Theme 3: Choice and availability of payment methods
What we want to achieve
The PSR is working on defining its future strategy. In July, we asked for your input into the ‘innovation and future payment methods’ theme and earlier this week we launched the ‘competition’ theme. You can still contribute to both. We’re now asking for input on our third and final theme, choice and availability of payments.
The PSR believes that all people and businesses should be able to make the payments they need and want to make.
But how do we ensure that enough options are available to allow that to happen? And what can we, as regulator, do to promote choices for businesses and consumers? We want your views.
We’ve published a specific set of questions below, along with a series of related content pieces to stimulate thinking and debate. Your feedback can be shared informally, on social media, by emailing email@example.com, through more formal mediums such as letters, or simply by reaching out to us on 03004563677 and we’ll be happy to arrange a call back.
We welcome contributions on any of the three themes by the end of October. There will also be further opportunities to contribute your views on our Strategy. We are holding two Strategy webinars in October (details will be available soon), and we will be consulting on a full draft Strategy early in the new year.
Where we are now
Every time anyone uses a cash machine, transfers money, uses contactless, or gets paid, they use a payment system. The PSR is here to make sure payment systems work well for everyone. The idea that people can choose how they pay is central to that.
Knowing that when it is time to make a payment you can use your preferred method of doing so can make a big difference in helping our everyday lives run smoothly. Not having access to a working cash machine or facing a technical glitch that forces you to abandon a transaction can be disruptive to us all. But choice and availability go further than that. Failed transactions also cause loss of income for retailers and they can even hinder the UK’s economic growth.
In short, availability of payment methods matters to all of us – as businesses and consumers, and so it matters to the PSR. In the past, we’ve acted to facilitate choice by making access to payment systems easier and cheaper for the payment service providers that can supply new and innovative options (for example by issuing General Directions requiring access providers to publish their access criteria). We’ve also worked to support cash access for those that want to use it; our research shows that over 80% of us pay for something using cash each week.
Ultimately, we want to ensure that everyone in the UK has a payment method available to them that works for them. But choices and preferences, much like the UK’s payments landscape, aren’t static. A payment method that worked in the past, might no longer suit us in the future. In recent years, and in many ways accelerated by the lockdown measures following the coronavirus outbreak earlier this year, online payments have risen while cash usage has declined at a rapid pace.
Over the last few years, the UK payments sector has innovated alongside changing needs. We’ve seen a number of new ways to pay emerge, including contactless cards and mobile wallets. That new technology brings with it challenges for many people. Some are concerned about how their data is used, others are worried about online fraud. To help combat fraud, we have been working with the payments industry to gather data and implement standards for how banks can work together to tackle APP scams.
Despite recent innovations, most consumer purchases at shops and online currently still involve a debit or credit card (whether directly or indirectly, such as through a linked mobile wallet). Our work on the Interchange Fee Regulation and our Market review into the supply of card-acquiring services help ensure those payments remain affordable for both businesses and consumers.
Developments in Open Banking could mean direct bank transfers could be used for more varied reasons and become a viable alternative to card payments in shops and online. To help develop those options we are closely monitoring the development and delivery of the New Payments Architecture. In doing so we want to ensure that it meets the expectations we’ve set out, supporting competition and innovation in the interests of all users. We are also considering whether any changes to consumer protections might aid the take-up of Open Banking.
Ultimately, we want people and businesses to be able to make the payments they need and want to make. With cash usage declining, and Open Banking not yet widely adopted, we want to understand whether there is enough choice for consumers, or whether, for example, we are comfortable with the current level of reliance on the card schemes for many of our purchases. We want to hear your views on these questions:
- Which types of payments are under-provided in our current environment? How could we encourage more choice for consumers and businesses so that they can adapt to changing circumstances?
- If cash continues to decline as a means of payment, and whilst the NPA and Open Banking are in development, UK consumers and businesses may rely heavily on the two main card schemes when making payments. With some uncertainty over how much ‘point of sale’ interbank payments will take off in the future, will these two systems be enough to allow people and businesses to make and receive all the payments they want and need to make?
- We can see that the Covid-19 pandemic and government responses to it have influenced the ways in which consumers pay for goods and the ways in which businesses make payments. We have observed a rapid decline in the use of cash, and increased difficulties in using cheques. Meanwhile contactless and online payments have increased. What do these changes tell us about how much consumers can rely on certain payment methods? How can innovation in payments help us to weather disruptive change? What should we and other regulators do (if anything) to make sure consumers can still make payments in times of rapid change?
- Is it always better to have multiple methods to make a payment so that businesses and consumers can choose between them or are there circumstances where a specialisation (and so perhaps reliance on one provider) is necessary?
- The PSR has worked to improve access to payment systems – is our work in this area enough to allow access to all services needed by consumers and businesses? Can businesses that need different services easily migrate to other providers or do they face barriers to doing so?
- Cross-border payments: How is choice and availability developing, and what can it tell us about domestic systems?
At this stage, we are not necessarily looking for fully fledged submissions. We will be consulting on our full draft Strategy early next year. For now, we want to stimulate debate and discussion. We are doing this so that as many views, concerns and visions for the payments industry as possible feed into the development of our strategy.
If you want to contribute, your feedback can be shared informally, here on our website by emailing firstname.lastname@example.org, responding to our social media blogs and questions, and through more formal mediums such as letters, or simply by reaching out to us on 03004563677.
We are also organising online discussion webinars. More information on these and how to take part will follow shortly. If you are not on our mailing list and want be informed on these and other updates around the PSR’s strategy, subscribe to our updates by emailing email@example.com.