Key Words
FCA (Financial Conduct Authority) – Regulates conduct in UK financial markets and protects consumers.
PSR (Payment Systems Regulator) – Regulates payment systems to promote competition and innovation.
Regulatory Congestion – Overlapping or conflicting rules from multiple regulators.
Faster Payments System – UK system enabling near-instant bank transfers.
BACS – Payment system for direct debits and salaries (typically takes 3 days).
CHAPS – Same-day high-value payment system, often used for property purchases.
Pay.UK – Organisation that operates major UK retail payment systems.
What’s Happening?
On November 2024, the UK government introduced the National Payments Vision, aimed at modernising the UK’s payments infrastructure and maintaining its position as a global leader in financial services.
A key issue identified is regulatory congestion, where multiple regulators—the FCA, Bank of England, and PSR—operate with overlapping and sometimes conflicting rules. To address this, the Payments Vision Committee has been established to improve coordination and prioritisation across regulators.
The UK is already a leader in payments, but emerging technologies such as AI and distributed ledger technology mean it must act quickly to remain competitive globally. Countries like Brazil and Sweden are already ahead in certain areas, with systems like PIX and Swish offering seamless, real-time payments.
Domestically, progress has been slow. The government now plans to:
- Upgrade the Faster Payments System
- Reform or restructure Pay.UK
- Improve funding and governance of payment infrastructure
A key concern is that Pay.UK’s current structure is dominated by banks which limits innovation, as they may resist change that increases competition or costs.
The Vision is built around three pillars:
- Innovation
- Competition
- Security
The Legal Issues
Regulatory Co-ordination
As stated, there are multiple regulators when it comes to managing the payments system. When re-designing this structure, it raises the question of how regulatory power , jurisdiction and accountability, will be shared, especially if there are plans to introduce a new regulatory body.
Governance Of A Possible New System
If the government is planning on brining a new system such as the PIX. It raises questions on how will this be funded and how regulators will be given jurisdiction over this new system.
Security Of Consumers
With any new system there is an aspect of uncertainty. Steps will have to be taken to ensure the safety of consumers when using this new system, and how prevention of cyberattacks, fraud and data breaches can be mitigated.
Competition Law
With the main members of PayUK being executives from banks, they have a significant influence over the decisions made. This means that they can delay or influence any ideas that may affect their profits. This highlights issues regarding anti-competitive behaviour and competition law.
Why This Matters For Lawyers
Regulatory Advice
Lawyers will advise financial institutions on how to navigate the new regulatory landscape.
Procurement
If the government is looking into building a new payments system, then procurement will be a task lawyers are heavily invested in. For procurement, governments are likely to hire fintech firms through government contracts. When doing this, governments have to ensure procurement rules are followed such as fair competition and transparency. There also has to be clarity regarding risk allocation and delivery timelines, all of which are managed through contracts drafted by lawyers.
Financing
In terms of financing a new payments system, lawyers will be responsible for deciding how it will be funded. Governments usually fund projects like this through banks, private investors and public funding. Lawyers will have to also decide how profit is shared and who gets paid first.
Again, a recurring theme is risk allocation, lawyers will have to draft contracts which outline how risk affects each investor and possible ways lenders can be protected through collateral. Some lenders will also require income streams, lawyers will have to decide if this is a possibility and if so how to set it up.