The what, why and how of the PSR

Issue 469 | 14 April 2023

The what, why and how of the PSR

The Payment Systems Regulator (PSR) has published their plan and budget for 2023/24 - at sixty pages the document provides a useful indication of the regulators intended focus for the coming 12 months.

There is, of course, no substitute to reading the full annual plan document so here’s a link: PSR 2023/24 Annual Plan.

However, here’s a quick read highlighting the key aspects of the 2023/24 annual plan - the what, why and how of the PSR.

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The role, remit and powers of the PSR

The PSR’s overarching vision is “…for payment systems that are accessible, reliable and secure, and represent value for money” and their objectives and powers come from sector specific legislation (principally from the Financial Services (Banking Reform) Act 2013 (FSBRA)) and from their role as a concurrent competition authority.

FSBRA sets out the PSR’s three statutory objectives:

• Service-user objective: Ensuring that payment systems are run and developed in a way that takes account of and promotes the interests of those that use, or are likely to use, services provided by them.

• Competition objective: Promoting effective competition in the market for payment systems and markets for services provided by payment systems in the interests of those who use, or are likely to use, services provided by them.

• Innovation objective: Promoting the development of, and innovation in, payment systems in the interests of those who use, or are likely to use, services provided by them.

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The PSR will be subject to further regulatory reform

In 2021, the government’s Future Regulatory Framework (FRF) Review put forward proposals on how the financial services regulatory framework should adapt for the future. In particular, it outlined how it wants regulation to adapt to the UK’s exit from the EU. This includes ensuring that financial services regulation in the UK is coherent, agile and internationally respected.

The Financial Services and Markets Bill (FSMB) puts the outcomes of the FRF Review into legislation. It will change the regulatory framework the PSR operates within, in particular by:

• repealing retained EU law in order to enable a UK regulatory regime that is properly tailored to the UK markets; this includes some payments legislation, notably the Payment Services Regulations 2017 and the Interchange Fee Regulation

• introducing new considerations which the PSR must have regard to, notably in respect of the delivery of sustainable growth consistent with the net zero climate target

• adding to the arrangements by which the PSR is accountable to Parliament, including new requirements on us in how the PSR develops proposals

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Three priorities for 2023/24

Consistent with the PSR’s five year strategic plan (published in January 2022) the 2023/24 annual plan focuses on the following priorities:

Protection:

People need to make and receive different kinds of payments safely and confidently. This means stopping scams from happening and better protecting people if they do fall victim.

Competition:

Competition in payments can improve outcomes for people and businesses by stimulating innovation, improving services and lowering prices. This is one reason we focus on making sure conditions are right for competition – both now and in the future.

Unlocking account-to-account payments:

We’re seeing significant growth in account-to-account payments, including those initiated within open banking. It’s now possible to use these payments to donate to charities, settle your taxes and pay your credit card bill. A number of firms are launching new payment services that use the open banking systems. We see significant potential in account-to-account payments, and open banking in particular, to deliver new payment services that benefit people and businesses.

Access and Choice:

It’s essential that people and businesses can use the payment services they rely on and have an effective choice of payment options, including both cash and digital payments.

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Seven key items in the 2023/24 work programme

For 2023/24 the PSR’s overarching strategy and priorities has led to the following work plan:

Authorised Push Payment (APP) Scams

The desired outcome is that APP scams are reduced, victims are protected, and financial fraud is tackled by coordinating efforts and sharing information and the PSR plan to achieve this by:

• Publishing a scorecard showing the UK’s largest PSPs’ performance on APP scams.

• Working with UK Finance and Pay.UK on information-sharing among PSPs, to improve scam detection. Implement rules that will lead to greater reimbursement of APP scam victims.

• Working with other authorities on other measures to prevent fraud in the wider payments ecosystem.