By Chris Dorrell
The UK’s payments regulator today argued that the credit card market did not have “sufficient competition”, but suggested progress on open banking could open it up to a wave of innovation.
Chris Hemsley, managing director of the Payment Systems Regulator (PSR), said the watchdog was looking to find ways of “injecting more competition into this market at a more structural level”.
The PSR is currently conducting two major reviews of card systems looking at scheme and processing fees, and cross-border interchange fees amid concerns that they are acting anti-competitively.
The review focuses on Visa and Mastercard, which both control the UK market.
Hemsley said, however, that open banking could unlock the market to greater competition.
“We think the combination of open banking, in particular, and the renewal of existing infrastructure for account-to-account payments has the potential to open a different way of taking payments, which will inject more rivalry and hopefully enforce more cost and quality pressure,” he said, speaking in front of the Treasury Select Committee.
“Over the longer term (this) is the route to giving businesses more choice and better services,” he said.
Visa and Mastercard have had to provide the PSR with a whole range of documents relating to the fees it charges on customers.
Hemsley said the extent of the PSR’s requests “surprised” the two payments giants. “I don’t think they’re used to this level of regulatory scrutiny,” he said.
Despite the potential for open banking to open up greater competition, MPs suggested progress had stalled due to vested interests.
Harriett Baldwin, chair of the committee, said “it does feel as though there’s been a concerted effort by incumbents to continue to try and slow these processes down.”
Hemsley also provided an update on the PSR’s consultation on mandatory fraud reimbursement.
A few months ago the Treasury Committee criticised the PSR‘s initial proposals, arguing it created a conflict of interests by handing enforcement power to Pay.UK, an industry body.
Under revised proposals released earlier this month, the PSR will now be responsible for ensuring banks comply with the regulation. “The extent to which we’re sitting behind these arrangements is broader than we originally proposed,” Hemsley said.
The PSR will receive its enforcement powers on fraud reimbursement when the Financial Services and Markets Bill comes into law, which could be as soon as next week.
However, the regulator will hold extensive consultations before introducing the rules. Hemsley accepted that the rules likely not be in place until the end of March.
