Regulating for Growth: Getting the Balance Right

Oliver Hanmer looks at how regulators can support growth, innovation, and competition by striking the right balance between oversight and flexibility.

The future of payments is a hot topic in financial services right now.

Businesses and people want to be able to make payments quickly, flexibly, and safely. Digital payments (where the card is not present) are increasing while more traditional forms of payments like cash and cheques are on the decline. More than half of all payments in the UK are now made using a debit card.

The relatively new government in the UK has an unwavering focus on economic growth and innovation, alongside a desire to see the UK offer a more attractive proposition for investment.

This points to the need for an economic climate of pace, agility, and freedom to operate. For this to become a reality, we need a regulatory landscape that supports growth and innovation.

A Clear Regulatory Framework

Last November, the government issued its National Payments Vision (NPV). This seeks to set the strategic direction for “a trusted, world-leading payments ecosystem delivered on next-generation technology, where consumers and businesses have a choice of payment methods to meet their needs”.

Key to delivering this successfully is a proportionate, clear, and coordinated regulatory framework and a resilient payment infrastructure which supports innovation.

The National Payments Vision’s three pillars should shape activity across the payments ecosystem:

• Innovation — to deliver payments that enhance the lives of consumers and promote economic growth.
• Competition — to provide choice for people and businesses on how they make payments, and in doing so encourage innovation.
• Security — to ensure that both the systems and the payments themselves offer protection to users and further build trust in payments domestically and across borders.

The NPV also calls upon regulators and industry to come together to deliver change, so that the UK payments space can hold its own against international comparators and ensure it is truly ready for the future.

Much will be written about the NPV — its outlook and its delivery — over the coming months, but I wanted to dwell, inevitably, on the role of regulation, in particular the part that the Payment Systems Regulator (PSR), will play.

The Role of Supervision

The payments ecosystem is evolving rapidly, driven by technological advancements, increased competition, and changing consumer expectations.

At the PSR, we seek to achieve thriving, world-leading payment systems where competition and innovation deliver accessible, convenient, secure, trusted and value-for-money services that meet people’s and businesses’ needs. We have ...

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