Payments infrastructures must support innovation says regulator
New payments options are springing up all over the place – except for the underlying infrastructure where current arrangement for access and governance may be a hinderance to innovation, according to the head of the UK’s Payment Systems Regulator.
Hannah Nixon (right), managing director of the PSR, said that the promotion of innovation is one of the functions of her organisation, which has been overseeing the UK’s payments systems since the beginning of April.
Nixon was speaking at a conference in London organised by techUK and the freshly renamed Payments UK – the industry organisation formerly known as the Payments Council that was replaced by the independent PSR.
“Payments are changing faster than ever before, but there is little innovation in the underlying infrastructure,” said Nixon.
She was referring to structural issues such as the way banks effectively control access to the infrastructure, currently the subject of reviews by the operators as well as the PSR.
The Faster Payments Service currently requires banks to be direct members or access the system via a sponsorship arrangement with a direct member, generally with a more limited capability, such as not having access at weekends – a clear disadvantage in the mobile-based banking world that is emerging.
Nixon said that markets should decide which innovations thrive and which don’t, but infrastructures are a special case where regulators may have to take a more direct interventionist approach because the cost of building an infrastructure may be prohibitive, and the benefits of the network effect hard to quantify.
The PSR’s role is to create an environment that is in the best interests of all parties – industry, consumers and the wider economy – and innovation is a spur to that, she said. Three months into the job, she thinks the “attitude of the industry is heading in the right direction”, but things are changing quickly.
