On 18 April 2023, the Payment Systems Regulator (PSR) published a speech by its Chair, Aidene Walsh, at the Innovate Finance Global Summit. The speech focusses on innovation from a regulatory perspective, including what changes, what stays the same and the integral role the PSR can play.
Ms Walsh explains that, for any payment system to work for a wide set of uses, consideration needs to be given to the wider benefits such as data, a rulebook to set standards around dispute resolution and protection. As such, firms need to allocate risks and liabilities, including to make sure that incentives are in place to tackle fraud and, there needs to be a commercial model that works for businesses and helps them innovate to deliver payment solutions that build a network of willing customers. Ms Walsh goes on to note that, by bringing these things together, it points to the best approach to innovation being when the PSR can work in tandem with innovators to ensure these outcomes are met.
There has been significant change and innovation in payment systems over the last few years. While some have rendered real benefits, others have been harmful, such as authorised push payment (APP) scams and cyber-attacks. Where there is a gap in the outcomes the PSR expects from innovation, it will intervene.
Positive examples of innovation highlighted in the speech include open banking, faster payments and the emergence of the digital pound.
In relation to open banking, Ms Walsh says that for the UK to succeed, the PSR needs to deliver a central set of rules and standards, setting minimum requirements that allow firms to innovate and tailor their service offering to different customers and merchants. As such, Ms Walsh highlights that, just this week, the Joint Regulatory Oversight Committee (JROC), co-chaired by the PSR and FCA, published its recommendations for the next phase of open banking in the UK. She hails this as a ‘pivotal point’, with the JROC recommendations setting out a roadmap of priorities over the next two years. The JROC also set out its vision for the open banking future entity, including the next steps which need to be taken in designing it, along with principles that will underpin a long-term regulatory framework.
Ms Walsh notes that the PSR is also focussed on the emergence of a digital pound and the potential benefits from having another system that will enable the UK to accommodate a wider range of payments. She says the payment ecosystem will be more resilient and competitive if there are a number of different, overlapping, systems that can take each type of payment. This guards against cyber threats, technical failure and the risk that the system operators fail to innovate sufficiently quickly. As the digital pound moves forward, the PSR believes it has a role in ensuring development is done in a way that enhances the UK’s payment systems as a whole, providing genuine choice across payment mechanisms.