactions where the issuer and acquirer are located in the European Economic Area (EEA).

Where the market share of a three-party card scheme is under 3%, however, the scheme may qualify for an exemption from the fee caps. In this connection, on 8 December 2015, and in making a provisional determination of card schemes that are subject to the domestic interchange fee caps in the UK, the PSR said that American Express will not be exempt.

What this means for you

In setting out how it was going to regulate the IFR, the PSR considered whether the American Express scheme might qualify for an exemption from the incoming regulations. The PSR concluded on a provisional basis that between 9 September 2014 and 8 September 2015, American Express’ market share was above the 3% threshold. As such, American Express, and any PSPs participating in the American Express scheme, were not exempt and must comply with the domestic interchange fee caps until 31 March 2016.

Spotlight on… key dates in 2016

2016 is set to be a busy year across the payments industry. To assist you with planning for the year ahead, we have set out some of the key dates on legislative and regulatory developments for the coming year. If you’d like to discuss any item in detail, please get in touch with one of our experts using the contact details below. View the calendar: Payment Services - Key developments tracker