.svg)
Chris Hemsley, managing director at the UK's Payment Systems Regulator (PSR), speaks to VIXIO about the regulator’s plans to rein in fraud and enhance competition.
Last week, the PSR launched its Annual Plan for 2022/23 at an in-person event.
During this event, Hemsley took time out to speak with VIXIO about some of the issues that the PSR wants to tackle in the near future, including fraud.
Fraud has become UK payments institutions’ biggest headache in recent years. Even though progress has been made with unauthorised fraud, including card-based payments supported by the introduction of strong customer authentication (SCA) requirements, authorised push payments (APP) have been increasingly exploited by criminals.
According to research by UK Finance published last week, there were 195,996 incidents of APP scams in 2021, with gross losses of £583.2m.
"The change in the law that has been agreed upon is what we've been asking for to deal with APP fraud. The legislative barriers will now go, and there is a lot that we can do to ensure that we make it harder for criminals,” Hemsley said, citing recent commitments from the government to increase the powers of the PSR to enforce the confirmation of payee requirements.
The firms who have joined the code so far have done the right thing, but many have not signed up, he pointed out. “This legislation will mean minimum standards that apply to all firms, which is the right approach to fraud protection and prevention."
However, Hemsley acknowledged that this was not a catch-all for dealing with the issue.
"This won't entirely solve the problem as we're dealing with sophisticated criminals who may well have moved out of payments and are looking at exploiting other areas that are vulnerable,” he said. “While legislative changes will help us reach out to a lot of firms, we have to accept that criminals will migrate to the weakest link in the chain. In a year or two, there will be a different fraud challenge."
For Hemsley, however, the next steps will inject a lot more incentives into the system to mean that banks and other payment firms will do more and innovate to solve these problems. “So far, we haven't got that entirely right."
"We need the overtone to be much clearer about where the vulnerabilities are. There needs to be better data to see, frankly, which firm is creating these problems,” he said, adding that there are known issues with social media firms in particular but there are other firms that create vulnerabilities. “If we know where the issues are, there will be an opportunity to be transparent about who is doing everything they can to solve the problem and those who could do more."
Opening up competition
Hemsley also discussed the issue of competition, having said during his opening speech at the event that the PSR wanted to put pressure on the likes of Visa and Mastercard, while also opening up new opportunities through account-to-account (A2A) payments.
A2A payments move money directly from one account to another and offer a potential alternative to cards for payment at merchants, including supporting open banking innovations. Although available, to date solutions taking advantage of these rails have not been hugely popular.
Speaking to VIXIO, Hemsley said, "I'm not picking winners but I want this to be a fair and tough fight that keeps prices competitive and innovation going.”
Adding: “There is an opportunity if we get the technology right. These are technical things like the information that flows around, so we ensure technology like fraud prevention actually works so that there is the infrastructure there to support different ways of selling goods and taking payments,” he commented.
If that is easier and provides a platform to launch new businesses, and for fintechs to launch new services that allow businesses to make payments the same way, he suggested, it will maintain the level of competition in the system while keeping everyone in the system honest.
Hemsley further made reference to the PSR’s scheme fees and card acquiring market reviews.
"These are quite complicated pieces of work and we need to make sure that we move forward with these issues as quickly as we can, but remember that these are quite careful processes,” he said. “Depending on where we get to, we need to have quite robust conclusions."
Commenting on last week's news that the PSR has published its provisional card acquiring market remedies, Hemsley said that the PSR needs to make it easier for businesses that do not necessarily have a payments team to make it easier to switch.
The PSR has outlined ways this could happen, including through greater transparency for merchants. For example, through card issuers being compelled to provide summary information boxes setting out key price and non-price service elements of card-acquiring services.
“This would mean that they could save quite large amounts of money,” he suggested.
The PSR is currently seeking views from stakeholders and interested parties on these latest proposals, with a consultation that will close on August 3. Subsequent to this, the PSR has said that it is planning to issue a final remedies notice later this year.
