The UK’s Financial Conduct Authority and Payments System Regulator have published their business plans for 2019/2020;
Retail Banking and Payment sector issues including scams, access to cash and operational resilience are areas of key focus;
In the context of the UK’s withdrawal from the European Union, the UK Government has signalled its intention to pursue greater integration with non-EU jurisdictions including with Australia in areas such as financial services.
Source: Financial Conduct Authority Business Plan 2019-2020
POINT OF VIEW
The United Kingdom’s Financial Conduct Authority (FCA), and its independently accountable subsidiary, the Payments System Regulator (PSR), have each released their Business Plans for 2019-2020. These set out their priorities for the next financial year and how they plan to deliver them.
The FCA is the conduct regulator for approximately 59,000 financial services firms in the UK and the prudential supervisor for approximately 48,000. The authority has significant powers, including the ability to specify minimum standards, place requirements on products, and the power to regulate conduct related to the marketing of financial products. The FCA’s Business Plan outlines both sector-specific priorities and cross-sector priorities. These include:
- Investment management;
- Retail lending;Pensions and retirement income;
- Retail investments;
- Retail banking;General insurance and protection;
- Wholesale financial markets.
Cross Sector Priorities:
- Firms’ culture and governance;
- Operational resilience;
- Financial crime (fraud, scams) & AML;
- Fair treatment of existing customers;
- Innovation, data and data ethics;
- Demographic change;
- Future of regulation.
Payments services come in for some focus under the “Retail Banking” sector priority. The FCA plans to support high standards in the payments industry through initiatives, including:
Extending the Principles for Businesses to payments services and e-money firms;
Ensuring that business models are fit for purpose through their re-authorisation programme;
Engaging with other regulators and industry to anticipate and shape the development of the banking and payments sector business models;
Building on their existing fraud work to improve their understanding of financial crime, including how fraudsters operate.
The FCA also noted that they will also continue to work with the PSR, on the delivery and implementation of the Payments Sector Strategy. The PSR leads on these initiatives under their mandate to “promote competition and innovation in payment systems, and ensure they work in the interests of the organisations and people that use them". The PSR’s focuses for 2019/20 will include:
In 2018 the PSR consulted on a requirement for the banks to implement Confirmation of Payee. This would help people confirm that their payments are going to the right person – which makes it harder for criminals to commit these scams. In 2019/2020 PSR will work through the responses and issues raised and issue a response;
The UK’s ATM network and access to cash:
With ATM withdrawals continuing to decrease, PSR will work closely with the Bank of England, the FCA and the Treasury on the issue of access to cash and the genuine questions about the economics of running ATMs. In doing so they will be taking into account issues raised by the Access To Cash Review group chaired by Natalie Ceeney;
Pay.UK and the new payments architecture:
In 2018 the interbank payment systems Bacs, Faster Payments, and Cheque and Credit were brought together under a new payment system operator - Pay.UK. This year, the PSR will monitor Pay.UK’s progress designing and implementing a new payments architecture (NPA) for the UK, which is intended to improve efficiency, increase competition in the market and make sure the UK’s payments infrastructure is fit for the future;
Card acquiring market review:
The PSR are carrying out a market review into the supply of card-acquiring services. In 2019 they will gather evidence and information and expect to publish an interim report at the end of 2019.
The FCA has played a prominent role in shaping regulation as the world has become increasingly interconnected. It works closely with overseas regulators and international organisations. Australian regulators have always closely examined the UK for domestic regulatory initiatives, such as ASIC’s Fintech Regulatory Sandbox, open banking developments and changes to licencing regimes. In addition the UK sees Australia as a key partner in its post-Brexit future in light of Philip Hammond’s references to Australia, the UK Department for International Trade’s statements about striking a trade deal with Australia after Brexit being "an early priority", and new British Prime Minister, Boris Johnson’s well-known affection for Australia.
The FCA’s Strategy, has a focus on Brexit, and therefore a focus on international co-operation with non-EU countries will be built on existing economic and financial dialogues. In his speech, Hammond singled out the ‘Fintech Bridges’ that exist between Britain and other counties including Australia. It is envisaged that the new arrangements would be more focused on financial services and could pave the way for limited free trade deals on specific financial industries, such as insurance or banking, and could ease the path to other, less formal arrangements such as regulatory co-operation, information sharing and access agreements.
The developments linked to the FCA’s implementation of this strategy is therefore likely paying close attention to. Topics such as operational resilience, data ethics, access to cash and scams are all very much the Australian regulators thoughts and plans here. In addition in the post-Hayne era the fair treatment of customers will be core to regulators strategy.