Written evidence submitted by the Payments
Council
1. INTRODUCTION
1.1 The Payments Council is pleased to have the
opportunity to submit written evidence to the Treasury Committee's
inquiry into Competition and Choice in the Banking Sector.
We recognise the importance of payments in access to retail banking
and so have focussed our response on this aspect of the banking
sector.
1.2 The Payments Council is the organisation
that sets strategy for UK payments. It was established in March
2007 to ensure that UK payment systems and services meet the needs
of users, payment services providers and the wider economy. Whilst
the Council is funded by its membership, which consists of banks
and other bodies that provide payment services, the Board does
have an Independent Chair and four Independent Directors who represent
consumer and business interests. These Independent Directors,
whilst in a numerical minority, can collectively veto any decision
of the Board. The Council also operates several User Forums to
enable better understanding of user requirements of the payment
system over a wide range of subjects.
1.3 The Payments Council has three core objectives:
— to have a strategic vision
for payments and lead the future development of cooperative payment
services in the UK;
— to ensure that the payment
system is open, accountable and transparent; and
— to ensure the operational
efficiency, effectiveness and integrity of payment services in
the UK.
1.4 The Payments Council works closely with its
contracted schemes, for the benefit of the UK payments industry.
These include:
— Bacs Payment Schemes Limited;
— CHAPS Clearing Company
(covering two schemes: the CHAPS Sterling and Faster Payments);
— LINK ATM Scheme;
— Cheque & Credit Clearing
Company Limited;
— Belfast Bankers' Clearing
Company Limited; and
— UK Domestic Cheque Guarantee
Card Scheme.
The clearing schemes are run by their respective
Boards which are responsible for setting the work of the schemes
and their entry criteria. This response covers the contracted
schemes, with the exception of the UK Domestic Cheque Guarantee
Card Scheme as it has been agreed this scheme will close on 30
June 2011.
2. ACCESS TO
PAYMENT SYSTEMS
2.1 We believe that the entry criteria set by
the clearing schemes are reasonable and proportionate. It is a
vital balance to get right, given their economic importance, between
enabling sufficient access to schemes to create competition amongst
players and ensuring that the criteria are robust and can withstand
changing economic environments. As systemically important infrastructure,
it is critical that payment systems are not made unstable by the
failure (financial or technical) of a scheme member. Therefore,
any criteria that restrict or inhibit access to the clearing schemes
are only in place to the extent that is necessary to protect the
systems against specific risks, or to protect the financial and
operational stability of the system. As a case in point, it is
important to note that the payment systems worked very well during
the extreme market convulsions in late 2008.
2.2 The Payments Council has seen no evidence
to suggest that the entry criteria for the clearing schemes impede
competition and it is in fact the policy of both the Council and
the schemes themselves to encourage new Members. The schemes aim
to be as transparent as possible and ensure that information regarding
membership is available in the public domain on their websites
and that firms are encouraged to make enquiries about potential
membership.
2.3 The schemes do not cover agency bank relationships
with clearing Members but we have no reason to consider that these
are causing problems. The ratio of agency arrangements to scheme
Membership suggests that the agency market is competitive and
thriving. If there were issues, we would expect to be made aware
of any problems via applications to become direct Members, complaints
about the rules of scheme Membership and wider market comment.
2.4 Over the last five years there have been
12 applications for membership across the schemes, all of which
have been successful. Two of these new Members are expected on
stream during the later part of 2010. Additionally, Faster Payments
has received two applications for Direct Agency status, which
are currently under consideration. When the technical specifications
for the Faster Payments Service were drawn up, a variety of ways
of accessing the service were designed so that payment institutions
and others which did not want to become full members could still
use the service by different routes such as direct agency access.
3. RAISING CONSUMER
AWARENESS ABOUT
CHOICE
3.1 The Payments Council pushes an agenda of
transparency so that customers have the necessary information
to make an informed choice about their providers. With the roll-out
of the Faster Payments Service, we have published information
on our website concerning Member status on the scheme - including
which banks are operating in the scheme and what their individual
limits are for single immediate payments and for standing orders.
We believe it is important that consumers have the ability to
chose their provider if speed of payments is important to them.
3.2 As part of our transparency agenda, we also
operate a sort code checker on the UK Payments website that allows
consumers to check whether their account (or an account they are
sending money to) can receive various payment types or be eligible
for having a Direct Debit instruction set up on it.
3.3 Whilst this work is important for informing
consumers, we also see it as having a vital function in pushing
our members to offer the best choice and service to their customers.
September 2010
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