The payments regulator created earlier this year could oversee Visa and Mastercard payments, as well as the major interbank payment systems, after the government launched a consultation on its role.
The government is asking whether Visa and Mastercard, as well as the likes of Bacs, Chaps and Faster Payments, should be regulated by the Payment Systems Regulator (PSR), which will become operational in April 2015. The regulator wants to oversee payments systems that would cause major disruption should they encounter problems.
Hannah Nixon, who was a senior partner at Ofgem, was made PSR managing director by the Financial Conduct Authority (FCA) in May 2014.
The PSR’s main aim is to increase competition in the sector because most large payment systems are owned by banks and there are concerns that the sector lacks transparency and innovation.
The government set up the Payment Systems Regulator to increase competition in the banking sector and encourage innovation so that customers can realise the benefits of new technologies.
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In March 2014, FCA CEO Martin Wheatley said the payments sector is critical to the economy, so it must reflect the needs of people and firms and enjoy their confidence.
“We need to know if the sector is as open as it should be to new entrants to the market and whether consumers are getting the best possible deal,” said Wheatley.
“The largest payment systems are owned and managed by the big banks, but concerns have been raised that the sector lacks transparency and innovation,” said the FCA. “It also needs to be easier for challenger banks to access these systems and compete with the bigger players.”
The PSR will make it easier for new payments providers to enter the market, putting existing providers under similar pressure to that being felt by banks as competitors, including technology companies, enter the market.
Consumers use web-based services, which are trusted and have good IT, every day. If services such as PayPal, Amazon and Facebook moved into banking, they would attract customers. Their systems already contain details about people and businesses and handle monetary transactions.