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Payment Matters: No 8 - UK

    • Financial services
    • Financial services - Payment services

    11-04-2014

    FCA publishes details of new regulator for payment systems and a “Call for Inputs”

    On 5 March 2014, the FCA published a “Call for Inputs” consultation requesting views on the current state of the UK payment systems landscape to help the new Payment Systems Regulator (PSR) develop its regulatory approach and identify early priorities.

    Since then, the FCA has published (on 2 April 2014) new webpages setting out details of the new regulator for payment systems and a timeline for payment systems regulation. On 4 April 2014, the FCA published a new webpage about the board of the PSR. The webpage lists the following, with links to their profiles, as the first board members: Chairman: John Griffith-Jones; Deputy chairman: Martin Wheatley; Interim managing director: Mary Starks; Three non-executive directors: Chris Woolard, Brian Pomeroy, and Amelia Fletcher.

    The PSR will promote competition and innovation, and ensure payment systems take account of and promote the interests of service users.

    What this means for you

    The FCA’s new webpages state that the PSR will be incorporated in April 2014 and the accompanying press release states that the new PSR will be fully operational by 1 April 2015.

    All stakeholders and participants in UK payment systems were invited to respond to the PSR regarding the Call for Inputs by 15 April 2014. Following those responses, the PSR will, between May and September 2014, formulate proposals on the regulatory approach, fees, rulebook, priorities and any other ancillary issues and will finalise the outstanding legislative governance requirements.

    Plans unveiled to modernise cheque payments

    We reported in Payment Matters: No. 6 on a Government press release published in December 2013, confirming the Government’s new proposals on cheque imaging and that the Government would be consulting this year on introducing the proposed legislation.

    On 6 March 2014, the Government published the resultant consultation paper setting out its proposals to introduce legislation to allow for the introduction of cheque imaging.  Cheque imaging will speed up cheque clearing times and give customers greater convenience and choice in how they deposit cheques. The reforms will enable banks to clear a certified, digital image of a cheque in lieu of a traditional paper cheque.

    What this means for you

    The changes should not only reduce the time it takes for a cheque to clear (to as little as two days), it should also increase the choice of ways to pay for consumers. While customers will continue to be able to deposit cheques at branches, cash machines, Post Offices or by post and still benefit from a faster clearing cycle, banks will also be able to offer the option of paying in cheques via smartphones. The Government sought views from stakeholders on how best to implement changes that, in its view, will boost the status of the cheque again. The deadline for responses to the consultation paper was 7 April 2014.

    Payments Council confirms new mobile payments service to be called ‘Paym’

    On 10 March 2014, the Payments Council announced that its new secure way for consumers to pay using just a mobile number will be called ‘Paym’. On 2 April the Payments Council then announced that the launch date of Paym will be 29 April 2014. A new webpage, overview document and frequently asked questions page about Paym have also been published by the Payments Council.

    Paym will be integrated into customers’ existing mobile banking apps as an additional way to pay, making it possible to send and receive payments using just a mobile number. At launch, the customers of nine banks and building societies will be able to use the new service.

    What this means for you

    Currently any payment service provider authorised or registered with the FCA under the Payment Services Regulations 2009, with access to Faster Payments and/or LINK, will be able to participate in Paym. Participants are required to sign up to an agreement to join the service containing rules, standards, a security code of conduct and an obligation to contribute to the costs of the service proportionate to the relevant participant’s use.  

    Government to make it easier to check that you’ve got the right bank deal

    On 16 March 2014, the Government announced, in a press release, an agreement between major current account providers to give customers their account data in a simple and standardised form. This will enable consumers to do quick comparisons of their accounts, fees, charges and benefits, and make informed decisions on whether there are better accounts for them to switch to.

    What this means for you

    Going forward, customers will be able to simply upload their usage data for analysis and get an instant answer as to whether or not they would be able to save money by moving to a different account. The major current account providers who have committed to this agreement are: Barclays, HSBC, Lloyds, Nationwide, RBS, and Santander. The Government expects that,  in due course, all current account providers will make account data available in this form.

    Bank of England: “Clearing houses as system risk managers”

    On 17 March 2014, the Bank of England (BoE) published its “Supervision of Financial Market Infrastructures Annual Report”. The report provides an account of how the BoE has exercised its responsibilities in respect of financial market infrastructure supervision and sets out issues the BoE expects to focus on over the coming year.

    The report states that over the past year, the UK retail payment systems BACS and Faster Payments Service (FPS) have developed plans to eliminate settlement risk through participants ‘pre-funding’ their payments with cash held at the BoE. Although none of the recognised payment systems act as principal to the payment transactions they process (and do not, therefore, face counterparty credit risk), their design and rules still impact the credit and liquidity risk borne by their members. Members in deferred net settlement systems (DNS) face credit and liquidity risks where payments are credited to recipient accounts before interbank settlement has taken place. The BoE says in its reports that this risk can be mitigated through all members ‘pre-funding’ the payments they make, so that, should a member fail before settlement occurs, the pre-funded resources can be used to cover any cash shortfall arising from payments already made.

    What this means for you

    The BoE has made it a supervisory priority that settlement risk is removed for members of the United Kingdom’s recognised retail payment systems and requires the members of BACS and FPS to completely prefund their outward payments with cash held at the BoE by the end of 2014.

    New chair for Payments Council announced

    On 31 March 2014, the Payments Council announced that it has appointed Gerard Lemos as its new Chair.

    What this means for you

    Mr Lemos will be taking over as Chairman of the Payments Council from Richard North, when his period as Chairman comes to an end on April 30th. 

    Sainsbury’s Supermarkets v Mastercard

    In December 2007, the European Commission adopted a decision finding that MasterCard's EEA multilateral interchange fee (MIF) breached the Treaty on the Functioning of the European Union (TFEU). In May 2012, the General Court dismissed MasterCard's appeal and upheld the Commission's decision in its entirety. This appeal is still pending before the ECJ and judgment is not expected until summer 2014.

    Sainsbury's Supermarkets Limited (Sainsbury) issued a claim form in the High Court, Chancery Division, claiming damages from MasterCard for breach of the TFEU and/or the Competition Act 1998.

    MasterCard initially tried to claim that Sainsbury was precluded from bringing a claim because it was part of the same undertaking as Sainsbury's Bank, which applied the MIF. On this basis, Sainsbury would have been considered one of the entities on whose behalf MasterCard was setting the UK MIF. However, the Court ruled that it was not appropriate to consider this question as a preliminary issue: there were doubts whether, even if MasterCard were successful on this point, it would resolve the action fully. Further, the issues involved were likely to be complex and substantial and lead to significant expense and potential delay in the main trial.

    What this means for you

    The ruling also considers disclosure applications by Sainsbury. In particular, the judge concluded that it would not be appropriate to rule on the disclosure of documents prepared by MasterCard for the purpose of investigations by the European Commission and the Office of Fair Trading until he’d seen responses from those bodies to letters sent asking for their views on such disclosure in the context of the Wm Morrison v MasterCard damages action.

    Applications of this nature are to be expected in relation to such a significant piece of litigation. The ruling confirms that this action will continue to run (against the backdrop of both new European legislation and the voluntary concessions being imposed by Visa) through to a trial or a settlement.