PSR's consultation: 'Our Proposed PSR Strategy' - Which? response

Summary

Which? welcomes the Payment Systems Regulator's proposed five-year strategy, which comes at a critical juncture for UK payments markets.

• We agree with the regulator’s assessment that payments do not currently work well for everyone, and that more needs to be done to tackle the issues in payments markets.
• It is therefore crucial that the Payment Systems Regulator acts to urgently address key gaps in consumer protections and threats to access, whilst establishing a longer-term course of action for how it will ensure that payment systems work for all consumers.
• Which? broadly supports the four strategic outcomes that the Payment Systems Regulator has identified, and the four strategic priorities required to meet these aims(see Appendix 1 & 2 for outcomes and priorities).
• However, we raise the following concerns:
  • Given the need for immediate action from the Payment Systems Regulator, we believe that the proposed measures would be better framed as specific, measurable objectives with clear timeframes for action. There is an evident need for pace on pressing issues in the payments market, hence why the regulator's final strategy should detail how and when it plans to act.
  • To deliver on its strategy, the Payment Systems Regulator must be willing, in practise, to intervene in areas of the payments market where competition between payment systems is insufficient in creating good outcomes for consumers (Priority 3). This would require a significant shift in culture and approach taken by the regulator - changes which have not been clearly set out in the proposed strategy.
  • In particular, there are weak incentives for firms to compete on the basis of what consumer protections they offer, as many initiatives to strengthen protections require collaboration between firms. Hence, it is vital that the Payment Systems Regulator acts to ensure that there are industry-wide levels of minimum protections for consumers (Priorities 2 & 4). This is important given the recent challenges that have stemmed from voluntary initiatives for consumer protection, most notably in relation to authorised push payment (APP) fraud.
  • The Payment Systems Regulator should prioritise working with the Financial Conduct Authority (FCA) to protect access to existing payment systems that millions of UK consumers continue to rely on (Priority 1). As well as supervising the uptake of new and alternative payment methods, consideration should be given to coordinating regulatory responsibilities and actions to maintain free access to cash, bank branches, and free-to-use ATMs in order to prevent further exclusion.