How a new UK payment regulator to be launched next year will stimulate the industry

Every year, payment systems in the UK process more than seven billion transactions, worth more than £75trillion.


A new payment regulator in the UK is set to increase competition in the field, as well as create innovation for the development of products.

Jerry Norton, managing director of financial services at information technology consulting firm CGI (inset, below), says: “There is a huge change, which just started in the UK, in the creation of a regulator for payments. This is quite profound, as payments have not been regulated formally before in the UK. It is also fairly unique globally to create such an entity.”

The Payment Systems Regulator, which is due to be fully operational by April 1, 2015, will sit within the Financial Conduct Authority (FCA) and will focus on three main areas – promoting competition, encouraging innovation and ensuring payment systems operate in the interests of customers.

75tn 2Norton says: “It is meant to be an economic regulator – you can see a model where it starts setting certain types of tariffs, which then are open for others to use. The idea being that it would potentially stimulate innovation and competition. The UK has been extremely good at payment innovation.”

The Payment Council has just launched PayM, a mobile payment service which will be available through nine banks and building societies. Nortn adds: “PayM, which just came out, is a person-to-person mobile payment mechanism for low-value purchases and is pretty unique globally. There are other mechanisms for doing it, but there aren’t many people who have got them live at the moment.

“PayM is the start. The key thing about PayM is that it is moving money from a personal current account to another or a charity and there is no card or anything else involved. To do that, it uses faster payments as the underlying transfer mechanism, which you initiate through your mobile phone.

“It is a simple mechanism. You do not have to key in some complicated sort code and account numbers you can never remember. It is a simple mechanism in terms of consumer acceptance – you get the money instantly.

“The reason why it is important is because it is easy to use, it is secure and it is not attracting fees. Mobile payments are often card-based and use some sort of credit and debit card, in which case they are picking up the fees associated with card payments, and those fees could be very high.

“PayM is using a different mechanism and using a lower cost. It is not one bank doing it, it is across the industry. Sweden has something similar, but there aren’t many other places that have got something. Again, we are ahead of the curve.”

Norton believes PayM is merely the first of many new products being developed for the payment industry, which will offer huge benefits.

He says: “In a card world there are all sorts of things that go on behind the scenes that most consumers do not know. The retailer might have to wait two or three days until it’s finalised and the cardholder can dispute the transaction.”

Through PayM the retailer gets the money immediately. “I think the future is in things like PayM,” Norton says. “The trend will be obviously mobile, obviously wallet, but effectively not a card-based thing; it will be account-based things.”