The Payments Systems Regulator has Officially Flexed its Muscles
Author(s): Kevin Rayner, Posted on December 14th, 2016
Will fintechs, likely to benefit from the Payment Strategy Forum’s “Payments Strategy for the 21st Century,” grasp the opportunity?
I have followed the PSR’s progress to radically change the way that money moves around in the UK since the inception of the Strategy Forum in October 2015. This included the jaw dropping moment when many of the current payments systems providers and operators realised just how the strategy was going to bring about a fundamental change to the UK payments landscape. This isn’t about bashing banks, far from it. In order to bring about the necessary change, non-banking organisations need to respond, including fintechs.
That necessary change, as defined by the Payments Strategy Forum, will deliver a payments future that is:
- Adaptable to user needs
- Secure & resilient against new threats
- Efficient simple & stable
- Encourages innovation & competition
- Easy to change
- Addresses current detriments and is responsive to emerging detriments
Very laudable objectives.
Who can’t relate to the pain caused by the rapid increase in the much publicised stealing of conveyancing payments mid-stream as fraudsters hack a lawyer’s email server and the house purchaser can’t assure the payment recipient through CHAPS before sending their money to the fraudster’s account? Or that nervous tap of the keyboard as you use the anonymous Faster Payments system to move funds to someone you can only identify by 14 numbers?
This will require a fundamental re-think on how payments are processed in the future and who they are processed by.
Delving deeper into the strategy, the organisations that will lead the future of UK payments must be able to deliver these features:
- A modern approach to security: Biometrics and modern infrastructure security for senders and recipients, including consumers, have a much bigger part to play in protecting future payments. The days of the password and PIN are numbered, no pun intended.
- End-to-end security: The ability to secure end-to-end infrastructure involved in the new payments life-cycle.
- Big data and data analytics to improve trust: Sharing that data with a whole host of bodies including government, crime agencies and aggregators, as well as between different payments systems.
- Volume: Processing large transaction volumes using cross-industry common message standards.
The banks are no doubt relieved that they are not being asked to fund and build more payments systems to replace the current ones, such as Faster Payments, and the new cheque Image Clearing System now being developed. Indeed, the recent PSR guidance published this week has backed away from forcing the banks to divest payments system operator Vocalink, due to its impending acquisition by MasterCard, as it remains subject to Competition and Markets Authority approval. I don’t see bank-developed, owned and operated payments systems delivering the PSR’s strategy.
This is where fintechs can look to dominate the future payments landscape. However, if they wait for the banks to come calling with open wallets they will miss the opportunity. Smart thinking fintechs are already creating their own business case for the investment funds needed.
If you would like to carry on the conversation please connect with me on LinkedIn or via email.