The UK’s Payment Systems Regulator has published its Annual Plan and Budget for 2021/22

On 24 March 2021, the PSR published its Annual Plan and Budget for the forthcoming year, outlining its plans to improve outcomes in payments now, but also in the future.

The PSR is the first economic regulator to oversee payment systems and wants to continue its mission to encourage competition and innovation in the payments space, and see consumers and businesses benefiting from more choice and ways to pay.

The PSR’s key focus areas for the year ahead

The PSR’s work will continue in certain areas where it has already sought to make headway, such as scam prevention, access to cash and the renewal of the UK’s interbank payment systems (the New Payments Architecture). The PSR will also undertake new projects such as conducting research into bank-to-bank payments.

More specifically, the PSR has identified its 6 key projects as:

  • Competition from interbank retail payments: The PSR is undertaking research, analysis and engagement to explore the extent to which digital payments innovations are materialising, the potential for interbank payments to increase choice and competition, and the impact on people making interbank payments at the point of sale. Additionally, it wants to better understand the scale of any barriers to interbank systems being used for retail payments, and how to address them. 

  • Consumer protection: The PSR is considering what consumer protection measures could benefit consumers and businesses, so they feel safe making payments directly from one account to another. Also, it’s evaluating responses to its call for views on consumer protection and assessing the actions it should take to support the development of effective protection measures, including regulatory steps. Proposed next steps will be set out in a statement by Q4 2021.

  • Authorised push payment (APP) scams and confirmation of payee: The PSR will continue working closely with government, industry and consumer groups to identify ways to prevent APP scams and improve protection for victims.

  • The New Payments Architecture (NPA): The NPA is a blueprint for a new payment system that is being developed by Pay.UK to process retail interbank payments in the UK. The PSR will continue overseeing the procurement of central infrastructure services in the NPA and exploring ways to lower risks to the NPA's delivery, including whether the PSR needs to use its powers.

  • Access to cash: The PSR will continue to work with stakeholders to ensure there is a long-term framework in place that provides access to cash, as well as continuing to oversee LINK.

  • Card-acquiring market review: The PSR is carrying out a market review into card-acquiring services to ensure the market for these services is working well and that competition is effective. It aims to publish and consult on a remedies paper containing its proposals to help merchants get a better deal for card-acquiring services, lead to better outcomes for merchants and, ultimately, consumers. It will also publish a final report setting out its findings and any action it intends to take.

Other important objectives for 2021/22 include:

  • Interchange Fee Regulation (IFR): The PSR will publish its findings and details of how it’s overseen the provisions of the IFR and will maintain international cooperation and coordinate with other UK bodies such as the Treasury and FCA.

  • Strategy: The PSR wants stakeholders to be clear on its long-term focus and will consult and encourage feedback from a broad range of interested parties about its strategy. It will publish the final strategy taking into account the feedback.

  • Monitoring access to payment systems: The PSR will assess developments in access to payment systems and compliance with the access regulations in Part 8 of the PSRs 2017. It will also assess applications under section 56 and 57 of FSBRA and complaints under the PSRs 2017. It will publish its annual report on access to payment systems and the governance of certain regulated payment systems operators in the UK. This report will cover two years of data as it did not publish a report in 2020 due to COVID-19 prioritisations. The PSR will also consider combining its guidance on these issues, which is currently in separate documents, and updating it to ensure it remains relevant.

  • Cryptocurrency: The PSR will continue working with the Treasury, Bank of England and FCA to develop a UK regulatory regime for cryptoassets and stablecoins. The PSR will also monitor the risks posed by cryptoassets more broadly.

The PSR has a range of formal powers available to it, enabling it to take enforcement action in relation to compliance failures (including under FSBRA, the IFR and PSD2), including in relation to infringements of the Competition Act 1998. The PSR is currently undertaking a range of enforcement work, with 4 enforcement investigations open relating to potential non-compliance with the IFR, one of which relates to potential non-compliance with PSD2 (an access case), as well as an ongoing case under the Competition Act 1998. The PSR expects to conclude the majority of its current regulatory enforcement investigations in 2021/22. If the PSR identifies suspected compliance failures, it may open new competition or regulatory enforcement investigations.

The PSR has compiled a fact sheet summarising its Annual Plan.

Comment

The PSR will publish its annual report in summer 2021 on how it has performed against its plans for 2020/21, which were published in March 2020. For the forthcoming year, it has set itself a programme of work that continues several previous themes. Given the trend towards digital payments and their use by digital platforms, which has been accelerated by the impact of COVID-19, it would be good to see the PSR leading the way and working closely with other regulators and stakeholders in this fast-moving sector.

We will continue to inform you of the latest developments, how you can get involved and influence the PSR’s work going forwards.

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