On 28 January 2021, the FCA published Consultation Paper 21/3: Changes to the SCA-RTS and to the guidance in ‘Payment Services and Electronic Money – Our Approach’ and the Perimeter Guidance Manual (CP21/3).

In the 2020/2021 Business Plan the FCA identified the payments sector as a priority for the next three years. The regulator has identified barriers to the future success and adoption of open banking as it grows in the UK and to address these it sets out in CP21/3 proposed amendments to the onshored technical standards on strong customer authentication and secure methods of communication (SCA-RTS).

Proposed changes to the SCA-RTS include:

  • Adding a new exemption from strong customer authentication (SCA) for when customers access their account information though an account information service provider (AISPs) (see paragraphs 3.6 to 3.15 of CP21/3).
  • Mandating the use of dedicated interfaces (such as application programming interfaces (APIs) by account servicing payment service providers (ASPSPs) to facilitate third party provider (TPP) access to retail and SME customers’ payment accounts (see paragraphs 3.16 to 3.23 of CP21/3).
  • Changing requirements for publishing interface technical specifications, availability of testing facilities, and fallback mechanisms by account providers (see paragraphs 3.24 to 3.30 of CP21/3).
  • Treating ASPSPs with deemed authorisation under the temporary permissions regime as exempt from the requirement to set up a fallback interface, where the ASPSP has an exemption from its home state competent authority (see paragraphs 3.31 to 3.39 of CP21/3).
  • Increasing the single and cumulative transaction thresholds for contactless payments from £45 up to £100 (or potentially a maximum of £120) and from £130 to £200 respectively (paragraphs 3.41 to 3.46 of CP21/3).

The proposals to amend the guidance in the document ‘Payment Services and Electronic Money – Our Approach’ (AD) relate to four areas:

  • In particular the FCA is updating the AD to take into account updated Commission Q&As and the European Banking Authority opinion published in June 2019 on SCA, clarifying what constitutes a valid element for the purposes of SCA.
  • Prudential risk management and safeguarding customer funds. In May last year the FCA published a consultation on coronavirus and safeguarding customers’ funds. In the consultation the FCA proposed additional temporary guidance to strengthen payment and e-money firms’ prudential risk management and arrangements for safeguarding customers’ funds in the exceptional circumstances of the COVID-19 pandemic. On 9 July 2020, the FCA published its temporary guidance taking into account the feedback it received to the consultation. The FCA is now proposing, among other things, to make this temporary guidance permanent and incorporate in the AD.
  • Onshoring changes to reflect changes to the regulations and rules following the UK’s withdrawal from the EU and the end of the transition period, and the application of FCA rules and guidance to firms in one of the temporary permission schemes designed to enable EEA payment institutions, electronic money institutions and registered account information services providers to continue operating in the UK for a limited time after the end of the transition period.
  • General updates relating to areas such as reporting requirements.

The FCA is also proposing to made changes to chapter 15 of the Perimeter Guidance manual regarding certain exclusions from the Payment Services Regulations 2017 (PSRs) and the Electronic Money Regulations 2011 (EMRs). The changes are intended to help industry identify whether their business activities fall within scope of the PSRs or EMRs.

The deadline for comments on the proposals for contactless payments is 24 February 2021. The deadline for the remainder of the proposals in CP21/3 is 30 April 2021.