Financial Conduct Authority - Payment Systems Regulation
Summary of response
On behalf of our member credit unions, we would like to express strong overall support for the importance of a payment systems regulator which takes a broad view of its remit and role in order to encompass as wide as possible a range of payment systems and services. Credit unions, as small deposit-taking co-operative financial institutions, increasingly seek to provide payment and transactional banking services to their members – through products such as the Credit Union Current Account or the Credit Union Prepaid Card – in order to attract a wide range of members and to operate sustainably. The full service model is one that has fuelled success for credit union sectors around the world where, in the US and Canada, for instance, as many as 40% of people belong to a credit union. This is the kind of success which we wish to see emulated by credit unions in Great Britain and fair access to payment systems is central to that.
Currently, small providers of payment systems, such as credit unions are reliant upon arrangements with sponsoring banks in order to provide payment services. Credit unions have found significant difficulty in reaching agreements with such banks since their willingness to enter into sponsorship and agency arrangements is strictly limited. Where such agreements have, however, been reached it is very difficult for credit unions or similar operators to a. understand whether the access terms they are receiving are competitive – since the payments structure and its operation by owner-user banks is so opaque – and b. even were full knowledge of comparable terms is available, negotiate competitive terms where the supply of banks willing to facilitate access is so limited given the relative market power of the negotiating parties this necessarily creates.
Therefore we would like to see a payments systems regulator which has authority over the full range of payments infrastructure in the UK. We would also like to see it take a far-reaching view of the possible action it might take to reform the landscape keeping radical measures such as divestments on the table as the system and its conflicts of interest are reviewed. It should also look at fundamental structural and minimum capacity barriers within the availability of access arrangements for small players and how the number of willing agency and sponsoring banks can be increased.
We are also conscious that the payments infrastructure is critical part of the economic system and innovation within it is vital in this respect. Due attention must be taken to ensure any measures the new regulator pursues do not inadvertently hinder this important process. That said, we also feel that while collaborative action is critical to innovation in payments, there is also the potential for conflicts of interest to stifle innovation and improvement and the new regulator should look closely at these issues.
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