Payments industry welcomes UK regulatory merger  

The payments industry welcomed the merger of the Financial Conduct Authority (FCA) and the Payment Systems Regulator (PSR) at Pay360 on March 26. Following the consolidation announcement on March 11, both the public and private sectors responded with positive feedback, including PSR employees and fintech giants.

While PSR representatives believed the transition phrase could take up to two years, the letter to the Treasury Committee on March 12 confirmed the government will consult on the proposal over the summer and legislate “as soon as possible”.

The PSR retains its statutory powers until legislation is passed by parliament; in the meantime, it is making plans to transfer certain functions to the FCA. The PSR and FCA will work together to recruit a joint PSR/FCA payments executive director during the interim period.

Jana Mackintosh, managing director of payments and innovation at industry body UK Finance and a former PSR manager from 2017, considered the merger to be a “natural move”. She felt the PSR was already part of the FCA, but believed it would take some time for the FCA’s decision-making process to fully absorb the PSR.

While Mackintosh believed the merger would allow the FCA to focus on payments infrastructures, there is still no plan outlining how it will work with the PSR and the Bank of England (BoE).

PSR head of strategy, analysis and engagement Dan Moore commented about the merger on a panel with FCA director of payments and digital assets Matthew Long.

“There is a real opportunity for streamlining with consolidation; I believe that is a big opportunity,” Moore said. “But I would say that payment systems have different characteristics which produce network effects and often the regulation needs to change to address this. One really important thing to mention is that it should be a distinct framework, particularly focusing on the future regime and what it consists of.

“There are still many decisions to be made about how all of this will look in the future, but no regulatory structure will work unless it addresses the challenges and opportunities that exist within a particular area,” Moore said. He confirmed that the PSR’s £28 million budget is “this year’s” but they would look at “what position there is” as they set one for next year.

The private sector perceived the merger to be a practical move, particularly towards improving data-sharing and fraud prevention. UK payments giant Revolut expected the FCA to continue the next step of the reimbursement scheme introduced by the PSR, for example.

“It’s a rational discussion to have, especially now that the PSR regime is in place in the UK and will continue under the FCA. In the long term, should we be looking at a different framework that collaborates real-time data sharing, but also a reimbursement framework?” said Rory Tanner, head of UK government affairs at Revolut.

“Support the FCA. Support the PSR,” Richard Luff, vice president of financial crime solutions at Mastercard, told delegates.

“Using the technologies weʼve built out, weʼre currently investing in an enhanced raw data solution, which will support the industry and provide an option for others to utilise, bringing in additional data sharing and development to enhance the system,” he added.