The UK has announced it will abolish its payments oversight body, The Payment Systems Regulator (PSR), and transfer its functions to the Financial Conduct Authority (FCA). While many financial institutions have welcomed the move as a step toward reducing bureaucracy, it leaves the UK’s fraud-fighting framework up in the air.
The government stated that its decision to eliminate the PSR was driven by concerns that the UK’s financial regulatory system had become overly complex. The country has operated under three financial regulators: the PSR, the FCA, and the Bank of England’s Prudential Regulatory Authority.
Until now, the PSR has been, at least nominally, a fully independent subsidiary of the FCA. However, since last July, it has been led by FCA director David Geale, and the two agencies have shared office space in London.
A Single Point of Contact
By absorbing the payments watchdog into the FCA, the UK government hopes to provide a single point of contact for businesses. The goal is to reduce expenses, particularly for smaller companies.
The PSR has also taken a leading role in fighting financial fraud in the UK. Eliminating the agency has left many concerned about the financial system’s ability to combat fraud.
“We believe that abolishing the Payment Systems Regulator at a time when the efficacy and resilience of payment systems, as well fraud risk management, are under intense review and focus, may not be the most opportune course of action,” Willem Wellinghoff, Chief Compliance Officer at Ecommpay, told Fintech Magazine.
Fighting APP Fraud
Some have felt that the PSR overstepped its bounds, particularly with the introduction of a mandatory refund system for authorized push payment fraud (APP fraud) last October. The regulator initially proposed that banks reimburse APP fraud victims up to £415,000. However, after criticism that this amount was too high for smaller and mid-sized banks, the cap was reduced to £85,000, with the reimbursement split 50/50 between the sending and receiving payment service providers.
The system got off to a slow start, raising further doubts about its effectiveness. Last month, Fortune reported that PSR’s platform had processed just 10 claims since its launch.
The PSR has also maintained oversight of the payment rails operating in the UK. Just last week, it criticized Visa and Mastercard for increasing fees and exerting dominating over the card market. The agency claimed that debit and credit card fees on these payment rails impose an extra £170 million in annual costs on businesses.
