Payment Matters No 11 - UK

• United Kingdom

• Financial services - Payment services

26-08-2014

BBA reports revolution in the way we bank

The British Bankers Association (BBA) has released a report entitled ‘The Way We Bank Now: It’s in your hands’, which highlights how the British public is embracing mobile and internet banking technologies and the effect that this is having on the way we manage our finances.  The report records that Britons are spending £6.4 billion a week via new payment methods and that there has been a sharp decrease in the number of transactions conducted in the banks’ high street outlets.  However, the BBA emphasises  the important role that branches continue to play when customers want to take out a mortgage, assess their financial options or make a complaint. 

What this means for you

Banks will need to ensure that they keep pace with the public’s demands to use technology to facilitate the way in which finances are managed.  However, they need to be mindful that the embracement of technology is not universal among the population and there are occasions when face-to-face contact is still a priority.  2014/15 is likely to be a challenging year for contactless payments, with consumer feedback and confidence still mixed and a sense that a proper user-friendly platform is yet to be decided upon outside of bus journeys in London.

UK retail finance market likely to face CMA investigation

The Competition and Markets Authority (CMA), the successor body to the Office of Fair Trading (OFT) and the Competition Commission, announced its provisional decision on 18 July 2014, that there should be a ‘joined up in-depth’ market investigation into the markets for banking services for SMEs and the supply of personal current accounts.

In relation to the supply of personal current accounts, the CMA has been updating the OFT’s 2013 review of the personal current account market.  In doing so, the CMA has considered certain longstanding competition concerns identified by the OFT, including high levels of concentration, low levels of new entry and low switching rates, and any developments in the sector in light of the following changes:

• The introduction of the new seven-day Current Account Switching Service.
• The impact of the planned divestments by Lloyds Banking Group and by the Royal Bank of Scotland of parts of their retail banking businesses.
• The forthcoming establishment of the Payment Systems Regulator.

What this means for you

The CMA will consult until 17 September 2014 on its provisional decision.  The CMA will make a final decision regarding the market investigation reference in Autumn 2014.  In the event that a market investigation reference is made, a panel of independent members of the CMA will undertake an in-depth and time consuming review over a period of 18 months with a view to determining whether there are market features which prevent or restrict competition in the supply of these banking services.  For more information please contact Lesley Farrell.

New appointments to PCB

The Payments Council Board (PCB) announced the appointment of three new independent directors to its board on 15 July 2014.  Sarah Chambers, Christine Farnish CBE and Robert Lerwill will join Clare Spottiswoode CBE, who currently sits as an independent director on the PCB.  The PCB is made up of 15 voting directors (including four independent directors), a voting independent chairman and an observer from the Bank of England.  Each independent director holds one voting seat and any two independent directors have the power of veto.

What this means for you

The Payments Council is responsible for ensuring that payment services work in the UK.   One of the Payments Council’s core objectives is to ensure the operational efficiency, effectiveness and integrity of payment services in the UK.  Participating in the Payment Council’s customer and industry forums provides interested parties with an opportunity to provide their views on key issues and developments.

Latest account switching results

The Payments Council has published a dashboard which shows that levels of awareness and confidence in respect of the free-to-use Current Account Switch Service are continuing to increase.  There was also a 16% increase in the switches made in comparison to the same period last year.

What this means for you

Since 16 September 2013, the Current Account Switch Service has enabled customers to switch their current account from one bank or building society to another more simply and reliably.  The Payments Council publishes switching data on a quarterly basis.  The latest results indicate that customers are increasingly willing to switch their account in an effort to obtain better levels of service and/or to take advantage of an array of current account incentives.

Checklist released to help with account switching

The Payments Council has released a ‘Current Account Switch Service - Small Business Checklist’ setting out considerations and steps to be taken when switching bank accounts.  The checklist advises small businesses to utilise comparison websites to assess which type of account is most suitable.  Guidance is also provided on the steps that need to be taken and the key differences between account opening and switching.  Small businesses are advised to ensure that all details held by their bank are correct and that any administration is completed on their old account prior to its closing.

What this means for you

The Payments Council continues to publicise the Current Account Switch Service.  Through the introduction of the checklist, its recent focus is upon supporting small businesses to become more savvy in relation to their bank accounts.  Small businesses are likely to follow the increasing number of consumers that are deciding to switch.

Corporate Governance within the PSR

On 10 July 2014, the Financial Conduct Authority (FCA) published details of the corporate governance structure within the Payment Systems Regulator (PSR).  The report encapsulates how the PSR is constituted, directed and controlled by the Board  and details how the Board’s rights and responsibilities are distributed to various committees such as the risk committee and remuneration committee, as well as to the executive.  It also highlights those decisions which are to be the sole reserve of the Board as well as including the PSR Articles of Association.

What this means for you

Those regulated by the PSR may find the report to be a useful read to see who has responsibility for particular aspects within the payment systems industry and in turn to understand the role of the PSR and the way in which it operates in more detail.

Contactless payments on TfL services

Transport for London (TfL) announced on 25 July 2014, that it is introducing contactless payments from 16 September 2014 for all pay-as-you-go customers.  Contactless payments were successfully launched on London’s buses in December 2012, allowing customers to pay for their journey with a contactless payment card.  Contactless payments are now to be extended to the Tube, trams, DLR and London Overground.   

What this means for you

Once the changes are introduced, customers will no longer need to spend time topping up Oyster balances because fares will be charged directly to payment card accounts.  Customers will touch in and out of the readers at the start and end of every journey, with only one charge per day being sent to the account provider for payment.