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Watchdog advises Britain's payments industry to ready itself for intervention

Signage is visible for the Financial Conduct Authority (FCA), the Britain's financial regulatory organization, and the Payment Systems Regulator (PSR) at their main offices in London, Britain March 10, 2022

LONDON, March 20 (mod1s) - Britain's payments regulator said on Wednesday the industry needs "targeted intervention" to enhance competition and eliminate impediments to innovation and "pockets of market power" that leave consumers picking up the price. 

Financial authorities in Britain face pressure to make it easier for start-ups to join industries like payments, a magnet for fintechs, to enhance economic development. 

The Payment Systems Regulator (PSR) has consulted on extending the usage of "open banking", opens new tab or third party payment providers being granted access to bank accounts, with a customer's agreement, to offer alternative services.

It wants "swift action" to bring out the option of users to link payment providers to their bank account for agreed, "low risk" regular payments, such as to local councils or utilities. 

PSR Managing Director Chris Hemsley said he had "heard loud and clear" from the survey that some market players believe the PSR is proposing to meddle too much, notably in limiting certain pricing, but he suggested some obligatory adjustments were probable.

"We are exploring the need for targeted regulatory intervention to make this work, like mandating the participation of sending firms," Hemsley told industry organization the Payments Association's Pay360 conference. 

"Creating new markets sometimes required targeted regulation to support rule-making and control pockets of market power." 

He highlighted comparisons with the telecommunications industry, where he believed intervention freed competition. "That is, essentially, my starting point when approaching open banking payments," he stated.

Hemsley said much has been gained in enhancing payments over the previous 15 years, with Britain contrasting favorably with other nations regarding speed and security of payments. 

"Have we accomplished that journey? In short, no," Hemsley said, adding there were no "pricing signals" to urge clients to move to better value service providers. 

"They eventually take up the expense of payments encountered by retailers. They do not notice this expense, of course, since it is hidden in the price of products and services," he remarked.

In reality, merchants have to take both Mastercard and Visa, the American pair that dominate cross-border payments, Hemsley added. The PSR has recommended a limit on cross-border interchange fees on shops levied by Mastercard and Visa.


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