…as Mark Twain once cabled to the US press, his obituary having been published a touch early. Alas, no such reprieve awaits the PSR. Having been created by the Conservative coalition government in response to the great abolition of cheques imbroglio, it is now to be merged into the Financial Conduct Authority by Labour. See https://www.gov.uk/government/news/regulator-axed-as-red-tape-is-slashed-to-boost-growth
Should we shed a tear? It has done useful work in encouraging direct participation by smaller banks in the Faster Payments system and BACS, and the declining use of cheques has been made more efficient by the new Image Clearing System. But some of its other priorities could happily live elsewhere. Sorting out Authorised Push Payments looks very much like an FCA task, and its worthy work on cards and merchant acquiring could surely be done by a specialist sub-panel or committee of the Competition and Markets Authority.
The irony is, of course, that any sector regulator – Ofgem, Oftel etc – can happily be abolished when its sector has become ‘competitive’ in some sense and no longer in need of regulation. To misquote St Augustine, perhaps the sector regulator’s prayer is ‘O Lord, make my sector competitive, but not yet’.
Keen readers of the Autumn Statement will have noticed, in paras 4.44 and 4.45, the heralding of this Review:
‘The government is also committed to growing the UK’s world-leading retail payments sector. That is why the government supports Joe Garner’s independent review into the future of payments. The government is acting to implement the review’s core recommendations…’ [see https://bit.ly/3Rm6jz1 for the Review itself]
Like the curate’s egg, the review is good in parts. But it has a few curious features which are worth some comment.
First, it makes no mention of the last vision and strategy produced by the Payments Strategy Forum (PSF) in November 2016 from which the diagram above was taken. Indeed, as the review acknowledges, Pay UK are still busy implementing key elements of this – notably the New Payments Architecture.
There is certainly a case for reviewing and updating the PSF’s work – for example, it makes no mention of cryptocurrencies or Central Bank Digital Currencies. And it is unfortunate, to my mind, that the Payments Strategy Forum itself was wound up once it had produced its work. Had it continued to function as a forum, it could have shed some useful sunshine and challenge from all payments stakeholders on the more technical workings of Pay UK.
Second, it suggests that the vision and strategy should be led by H M Treasury (p29):
‘We considered where the creation of such an overriding vision and strategy should be led from and concluded that only HM Treasury has the influence and oversight to provide leadership to the entire payments landscape. To be successful, HM Treasury needs to allocate an adequate level of resource to develop the blueprint and to ensure its delivery.’
‘An adequate level of resource’ neatly summarises the problem – I suspect they will find that, when they open the resources cupboard at HMT, they will find it pretty bare. And what resources there are will be required to carry out the Review’s other recommendations – like monitoring digital exclusion (Recommendation 3, p11).
It would be far better to my mind to revive the Payments Strategy Forum to update its 2016 work – and readers might be interested in watching this video of its participants commenting on its approach: https://bit.ly/3N9JVGj. But perhaps that’s too ‘open government’ for the current administration, and they would prefer it behind the closed doors of HMT?
The final comment to make is on account to account payments being ‘too clunky’ because they rely on using sort codes and account numbers. While the ‘clunky’ epithet is true enough, the Review makes no mention of the key reason for this: unlike countries like India, with its Unified Payments Interface (UPI), we have no digital identity system in the UK. As The Banker made clear in a piece on this in early November, this is key to India’s success with UPI:
‘The basis for UPI’s success had been laid long before 2016. The Aadhaar digital identity (ID) system was introduced in 2009, with the aim of providing every Indian and foreign resident with a unique 12-digit identity number for use across a range of services….[see https://bit.ly/47Neudk for the whole article].’
The UK doesn’t have any national ID system – the last attempt at it was scrapped by the incoming Conservative government in 2010 by one Theresa May. Without it, P2P bank transfers are bound to be clunky.
It will be interesting to see what happens to the Review. The government seems rather keen on setting up Reviews which produce worthy reports which then sink beneath the waves – for example the Penrose Report on competition policy (see my bog from February 2021). It would be a pity if the same fate befell this Review.
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