Government seeks ‘fresh start’ for payments industry governance after cheques fiasco
The government wants to supplant the Payments Council with a Payments Strategy Board that would comprise representatives from consumer groups, in an effort to wrest control of payments services away from the banks.
In the wake of the debacle over the proposed scrapping of cheques last year, the government has issued a consultation on the future regulation and governance of the industry, and outlined three possible options for the future.
Its preferred option is to create a new Payments Strategy Board that would monitor and make recommendations to the payments industry. This would be run by a mixture of senior industry and non-industry representatives, including from consumers groups.
The Payments Council could continue to exist as a representative body for the banking industry, and may be the most approriate body to respond to any recommendations out of the new Payments Strategy Board, the government suggests. However, this is a decision for the payments industry itself.
But if the industry did wish to keep the Payments Council going, the government would seek some reforms of its governance.
The consultation is one of a number of banking-related measures aimed at increasing competition and protecting consumers outlined today by Mark Hoban, Financial Secretary to the Treasury.
Payments Council 'not always responsive'
In a statement, the Treasury said that the payments industry to date has “not always been responsive to the needs of all users”, citing in particular the decision last year to abolish cheques by 2018.
After pressure from the Treasury Select Committee, the Payments Council reversed this decision a year ago but its actions throughout the fiasco prompted the government to bring the Council within the scope of financial regulation and look at options for reform.
The consultation document states: “There are a number of reasons why the Payments Council’s current structure undermines its ability to fulfil a strong advisory and strategy-setting role. This helps to explain why the Payments Council has not adequately taken into account consumer and wider views when making decisions.
“The main reason is the Payments Council is dominated by the UK’s largest banks.
"The creation of a Payments Strategy Board would deliver a fresh start."
Hoban added: “We need a payments system that responds to the needs of customers and is not just run for the banks.”
Two other options
The other two options are for continued self-regulation through the Payments Council, but with changes to improve its responsiveness, and the creation of a whole new regulator. This latter option would create significant regulatory burden for businesses and so neither of these options is preferred by government.
Related measures announced today by the Treasury include the sale of Lloyds branches to the Co-op Bank and new powers for the Office of Fair Trading to protect consumers in the consumer credit market.